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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-23008
AMERICAN TELECASTING, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 54-1486988
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE: (719) 260-5533
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Common Stock, $0.01 Par Value
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 [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SEC. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ]
As of March 11, 1997, the aggregate market value of Class A Common Stock
held by non-affiliates* of the Registrant approximated $59.3 million based upon
the closing price of the Class A Common Stock as reported on Nasdaq as of the
close of business on that date.
As of March 11, 1997, 25,743,607 shares of the registrant's Class A Common
Stock were outstanding.
---------------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated into this Form 10-K by reference:
Proxy Statement for Annual Meeting of Stockholders to be held on April 24,
1997 Part III
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* Without acknowledging that any individual director or executive officer of the
Company is an affiliate, the shares over which they have voting control have
been included as owned by affiliates solely for purposes of this computation.
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PART I
ITEM 1. BUSINESS
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
service; changes in labor, equipment and capital costs; 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 Federal Communications Commission ("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 Securities and Exchange Commission ("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.
GENERAL
American Telecasting, Inc. ("ATI" or the "Company") was formed in 1988 to
develop wireless cable television systems in mid-sized markets throughout the
United States. As of December 31, 1996, the Company provided subscription
television service to approximately 179,800 subscribers through 38 operational
wireless cable systems located in selected U.S. markets (the "Developed
Markets"). The Company also has significant wireless cable (microwave) frequency
interests in 16 other U.S. markets (the "Undeveloped Markets" and together with
the Developed Markets, the "Markets"). As of December 31, 1996, the Company had
approximately 12.0 million Estimated Households in Service Area in its Markets,
although some of these households will be "shadowed" and unable to receive the
services offered by the Company due to certain characteristics of the particular
market, such as transmitter height and transmission power, terrain and foliage
("Line-of-Sight Constraints"). See "-- Markets".
Wireless cable systems use microwave frequencies licensed by the FCC to
transmit signals over the air from a transmission tower to a microwave receiver
installed at the customer's home or business. Wireless cable systems transmit
signals over coverage areas of approximately 20 to 40 miles from their central
transmission point, although increases in transmission power and other factors
may expand the coverage area of a system to approximately 40 to 50 miles from
the central transmission point. Because microwave signals are transmitted over
the air, wireless cable technology does not require the large networks of cable
and amplifiers utilized by franchise cable operators to deliver services. Thus,
wireless cable technology has been developed as a reliable, yet relatively low
cost medium to provide service to customers in single family homes, multiple
dwelling units and commercial properties.
The Company was incorporated in Delaware in December 1988 and has its
principal executive offices at 5575 Tech Center Drive, Suite 300, Colorado
Springs, Colorado 80919. The Company's telephone number is (719) 260-5533. The
Company operates its business through its subsidiaries. Except as otherwise
indicated, references in this Report to "ATI" or the "Company" refer to American
Telecasting, Inc. and its subsidiaries collectively.
BUSINESS STRATEGY
Since inception, the Company has focused principally on developing wireless
cable systems to provide multiple channel television programming similar to that
offered by franchise cable companies. The Company's
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primary strategy has been to develop systems in mid-sized markets where terrain
and other conditions are well suited to wireless cable service. To attract
subscribers in these markets, the Company has sought to exploit the cost
advantage that wireless cable has over other subscription television services by
offering the most popular programming (including "basic" channels such as ESPN,
CNN, USA Network, Nickelodeon, Discovery, regional sports channels, MTV, local
broadcast channels, and one to three "premium" channels such as Home Box Office,
Showtime and The Disney Channel) at affordable prices and by emphasizing a
strong commitment to customer service. In developing and implementing its
business strategy, the Company also has sought to maintain the flexibility to
adapt to new technologies such as digital compression and interactive services.
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. See
"-- Regulation" and "-- Competition." 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. 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.
Digital Video Service
Digital video is capable of delivering a significantly expanded number of
high quality channels of compressed video programming services, including
off-air programming. Digital compression allows the capacity of each wireless
cable channel to increase by four to ten times. The first fully operational
commercial microwave digital video system in North America was launched in
Canada in late 1996. To date, no wireless cable operator has commercially
introduced digital video compression technology in the United States, although a
number of wireless cable operators, including the Company, have successfully
tested such technology in their systems and have announced various plans for
commercial deployment. While management believes that the Company is generally
prepared for the introduction of digital video compression in certain of its
markets, the purchase of digital video compression transmission and receiving
equipment would involve substantial capital expenditures, which the Company is
not in a position to make at this time. In addition, although the FCC generally
authorized the use of digital technologies in 1996, further specific
authorizations must be obtained from the FCC and affected FCC licensees and
applicants on a market-by-market basis in order for the Company to begin
offering digital video service. See "-- Regulation." To the extent that the
Company is able to implement digital compression technology in any of its
markets, management anticipates that this expanded channel capacity will
increase the Company's opportunities to compete with other providers of video
services. In addition, the application of digital compression may result in the
availability of channel capacity for other services, as described below.
High-Speed Internet Access Service
The Company is working to deploy high-capacity, high-speed Internet access
service in certain of its markets. During 1996, the Company, along with other
industry participants, successfully tested a two-way wireless Internet
technology at the Company's Lakeland, Florida system using existing transmission
and reception equipment. This test confirmed that wireless cable frequencies are
capable of delivering two-way Internet access at speeds that are significantly
faster than speeds commonly available using conventional telephone lines.
However, before the Company may begin offering two-way Internet access on a
commercial basis, it must secure certain regulatory approvals from the FCC. The
Company, together with other wireless cable operators, petitioned the FCC in
March 1997 to expand its digital authorizations to permit two-way transmission.
See "-- Regulation."
Prior to any two-way authorization, the Company intends to deploy an
asymmetrical (i.e., one-way) high-speed Internet access service in its Colorado
Springs, Colorado system during the second quarter of 1997.
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This technology utilizes a high-speed wireless cable modem for downstream
Internet access, while relying on a telephone line for upstream Internet access.
The Company's plan in deploying a one-way high-speed Internet service in
Colorado Springs is to establish the commercial viability of its service by
confirming the reliability and performance of the technologies involved and
exploring the level of customer demand for such service. Based upon the
Company's experience in Colorado Springs, available capital and other factors,
it will consider a broader deployment of commercial Internet services in other
markets.
Telephony Service
The Company is considering using its wireless spectrum to deliver telephony
services. Although the development of such telephony services is in its early
stages, management believes that the Company's wireless spectrum may be capable
of providing "local loop" telephone service in the future.
While the Company intends to continue its development efforts with respect
to local loop telephone service, the introduction of such service in any of the
Company's markets would involve substantial capital expenditures, which the
Company is not in a position to make at this time. The Company's ability to
commence delivery of wireless local loop service will also depend upon
successful development of wireless local loop technology and equipment and the
availability of appropriate transmission and reception equipment on satisfactory
terms. Regulatory approvals and changes, especially routine two-way licensing of
the radio spectrum used by the Company, also would be required before the
Company could commercially introduce local loop telephone service. See
"-- Regulation."
CERTAIN REQUIREMENTS AND UNCERTAINTIES
While the Company has begun planning and testing of the digital wireless
services described above, 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. See "-- Competition."
There can be no assurance that sufficient capital will be available on
terms satisfactory to the Company, or at all, to fund the introduction of such
digital wireless services, that the Company's development efforts will be
successful, that the Company will be able to obtain the necessary regulatory
approvals and changes to commercially introduce such services, that there will
be sufficient customer demand for such services to justify the cost of their
introduction in any of the Company's markets, or that the Company will be
successful in competing against existing or new competitors in the market for
such digital wireless services.
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. These relationships could provide the
Company with access to technologies, products, capital and infrastructure. 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. As of the date of this Report, except for the BellSouth
Agreement (as defined herein), the Company has not reached any agreements or
understandings with respect to such strategic relationships or transactions and
there can be no assurance that any such agreements or understandings will be
reached.
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. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Moreover, at this time, the Company does
not generally intend to further develop any of its Undeveloped Markets using
analog technology. Thus, the
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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 those described above.
RECENT DEVELOPMENT
On March 18, 1997, the Company entered into a definitive agreement (the
"BellSouth Agreement") with BellSouth Corporation and BellSouth Wireless
Corporation ("BellSouth Wireless") providing for the sale of all of the
Company's Florida and Louisville, Kentucky wireless cable assets (the
"Southeastern Assets") to BellSouth Wireless (the "BellSouth Transaction"). 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. As of December 31, 1996, the Southeastern Assets represented
approximately 2.6 million Estimated Households in Service Area and served over
35,000 subscribers.
Pursuant to the BellSouth Agreement, 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. A first closing is expected to occur when all necessary
third party and governmental consents to the assignment of a minimum number of
channel positions in Orlando, Jacksonville, Daytona Beach, Ft. Myers, Miami,
Lakeland, Bradenton and Louisville have been obtained, which the Company expects
will occur prior to the end of the fourth quarter of 1997. The remainder of the
Southeastern Assets will be sold upon the satisfaction of certain closing
conditions that are specific to the markets involved, but in no event later than
two years after the date of the first closing.
The BellSouth Agreement grants BellSouth Wireless a right of first refusal
in the event of a proposed sale by the Company of any wireless cable channel
rights that the Company owns or subsequently develops in Florida, Georgia,
Alabama, Mississippi, Louisiana, Kentucky, Tennessee, North Carolina or South
Carolina. The BellSouth Agreement also contains a covenant not-to-compete that
prohibits the Company from competing with BellSouth Wireless in the video
distribution business in the Florida and Louisville, Kentucky BTAs (as defined
herein) for a period of five years from the closing date.
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 also has granted to BellSouth Wireless an option to purchase
for $9.0 million the Company's wireless cable channel rights in Yuba City,
California and the Company's Yuba City and Sacramento, California BTA
authorizations. The option can be exercised by BellSouth Wireless at any time
within 18 months after the date of the BellSouth Agreement.
SUBSCRIPTION TELEVISION INDUSTRY
The subscription television industry began in the late 1940's and 1950's to
serve the needs of residents in predominantly rural areas with limited access to
local off-air VHF/UHF broadcasts. The industry expanded to metropolitan areas
due to, among other things, the fact that subscription television offered better
reception and more programming. Currently, subscription television systems offer
various types of programming, which generally include basic service, expanded
basic service, premium service, and, in some instances, pay-per-view service.
A subscription television customer generally pays an initial connection
charge and a fixed monthly fee for basic service. The amount of the monthly
basic service fee varies from one area to another and is a function, in part, of
the number of channels and services included in the basic service package and
the cost of such services to the subscription television system operator. In
most instances, a separate monthly fee for each premium service and certain
other specific programming is charged to customers, with discounts generally
available to customers receiving multiple premium services. Monthly service fees
for basic, expanded basic, and premium
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services constitute the major source of revenue for subscription television
systems. Customers normally are free to discontinue service at any time.
Converter rentals, remote control rentals, installation charges and reconnect
charges are also included in a subscription television system's revenues, but
generally are not a significant component of such revenues.
TRADITIONAL HARDWIRE CABLE TECHNOLOGY
Most subscription television systems are franchise (hardwire) cable systems
that currently use a coaxial cable to transmit television signals. Traditional
hardwire cable operators receive, at a headend, signals for programming
services, such as CBS, NBC, ABC, FOX, HBO, Cinemax and CNN, which have been
transmitted to them by a broadcast or satellite transmission. A headend consists
of signal reception equipment and decryption, retransmission, encoding and
related equipment. The operator then delivers the signal from the headend to
customers via a distribution network consisting of coaxial cable, amplifiers and
other components ("Cable Plant"). As a direct result of the use of Cable Plant
to deliver signals throughout a service area, traditional hardwire cable systems
are susceptible to signal problems. Signals can only be transmitted via coaxial
cable a relatively short distance without amplification. Each time a television
signal passes through an amplifier, some measure of noise is added. A series of
amplifiers between the headend and the viewing customer leads to progressively
greater noise, and thus a grainier picture for some viewers. Also, an amplifier
must be properly balanced or the signal may be improperly amplified. Failure of
any one amplifier in the chain of Cable Plant will black out the system
transmission signal from that point on. Regular system maintenance is required
due to water ingress, temperature changes, and other equipment problems, all of
which may affect the quality of signals delivered to customers. Some franchise
cable operators have begun installing fiber optic networks which will
substantially reduce the transmission and reception problems currently
experienced by traditional franchise cable systems and expand channel capacity
of their systems. The installation of such networks will require a substantial
investment by franchise cable operators.
WIRELESS CABLE TECHNOLOGY
The wireless cable industry was made commercially possible in 1983 when the
FCC reallocated a portion of the electromagnetic radio spectrum located between
2500 and 2700 MHz and permitted this spectrum to be used for commercial
purposes. At that time, the FCC also modified its rules on the usage of the
remaining portion of such spectrum. Nevertheless, regulatory and other obstacles
impeded the growth of the wireless cable industry through the remainder of the
1980s. For example, before the 1992 Cable Act (as defined herein) became
effective, a continued supply of programming from cable controlled programmers
was not assured. The factors contributing to the growth of wireless cable
systems since that time include: (i) regulatory reforms by the FCC to facilitate
competition for franchise cable operators; (ii) increased availability of
programming for wireless cable systems; (iii) consumer demand for an alternative
to traditional franchise cable; (iv) increasing accumulation by wireless cable
operators of a sufficient number of channels in each market to create a
competitive product; and (v) increased availability of capital to wireless cable
operators in the public and private markets.
Like a traditional franchise cable system, a wireless cable system receives
programming at a headend. Unlike a traditional franchise cable system, however,
the programming is then retransmitted by a microwave transmitter from an antenna
located on a tower associated with the headend to a small microwave receiver
located at the customer's premises. At the customer's location, the signals are
converted to frequencies that can pass through conventional coaxial cable into a
descrambling converter located on top of a television set. Wireless cable
requires a clear line-of-sight because the microwave frequencies used will not
pass through dense foliage, hills, buildings, or other obstructions. Some of
these obstructions can be overcome with the use of signal repeaters, which
retransmit an otherwise blocked signal over a limited area. Since wireless cable
systems do not require extensive Cable Plant, wireless cable operators are
capable of providing customers with a high-quality picture with few transmission
disruptions at a significantly lower system capital cost per installed customer
than traditional hardwire cable systems.
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REGULATION
The subscription television industry is highly regulated. Wireless cable
companies are subject to both federal and local regulation, as described below.
Federal Communications Commission
The FCC has authorized access for wireless cable service to a series of
channel groups, consisting of certain channel groups specifically allocated for
wireless cable ("MDS"), and other channels originally authorized for educational
purposes ("ITFS"), although excess capacity can be leased from ITFS licensees by
wireless cable providers. Currently, up to 33 total channels are potentially
available for licensing, lease or purchase by wireless cable companies in each
market. Up to 13 channels in any given market typically can be owned by
commercial operators for full-time usage without programming restrictions. The
remaining 20 channels in a given market generally are allocated for ITFS use.
FCC rules generally prohibit the ownership or leasing of MDS and ITFS
authorizations by cable companies if the MDS facility is located within 35
miles, or the ITFS facility is located within 20 miles, of the cable company's
franchise or service areas. Pursuant to the 1996 Act, the cable-MDS rule does
not apply to a cable operator in a franchise area in which the operator is
subject to effective competition.
Authorizations have been issued, or are currently pending, for the majority
of MDS wireless cable licenses in most major U.S. markets, and, as discussed
below, under the current regulatory structure, only holders of a BTA
authorization may apply for available MDS frequencies within the BTA. In a
number of markets, certain ITFS frequencies are still available. However, except
as noted below, eligibility for ownership of ITFS licenses is limited to
accredited educational institutions, governmental organizations engaged in the
formal education of enrolled students and non-profit organizations whose
purposes are educational and include providing educational and instructional
television material to such accredited institutions and governmental
organizations ("qualified ITFS educational entities"). Non-local applicants must
demonstrate that they have arranged with local educational entities to provide
them with programming and that they have established a local programming
committee.
On July 10, 1996, the FCC adopted an Order in which it authorized the
interim use of certain digital compression technologies for the provision of
video, voice and data services over MDS and ITFS frequencies. Such technology
may be utilized by a wireless cable operator or an MDS or ITFS licensee, after
applying for, and being granted, such an authorization by the FCC. The Company
has filed, and will continue to file, applications for digital authorizations in
many of its markets. The FCC has begun granting digital authorizations. Upon
receiving a digital authorization, a licensee also may transmit one-way
downstream Internet service. The Company, along with other wireless cable
industry companies, petitioned the FCC in March 1997 to expand its digital
authorizations to permit the grant of applications for two-way transmission of
interactive services over MDS and ITFS frequencies. The petition proposes rule
changes necessary for the FCC to routinely grant wireless cable companies the
right to implement two-way wireless services without licensing delays. There can
be no assurance that the petition will be granted, or if granted, that the
Company will be able to develop commercially successful products using two-way
transmission.
FCC rules require ITFS operators to transmit a minimum amount of
educational programming per channel per week. If the educational programming
minimums are met, remaining airtime can be leased to wireless cable operators
for profit and used to transmit non-educational programming. ITFS licensees are
now entitled to meet their minimum educational programming requirements for all
licensed channels using only one channel via "channel loading," if desired.
Beginning in November 1995, the FCC auctioned all available MDS rights on
the basis of Basic Trading Areas ("BTAs"), with one such authorization available
per BTA. The winning bidder acquired the right to apply to operate one or more
MDS stations within the BTA, as long as its station proposals complied with the
FCC's interference requirements and other rules. With regard to commercial ITFS
channels, only the BTA license holder may apply for available authorizations
within the BTA. A BTA licensee has a five-year build-out period within which to
expand or initiate new service within its BTA. It may sell, trade or otherwise
alienate all or part of its rights in the BTA and may also partition its BTA
along geopolitical boundaries and
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contract with eligible parties to allow them to apply for MDS authorizations
within the partitioned area, and conversely, acquire such rights from other BTA
licensees. The license term for each station authorized under these BTA
procedures is ten years, commencing on the date that the FCC announced that the
auction for the BTA had closed.
The Company was the winning bidder in 59 BTAs and, as of December 31, 1996,
had been issued MDS authorizations in 55 of its BTAs. The Company has filed
applications for MDS licenses in the other four BTAs in which it was the winning
bidder. The FCC must approve these applications before the MDS authorizations
will be issued. Competing applications cannot be filed but the FCC will consider
petitions to deny the Company's applications. There can be no assurance that the
FCC will approve the Company's remaining applications. As long as the Company
continues to hold the BTA rights in any given market, other entities seeking new
licenses or certain modifications to existing licenses within such market must
seek approval from the Company, as the BTA owner. Similarly, to the extent the
Company wishes to obtain new licenses or certain modifications to its existing
licenses in markets in which it was not the BTA winner, it will be required to
negotiate with the BTA owner for approval of such licenses or modifications.
Certain of the Company's MDS applications were filed prior to adoption of
the BTA rules. Once such MDS applications are processed by the FCC and the
Company resolves any deficiencies identified by the FCC, a conditional license
is expected to be issued, allowing construction of the station to commence.
Construction of such stations generally must be completed within one year after
the date of grant of the conditional license. ITFS authorization holders
generally have 18 months within which to construct the station. All ITFS
licenses have terms of ten years and most current non-BTA MDS licenses will
expire on May 1, 2001. The FCC's standards for renewal of MDS and ITFS licenses
are similar to those for other FCC licenses. Licenses also may be revoked for
cause in a manner similar to other FCC licenses. FCC rules prohibit the sale for
profit of an MDS authorization not obtained by auction or of a controlling
interest in the licensee of such a facility prior to construction of the station
or, in certain instances, prior to the completion of one year of operation. The
FCC, however, does permit the leasing of 100% of an MDS licensee's spectrum
capacity to a third party and the granting of options to purchase a controlling
interest in an authorization once the required time period has lapsed.
The Company is also subject to various FCC regulatory limitations relating
to ownership and control. The Communications Act and FCC rules require the FCC's
approval before a license may be assigned or control of the holder of a license
may be transferred. Moreover, the Act provides that certain types of licenses,
including those for MDS stations, may not be held directly by corporations of
which non-U.S. citizens or entities ("Aliens") own of record or vote more than
20% of the capital stock. In situations in which such an FCC license is directly
or indirectly controlled by another corporation, Aliens may own of record or
vote no more than 25% of the controlling corporation's capital stock.
In light of these restrictions, ATI amended its certificate of
incorporation in April 1995 to require that all of its officers and directors be
U.S. citizens and to empower the Board of Directors to redeem ATI's outstanding
capital stock to the extent necessary to protect the loss or secure the
reinstatement of any license or franchise from any governmental agency if a
situation arises whereby more than the permitted percentage of outstanding
capital stock of ATI is owned or voted by Aliens. Moreover, the amendments
adopted in April 1995 provide that, in such circumstances, no transfers of
shares may be made to Aliens and shares causing ATI to exceed the statutory
limit may neither be voted, receive dividends, nor be entitled to any other
rights, until transferred to U.S. citizens.
Telecommunications Act of 1996
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act")
became law. Among other things, the 1996 Act eliminates the cable/telephone
cross-ownership restriction, allowing a telephone company the option of
providing video programming within its telephone service area over a cable
system or a video platform. Conversely, cable companies are now permitted to
provide telephone service. The 1996 Act also limits, and in some cases
eliminates, FCC regulation of cable rates established by the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"),
depending upon the size of the
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cable system and whether the system is subject to effective competition and the
nature of the rate. Specifically, regulation of upper tier rates is scheduled to
end March 31, 1999. Moreover, small cable operators and systems subject to
effective competition are now exempt from rate regulation as a result of the
1996 Act. The 1996 Act also vests the FCC with exclusive jurisdiction over the
provision of DBS (as defined herein) service and preempts the authority of local
authorities to impose certain taxes on such services.
While current FCC regulations are intended to promote the development of a
competitive subscription cable television industry, there can be no assurance
that these regulations will have a favorable impact on the Company. Changes in
FCC policies or procedures could have a negative effect on the wireless cable
industry as a whole and/or the Company in particular. In addition, the FCC's
regulation of other spectrum could permit the operation of other wireless
services to interfere with MDS and ITFS frequencies.
Pending Legislation
Legislation has been introduced in several states that would authorize
state and local authorities to impose taxes on providers of subscription
television programming, including wireless cable operators, based upon their
gross receipts. Because the nature of any such legislation, if enacted, is
unknown, the Company cannot predict what impact such legislation would have upon
its operations.
Other Forms of Regulation
Federal law requires that all "cable companies," as defined by Section 602
of the Communications Act, obtain local or state franchises prior to
constructing a subscription television distribution system. Because wireless
cable systems deliver programming to subscribers by means of microwave
facilities rather than through coaxial cable and are not specifically defined as
"cable systems" in Section 602 of the Communications Act, the 1992 Cable Act, or
in earlier statutes or FCC regulations, they have not been considered cable
companies under FCC rules in this context. Accordingly, wireless cable companies
generally are not required to obtain franchises and are generally not subject to
state regulation by public utility or cable commissions.
The Company's Lakeland system (which was acquired in September 1994)
consists of a hybrid of wireless cable and franchise cable, the latter being
utilized to serve areas that are not reached by the system's microwave signals
or to distribute programming to limited areas, such as apartment buildings,
housing subdivisions and mobile home parks. This system is deemed a "cable
company" under the Communications Act and the FCC's rules promulgated
thereunder. As such, this system is subject to regulation under some or all of
the federal, state and local rules that govern traditional franchise cable
operators.
Similarly, the Company's subscription television assets in Cincinnati, Ohio
include both wireless cable and SMATV facilities, the latter of which have been
deemed by the FCC to constitute cable systems. By letter dated October 17, 1996,
the FCC provided a temporary waiver of the cable/MDS cross-ownership rules to
allow the common ownership and operation of these facilities, which will expire
on November 5, 1997. By that date, the Company will be required to take all
actions necessary to comply with these rules, including possible divestiture.
Wireless cable operators also are subject to regulation by the Federal
Aviation Administration and the FCC with respect to construction of transmission
towers and certain local zoning regulations affecting construction of such
towers and other facilities. Additional restrictions may also be imposed by
local authorities, neighborhood associations and other similar organizations
limiting the use of certain types of reception equipment used by the Company and
its subscribers.
COMPETITION
The subscription television industry is highly competitive. Currently, the
Company's existing and potential competitors consist of a broad range of
companies engaged in the communications and entertainment businesses, including
cable operators, digital satellite program providers, television networks and
home video products companies. To date, the Company has sought to differentiate
itself from its competitors through lower priced, streamlined pricing plans,
service guarantees, high-quality customer service and system
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<PAGE> 10
performance, and local community involvement and support. In the future, the
Company expects to face intense competition from numerous other companies
offering video, audio and data products and services. Many of the Company's
existing or potential competitors have substantially greater name recognition
and financial, technical and human resources than the Company and may be better
equipped to develop and operate systems providing subscription television
service, high-speed Internet access and telephony services. The Company's
principal existing and potential competitors are described below:
Franchise Cable Systems
Currently, the Company's principal competitors are franchise cable
companies that own local franchises to operate their systems in the Company's
markets. Cable television service is currently available to the vast majority of
U.S. television households. In most instances, the franchise cable operators
with which the Company competes serve more subscribers on both a local and
national level. Franchise cable companies typically offer a larger selection of
programming than the Company. The Company seeks to compete with franchise cable
companies by offering the most widely demanded programming choices at lower
prices, combined with high-quality customer service.
The Company believes that a number of franchise cable operators will be
required to significantly upgrade their coaxial systems to provide digital
programming, which will involve a substantial investment of capital. Many cable
television providers are already in the process of upgrading their systems and
other cable operators have announced their intentions to make significant
upgrades. A number of proposed technological improvements, when fully completed,
will permit cable companies to increase channel capacity, thereby increasing
programming alternatives, and to deliver a better quality signal without
significant upgrades to their systems.
Many of the largest cable systems in the United States have announced plans
to offer data and telephony service through upgraded networks, and have entered
into agreements with major telephony providers to further these efforts. In some
cases, trials of data and telephony services are underway. In the event that
these trials are successful, the cable operators who are capable of offering
both data and telephony services will have a competitive advantage over wireless
companies if consumers choose to receive both their cable and telephone service
from the same operator.
Direct Broadcast Satellite ("DBS")
DBS involves the transmission of an encoded signal direct from a satellite
to the customer's home. Because the signal is at a higher power level and
frequency than most satellite-transmitted signals, its reception can be
accomplished with a relatively small (18-inch) dish mounted on a rooftop or in
the customer's yard.
The cost of constructing and launching the satellites used to distribute
DBS programming is substantial. When first introduced, DBS reception equipment
for a single television set cost approximately $650 per customer, plus
installation fees, service charges and off-air antenna installation, where
applicable. Furthermore, each additional, independent outlet requires a separate
descrambling device at additional cost to the subscriber. These prices have
decreased as additional competitors have entered the DBS market. Recent
promotions have offered DBS reception equipment for less than $150 (exclusive of
installation and other charges) when the consumer agrees to prepay a one-year
subscription fee. The Company's principal DBS competitors are described below.
DirecTV, Inc. ("DirecTV"), which is substantially owned by GM-Hughes
Electronics, successfully launched its first satellite in December 1993, its
second satellite in August 1994, and a third satellite as an in-orbit spare in
June 1995. The third satellite may also be operated by DirecTV to provide
additional capacity. Each of DirecTV's satellites are high power satellites. As
of December 31, 1996, according to trade publications, DirecTV served
approximately 2.3 million subscribers. Recently, AT&T Corporation ("AT&T") and
DirecTV entered into an exclusive agreement for AT&T to market and distribute
DirecTV's DBS service and related equipment to AT&T's large customer base. As
part of the agreement, AT&T made an initial investment of approximately $137.5
million to acquire 2.5% of the equity of DirecTV, with an option to
9
<PAGE> 11
increase its investment to up to 30% over five years. This agreement provides a
significant base of potential customers for DirecTV's DBS systems and allows
AT&T and DirecTV to offer customers a package of digital entertainment and
communications services. AT&T and DirecTV have also announced plans to jointly
develop new multimedia services for DirecTV under the agreement.
United States Satellite Broadcasting Corporation ("USSB") owns and operates
DBS spectrum on DirecTV's first satellite and offers a programming service
separate from DirecTV's service. As of December 31, 1996, this programming
service had over 25 channels of premium video programming not available from
DirecTV. USSB's selection of programming services (and its use of transponders
on the same satellite used by DirecTV, which enables subscribers to receive both
DirecTV and USSB signals with a signal satellite receiver) allows it to be
marketed as a complementary service to DirecTV, partially offsetting the
competitive handicap caused by its relatively limited channel capacity.
According to trade publications, as of December 31, 1996, approximately one-half
of DirecTV's 2.3 million subscribers received USSB programming.
PrimeStar Partners ("PrimeStar") currently offers medium power Ku-band
programming service to customers using dishes approximately three feet in
diameter. PrimeStar is owned by a group of franchise cable operators and
provides service nationwide. According to trade publications, PrimeStar had
approximately 1.6 million subscribers as of December 31, 1996.
EchoStar Communications Corporation ("EchoStar") launched a high power
satellite in December 1995, commenced national broadcasting of programming
channels in March 1996 and, as of December 31, 1996, broadcasted approximately
150 channels of programming. EchoStar has announced plans to increase its
program offering through the launch of two additional satellites (one in each of
1997 and 1998). As of December 31, 1996, EchoStar had approximately 350,000
subscribers, according to trade publications.
During 1996, MCI Communications Corporation ("MCI") acquired high power DBS
spectrum with the capacity to offer over 200 channels of digital video
programming for $682.5 million in an FCC auction. Thereafter, MCI entered into a
joint venture with The News Corporation ("News Corp") to build and launch a high
power digital satellite system. On February 24, 1997, EchoStar and News Corp
announced that News Corp had agreed to acquire a 50% ownership interest in
EchoStar in exchange for aggregate consideration of approximately $1.0 billion
(such consideration consisting of cash and certain DBS assets). The EchoStar/
News Corp alliance, which will do business using the "Sky" brand name, announced
that it plans to provide approximately 500 channels of digital programming,
including local broadcast signals, by the end of 1998 to a majority of the
continental United States. As a result of its alliance with News Corp, EchoStar
will have substantially greater financial and other resources than the Company
and can be expected to increase the competition that the Company encounters in
the overall market for subscription television customers.
C-band Satellite Program Distributors
The Company also competes with C-band satellite program distributors (also
referred to as "backyard dish" or television receive only ("TVRO") systems).
C-band systems have been popular (mostly in rural and semi-rural areas) since
the late 1970s, and currently serve approximately 2.1 million subscribers in the
aggregate, according to trade publications. The primary advantages of wireless
cable systems over TVRO systems are lower equipment costs and broader
availability of local programming. TVRO systems, on the other hand, enjoy the
advantage of access to a wider variety of satellite programming and serve areas
not served by franchise or wireless cable systems. A conventional TVRO antenna
system costs in excess of $1,000 per subscriber, and subscribers are charged
monthly fees for access to certain programming. TVRO systems typically cannot
receive local off-air broadcast channels.
Telephone Companies
Certain regional and long distance telephone companies could become
significant competitors of the Company in the future, as they have expressed an
interest in becoming subscription television providers. The 1996 Act removes
barriers to entry that previously inhibited telephone companies from competing,
or made it more difficult for telephone companies to compete, in the provision
of video programming and information services. Certain telephone companies have
received authorization to test market video and other services in
10
<PAGE> 12
certain geographic areas using fiber optic cable and digital compression over
existing telephone lines. Estimates for the timing of wide-scale deployment of
such multichannel video service vary, as several telephone companies have pushed
back originally announced deployment schedules.
As more telephone companies begin to provide subscription television
programming and other information and communications services to their
customers, significant additional competition for subscribers is expected to
develop. Among other things, telephone companies have an existing relationship
with substantially every household in their service area, substantial financial
resources and an existing infrastructure, and may be able to subsidize the
delivery of programming through their position as the sole source of telephone
service to the home.
VHF/UHF Broadcasters
Most areas of the United States are covered by traditional territorial
over-the-air VHF/UHF broadcasters. Consumers can receive from three to ten
channels of over-the-air programming in most markets. These stations provide
local, network and syndicated programming free of charge, but each major market
is generally limited in the number of programming channels. Congress is expected
to consider the release of additional digital spectrum for use by VHF/UHF
broadcasters in the delivery of high definition television services later in
1997.
Private Cable
Private cable is a multi-channel subscription television service where the
programming is received by a satellite receiver and then transmitted via coaxial
cable throughout private property, often multiple dwelling units ("MDUs"),
without crossing public rights of way. Private cable operates under an agreement
with a private landowner to service a specific MDU, commercial establishment or
hotel. The FCC recently amended its rules to allow the provision of
point-to-point delivery of video programming by private cable operators and
other video delivery systems in the 18 GHz bandwidth. Private cable operators
compete with the Company for exclusive rights of entry into MDUs.
Local Multi-Point Distribution Service ("LMDS")
On March 13, 1997, the FCC released service and competitive bidding rules
for LMDS, which is located at 27.5 to 28.35 GHZ, 29.1 to 29.25 GHZ and 31.0 to
31.3 GHZ in the frequency band. There will be one 1150 MHz LMDS license and one
150 MHz LMDS license awarded for each BTA, for a total of 986 authorizations.
There will be no restrictions on the number of licenses an entity may hold, but
incumbent LECs and cable companies will not be able to obtain the 1150 MHz
licenses in-region for three years. A simultaneous multiple round auction will
be scheduled for later this year. Certain issues regarding geographic
partitioning and spectrum disaggregation are the subject of a pending
rulemaking. The rules for use of the spectrum are relatively broad, but it is
expected that the spectrum will be used for multichannel video programming,
telephony, video communications and data services, including two-way video
communications.
Wireless Communications Service ("WCS")
On February 19, 1997, the FCC announced service and auction rules for WCS,
which is located at about 2.3 GHz in the frequency band. There will be two 10
MHz WCS licenses for each of 52 major economic areas and two 5 MHz WCS licenses
for each of 12 regional economic area groupings. A simultaneous, multiple-round
electronic auction for the WCS licenses is expected to begin in April 1997. The
rules for use of the spectrum are relatively broad. Since the licenses involve
much less total spectrum than is available to other providers of subscription
television service, such as the Company, in a typical market, it is unlikely
that WCS license winners will be able to effectively compete with such
subscription television providers. However, WCS license winners could increase
competition in the data and wireless telephony businesses in the future. The
Company has not determined the degree of participation, if any, it will have in
the WCS auction.
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<PAGE> 13
MARKETS
The Company operates under a decentralized management structure in order to
maximize the Company's local presence in each market. Most of the Company's
operational systems or system clusters are managed by a general or operations
manager who reports directly to a regional manager. General and operations
managers are responsible for the day-to-day operations of their respective
systems. Each operating system is staffed with customer service and sales
representatives and service technicians. Most non-executive employees of the
Company have incentive compensation programs that are tied to service quality
levels and sales goals. Pricing and programming decisions are made at the local
level, subject to review by the Company's executive management. Each of the
Company's analog wireless cable systems typically offers 15 to 25 basic cable
channels, one to three premium channels, and one or two pay-per-view channels.
Pay-per-view programming is offered only on an event-by-event basis in certain
of the Company's markets.
The following table sets forth, by region, certain information relating to
the Company's Markets as of December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
TOTAL DEVELOPED HOUSEHOLDS
REGION MARKETS MARKETS IN SERVICE AREA SUBSCRIBERS
------ ------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Rocky Mountain....................................... 11 9 2,045,000 63,200
Southeast............................................ 8 5 2,134,000 35,500
Western.............................................. 17 11 3,709,000 35,100
Upper Midwest........................................ 10 7 1,008,000 14,700
Midwest.............................................. 8 6 3,096,000 31,300
-- -- ---------- -------
54 38 11,992,000 179,800
== == ========== =======
</TABLE>
Information regarding the Company's Markets as of December 31, 1996 is
presented in the following table. "Estimated Households in Service Area"
represents the approximate number of households within a 35 mile radius of the
Company's tower sites, subject to certain downward adjustments for overlapping
service areas. This information is based upon household estimates provided by
Strategic Mapping, Inc. using data obtained from the Donnelley Marketing Inc.
Residential Database. Some of these households will be "shadowed" and therefore
unable to receive the Company's service due to Line-of-Sight Constraints. The
percentage of Estimated Households in Service Area that the Company estimates
may be shadowed due to Line-of-Sight Constraints generally ranges from 10% to
50% depending upon the market.
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<PAGE> 14
WIRELESS CABLE CHANNELS
<TABLE>
<CAPTION>
OWNED OR TOTAL EXPECTED
LEASED CHANNELS ANALOG CHANNELS
ESTIMATED OWNED SUBJECT TO (INCLUDING
HOUSEHOLDS IN OR LEASED PENDING FCC TOTAL OFF-AIR
SERVICE AREA FCC CHANNELS APPLICATIONS(1) MICROWAVE CHANNELS)(2)
------------- ------------ --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
ROCKY MOUNTAIN REGION
Denver, CO............................. 689,000 29 4 33 41
Oklahoma City, OK...................... 391,000 28 -- 28 37
Little Rock, AR........................ 231,000 30 1 31 37
Wichita, KS............................ 213,000 28 3 31 34
Colorado Springs, CO(3)................ 190,000 33 0 33 38
Greeley, CO(3)......................... 113,000 24 9 33 41
Fort Collins, CO(3).................... 91,000 29 4 33 41
Billings, MT........................... 52,000 28 4 32 35
Pueblo, CO(3).......................... 49,000 8 24 32 37
Alamoso, CO(3)......................... 14,000 13 8 21 21
Sheridan, WY........................... 12,000 23 4 27 30
----------
Regional Total....................... 2,045,000
SOUTHEAST REGION
Orlando, FL(3)......................... 521,000 27 -- 27 33
Lakeland, FL(3)........................ 305,000 30 3 33 41
Jacksonville, FL(3).................... 373,000 19 3 22 29
Daytona Beach, FL(3)................... 193,000 13 4 17 25
Ft. Myers, FL(3)....................... 175,000 20 8 28 33
Bradenton, FL.......................... 417,000 9 4 13 19
Naples, FL............................. 99,000 18 5 23 27
Sebring, FL............................ 51,000 -- 20 20 20
----------
Regional Total....................... 2,134,000
WESTERN REGION
Seattle, WA............................ 1,254,000 13 -- 13 23
Portland, OR(3)........................ 579,000 28 -- 28 34
Las Vegas, NV(3)....................... 368,000 23 4 27 39
Fresno, CA............................. 268,000 25 -- 25 39
Salem, OR(3)........................... 180,000 24 3 27 34
Monterey/Salinas, CA(3)................ 171,000 22 5 27 34
Eugene, OR(3).......................... 124,000 26 3 29 32
Visalia, CA............................ 117,000 31 2 33 44
Santa Barbara, CA...................... 103,000 4 4 8 14
Anchorage, AK.......................... 99,000 25 4 29 36
Yuba City, CA(3)....................... 93,000 27 -- 27 38
Medford, OR(3)......................... 92,000 33 -- 33 33
Redding, CA(3)......................... 70,000 24 7 31 36
Merced, CA............................. 69,000 17 16 33 38
Bend, OR............................... 44,000 28 4 32 36
Wenatchee, WA(3)....................... 41,000 9 12 21 23
Maui, HI(3)............................ 37,000 28 3 31 37
----------
Regional Total....................... 3,709,000
UPPER MIDWEST REGION
Omaha, NE(3)........................... 299,000 13 16 29 33
Green Bay, WI(3)....................... 198,000 21 7 28 34
Sheboygan, WI(3)....................... 198,000 11 10 21 26
Lincoln, NE(3)......................... 50,000 32 -- 32 39
Fargo, ND(3)........................... 85,000 32 -- 32 37
Rapid City, SD......................... 46,000 30 -- 30 35
Grand Island, NE(3).................... 43,000 32 -- 32 41
Tecumseh, NE(3)........................ 39,000 16 4 20 20
Windom, MN(3).......................... 31,000 12 17 29 33
Geneva, NE(3).......................... 19,000 8 -- 8 15
----------
Regional Total....................... 1,008,000
MIDWEST REGION
Columbus, OH(3)........................ 575,000 20 9 29 34
Cincinnati, OH(3)...................... 622,000 9 4 13 19
Louisville, KY......................... 438,000 20 4 24 34
Youngstown, OH(3)...................... 431,000 31 2 33 37
Toledo, OH............................. 351,000 32 -- 32 40
South Bend/Elkhart, IN(3).............. 292,000 27 4 31 36
Lansing, MI(3)......................... 224,000 15 17 32 38
Jackson, MI(3)......................... 163,000 17 13 30 34
----------
Regional Total....................... 3,096,000
Total.................................... 11,992,000
==========
</TABLE>
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<PAGE> 15
- ---------------
(1) New station applications, petitions for reconsideration, and petitions for
reinstatement are subject to approval by the FCC. The entities with which
the Company has entered into leasing agreements have filed a series of
applications for wireless cable channels. In many cases, the Company's
applicant is the sole applicant. Due to the qualifications of the Company's
applicants relative to competing filings, the Company expects that most of
these applications will be approved by the FCC. However, there can be no
assurance that these FCC applications will be approved.
(2) Represents total expected wireless channels (including channels not yet in
service) plus local off-air broadcast channels which are generally available
in the Company's broadcast signal area and which the Company does not expect
to rebroadcast over its wireless cable channels.
(3) The Company is the BTA holder in this market. In certain cases, two or more
of the Company's existing or target markets may be contained within a single
BTA.
In addition to the channel interests detailed above, the Company holds
channel rights in a number of other U.S. markets. The Company may seek
additional channel rights in these markets or sell or exchange the channel
rights it already holds.
Pursuant to an Investment Agreement dated January 19, 1991, between CFW
Communications Company, a diversified publicly-traded telecommunications company
based in Waynesboro, Virginia ("CFW") and ATI (which agreement provided for the
purchase by CFW of 1,209,678 shares of ATI's Series A Convertible Preferred
Stock), the Company is entitled to receive payments equal to 10% of the earnings
(as defined in the agreement) of each wireless cable system developed by CFW in
the Commonwealth of Virginia for a 15-year period after each respective system
has achieved accumulated pre-tax income. In return, the Company is required to
provide certain advisory services to CFW in connection with the development of
such systems. CFW currently operates wireless cable systems in Richmond,
Charlottesville and other cities within the Shenandoah Valley, and maintains
certain wireless cable channel rights in Lynchburg and Winchester, Virginia.
ACQUISITIONS AND DIVESTITURES
Since May 1993, the Company has acquired 22 operational wireless cable
systems and wireless cable channel rights in 18 additional markets, and has sold
two operational wireless cable systems and wireless cable channel rights in two
additional markets. 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. See "-- Recent Development". 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 may in the future pursue other opportunities to sell or
exchange certain of its wireless cable television assets. There can be no
assurance that the Company will be successful in completing any such
transactions.
PROGRAMMING
The Company's analog wireless cable systems seek to offer popular
programming at affordable prices. The Company selects its basic programming
channels to appeal to a specific customer base and generally does not offer
programming which appeals to small, specialized market segments. The Company's
typical analog channel offering includes between 15 and 25 basic cable channels,
one to three premium channels (typically HBO, Showtime or the Disney Channel)
and one or two pay-per-view channels. Pay-per-view service is offered in certain
markets only on an event-by-event basis. Specific programming packages vary
according to
14
<PAGE> 16
particular market demand. Local off-air channels are received by the subscriber
along with the Company's wireless channels, thereby adding, on average, four to
eight channels to the number of basic channels offered and resulting in
aggregate offerings currently ranging from 14 to 44 channels. Programming
expenses typically equal approximately one-third of the Company's revenue and
have been increasing relative to revenues. The Company could be adversely
affected if it cannot increase subscriber rates, because of market pressures or
otherwise, to offset increases in programming and other expenses.
SERVICE
The Company's subscription television business emphasizes a strong
commitment to high-quality customer service. This commitment is evidenced, in a
number of the Company's Developed Markets, by seven-day-a-week,
fixed-appointment-time installations; same-day response to service call
requests; short telephone hold times; and extended office, telephone and
technical service hours.
SALES AND MARKETING
In marketing its subscription television service, the Company continues to
target specific consumer segments which have demonstrated a propensity toward
value-added choices and offers specific marketing programs based on local
demand, general market characteristics, and customer surveys.
EQUIPMENT AND FACILITIES
The Company's analog wireless cable systems utilize fully addressable
subscriber equipment. In-home wireless subscriber equipment components used in
the Company's systems are generally similar to those used in franchise cable
systems. Subscriber equipment includes a microwave receiver, downconverter,
set-top converter and remote control unit. The Company is not dependent upon any
one supplier for its equipment needs.
LICENSES AND CHANNEL LEASES
The Company generally does not hold FCC licenses for channels that it uses
to broadcast programming; instead, it has acquired the right to broadcast under
long-term leases with third party licensees. The average term of the Company's
channel leases, including renewals at the Company's option, is more than ten
years. Although the Company anticipates that it will continue to have access to
a sufficient number of channels to operate a successful wireless cable system,
if a significant number of the Company's channel leases are not renewed, a
significant number of its pending FCC applications are not granted, or the FCC
terminates, forfeits, revokes or fails to renew the authorizations held by the
Company's channel lessors, ATI may be unable to provide a viable programming
package to subscribers in some or all of its markets.
Prior to November 1993, the Company was a direct FCC licensee with respect
to approximately ten wireless cable authorizations used by its systems to
broadcast programming and had applications pending with the FCC regarding 39
other authorizations. In November and December 1993, the Company assigned its
FCC licenses, and filed amendments to assign these pending FCC applications, to
Wireless Properties, Inc., Wireless Properties of Virginia, Inc., Wireless
Properties -- East, Inc. or Wireless Properties -- West, Inc. (collectively, the
"Wireless Companies"). The Wireless Companies are owned and controlled by Donald
R. DePriest, Chairman of the Board of Directors and a Director of ATI. In
return, the Wireless Companies agreed to grant to the Company the exclusive
right to use such FCC licenses for an initial term of five years and, at the
Company's option, for an unlimited number of successive one-year terms
thereafter, pursuant to certain channel lease agreements. The Wireless Companies
assigned the majority of such licenses back to the Company during 1996. The
annual lease payments required to be paid by the Company pursuant to its channel
lease agreements with the Wireless Companies were nominal.
15
<PAGE> 17
EMPLOYEES
As of December 31, 1996, the Company had approximately 640 employees. The
Company considers relations with its employees to be satisfactory. The Company
also uses independent contractors to perform some installations and door-to-door
sales.
ITEM 2. PROPERTIES
The principal physical assets of a wireless cable system consist of
satellite signal reception equipment, radio transmitters and transmission
antennas, as well as office space and transmission tower space. The Company's
principal office is located in approximately 18,000 square feet of leased office
space in Colorado Springs, Colorado. The Company occupies this space under a
lease agreement that expires in 2000. The Company believes that such office
space in Colorado Springs is adequate for the near future. The Company currently
leases additional office and warehouse space in each of its Developed Markets
and certain of its Undeveloped Markets pursuant to lease agreements that expire
at various times over the next three to five years.
The Company also leases tower transmission space in all of its Developed
Markets (except for three markets where it owns transmission towers) and certain
of its Undeveloped Markets, pursuant to long-term lease arrangements. The
Company's tower lease agreements provide for locating transmitter, antenna and
other equipment at existing towers to broadcast wireless cable signals. The
agreements generally cover a period of five to seven years and are subject to
renewal upon expiration. To date, the Company has been able to obtain suitable
tower space on satisfactory terms in each of its Developed Markets. In the event
that any one or more of these tower space leases is terminated or not renewed
upon expiration, the Company will be required to obtain alternative tower space
in order to broadcast its programming.
ITEM 3. LEGAL PROCEEDINGS
On or about February 17, 1994, Fresno Telsat, Inc. ("FTI"), the 35% general
partner of Fresno MMDS Associates ("the Fresno Partnership") which operates the
Company's Fresno, Merced and Visalia wireless cable systems, 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
16
<PAGE> 18
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. The motion to dismiss is scheduled to be heard on April 25, 1997. 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.
The Complaint seeks compensatory damages (in an unspecified amount but
estimated by the plaintiff to be no less than $5 million) 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 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. Although the ultimate outcome of the litigation cannot be
predicted at this time, management 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.
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 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 these matters will not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 1996.
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<PAGE> 19
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
(FURNISHED IN ACCORDANCE WITH ITEM 401(B) OF REGULATION S-K, PURSUANT
TO GENERAL INSTRUCTION G(3) OF FORM 10-K)
The following table sets forth certain data concerning the Company's
executive officers as of the date of this Report:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --- ---------------- -----------------------------------------
<S> <C> <C> <C>
Donald R. DePriest...... 57 Chairman of the Board of Chairman of the Board of Directors since March
Directors 1990; President of the Company from 1988
through March 1990; Chairman of the Board of
Directors, President and sole stockholder of
MedCom Development Corporation ("MedCom"), the
sole general partner of MCT, an investment
partnership specializing in the communications
and health care industries and ATI's largest
stockholder; also a limited partner of MCT;
Chairman of the Board and President of
Boundary Healthcare Products Corporation, a
hospital products manufacturer, from 1987
through its sale to Maxxim Medical, Inc.
("Maxxim") in December 1992; Director of
Maxxim, a publicly-traded hospital products
manufacturer, since December 1992.
Richard F. Seney........ 42 Vice Chairman of the Board Vice Chairman of the Board of Directors since
of Directors and Secretary October 1993; Secretary of the Company since
1988; Treasurer of the Company from 1988 to
March 1994; Vice President and General Manager
of MedCom since 1987; limited partner of MCT.
Robert D. Hostetler..... 55 President and Chief President and Chief Executive Officer of the
Executive Officer Company since January, 1996; Vice President --
Development from January 1995 through December
1995; Director of Mergers and Acquisitions of
the Company from December 1993 through
December 1994; a member of the Board of
Directors of the Company since March 1994;
Director and/or officer of several affiliated
wireless cable entities in the Choice TV Group
(as defined herein) and President of FTI from
1988 to December 1993.
David K. Sentman........ 46 Senior Vice President, Chief Senior Vice President and Chief Financial
Financial Officer, and Officer since January 1996; Vice
Treasurer President -- Finance and Chief Financial
Officer from July 1995 through December 1995;
served in various capacities, including Chief
Financial Officer, with Artisoft, Inc. from
July 1992 through February 1995; prior to July
1992, held various management positions with
CTS Corporation.
Terry J. Holmes......... 42 Vice President -- Operations Vice President -- Operations since January
1996; Regional Manager -- Western Region from
June 1995 through December 1995; currently
Managing Director of the Fresno Partnership;
General Manager of the Fresno Partnership from
June 1991 to June 1995; prior to June 1991,
held various positions with
Telecommunications, Inc., Prime Cable and
other private cable operators.
John B. Suranyi......... 36 Vice President -- Operations Vice President -- Operations since January
1996; Regional Manager -- Rocky Mountain and
Upper Midwest Regions from September 1993
through December 1995; prior to September
1993, held various positions with
Telecommunications, Inc. and United Artists
Cable.
</TABLE>
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<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is quoted on the Nasdaq Stock Market
under the symbol "ATEL." The high and low closing sale prices of the Class A
Common Stock for 1995 and 1996 on the Nasdaq Stock Market (as reported by
Nasdaq) are set forth below:
NASDAQ DAILY CLOSING PRICE
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1995
First Quarter............................................... $17 3/4 $ 9 1/4
Second Quarter.............................................. 16 1/2 11 3/4
Third Quarter............................................... 13 3/4 9 1/2
Fourth Quarter.............................................. 15 12
1996
First Quarter............................................... $17 $13 3/4
Second Quarter.............................................. 16 11 1/4
Third Quarter............................................... 14 1/4 8 3/4
Fourth Quarter.............................................. 11 1/2 5 1/4
</TABLE>
As of March 11, 1997, there were approximately 408 record holders of the
Company's Class A Common Stock, not including stockholders who beneficially own
Class A Common Stock held in nominee or street name. As of March 11, 1997, there
were approximately 5,000 beneficial owners of the Company's Class A Common Stock
held in nominee or street name.
The Company has never declared or paid any cash dividends on its Class A
Common Stock and does not expect to declare dividends in the foreseeable future.
Payment of any future dividends will depend upon the earnings and capital
requirements of the Company, the Company's debt facilities, and other factors
the Board of Directors considers appropriate. The Company currently intends to
retain its earnings, if any, to support future growth and expansion. The
Company's ability to declare dividends is affected by covenants in certain debt
facilities that prohibit the Company from declaring dividends and the Company's
subsidiaries from transferring funds in the form of cash dividends, loans or
advances to ATI. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
19
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data as of and for each period in the
five year period ended December 31, 1996 have been derived from, and are
qualified by reference to, the Company's Consolidated Financial Statements which
have been audited by Arthur Andersen LLP, independent public accountants. This
data should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes thereto for the three years ended December 31,
1996, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1992 1993(1) 1994(2) 1995(3) 1996
------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND
OPERATING DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenues............................................ $ 3,534 $ 7,178 $ 21,629 $ 47,501 $ 62,032
Costs and expenses:
Operating............................................... 2,563 4,524 13,128 26,021 36,029
Marketing, general and administrative................... 1,729 2,937 13,486 27,870 26,256
Depreciation and amortization........................... 1,158 2,563 12,032 29,276 44,665
Impairment of wireless cable assets..................... -- -- -- -- 21,271
------- -------- -------- -------- ---------
Loss before interest and taxes............................ (1,916) (2,846) (17,017) (35,666) (66,189)
Interest expense and other, net........................... (258) (1,665) (7,271) (22,300) (35,488)
------- -------- -------- -------- ---------
Loss before income tax benefit............................ $(2,174) $( 4,511) $(24,288) $(57,966) $(101,677)
======= ======== ======== ======== =========
Net loss applicable to Class A Common Stock(4)............ $(2,174) $ (4,511) $(15,478) $(66,635) $(104,630)
======= ======== ======== ======== =========
Net loss per share(5)..................................... $ (0.46) $ (1.07) $ (4.17) $ (5.78)
======== ======== ======== =========
Weighted average shares outstanding(5).................... 9,831 14,445 15,977 18,096
======== ======== ======== =========
OPERATING AND OTHER DATA:
Earnings (loss) before interest, income taxes,
depreciation and amortization(6)........................ $ (758) $ (283) $ (4,985) $ (6,390) $ (253)
Number of operational systems (at end of period).......... 3 10 26 38 38
Number of subscribers (at end of period).................. 15,300 31,400 106,500 173,700 179,800
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $ 81 $ 36,377 $ 33,331 $ 32,514 $ 18,476
Intangible assets, net.................................... 1,678 46,273 118,397 166,194 160,052
Total assets.............................................. 11,275 101,653 226,920 317,049 283,572
Long-term obligations (net of current portion and deferred
income taxes)........................................... 3,871 11,641 117,761 225,512 256,354
Stockholders' equity...................................... 2,903 79,056 93,843 53,736 3,113
</TABLE>
- ---------------
(1) Includes the results of operations of the Billings, Denver and South
Bend/Elkhart systems from their respective acquisition dates.
(2) Includes the results of operations of the Bend, FEN/WEN Group, Oklahoma
City, Wichita and Lakeland systems from their respective acquisition dates.
(3) Includes the results of operations of the Medford, Sheridan, Redding, Las
Vegas and Rapid City systems and Fresno Wireless Cable Television, Inc.
("FWCTI") from their respective acquisition dates.
(4) Reflects the cumulative effect of the change in accounting for installation
costs effected January 1, 1995 (income, net of income taxes, of $602,000 or
$0.04 per share) and the extraordinary charge on early retirement of debt
recognized during the quarter ended September 30, 1995 (charge of $11.5
million or $0.72 per share). Net loss for the year ended December 31, 1996
includes dividend embedded in conversion feature of Series B Convertible
Preferred Stock of $6.25 million.
(5) Net loss per share and weighted average shares outstanding for the years
ended December 31, 1993 and 1994 give effect to the conversion in January
1994 of all outstanding shares of ATI's Series A Convertible Preferred Stock
into 2,014,098 shares of Common Stock. Net loss per share for the year ended
December 31, 1996 gives effect to the dividend embedded in conversion
feature of Series B Convertible Preferred Stock of $6.25 million.
(6) Earnings (loss) before interest, taxes, depreciation and amortization is a
commonly used measure of performance within the wireless cable industry.
However, it 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 in accordance with generally accepted accounting principles. The
amount for 1996 excludes impairment of wireless cable assets of
approximately $21.3 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Fiscal Year 1996 Compared
to Fiscal Year 1995."
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<PAGE> 22
ITEM 7. 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. See
"Business -- Regulation" and "Business -- Competition." 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. As more fully described above under "Business -- Certain Requirements
and Uncertainties," 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 (as defined herein), 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
21
<PAGE> 23
ranging from $67.9 million to $103.2 million, depending on the number of
wireless cable channel rights that are ultimately transferred to BellSouth
Wireless. See "Business -- Recent Development." 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. See "-- Liquidity and Capital
Resources -- Sources and Uses of Funds -- Strategic Relationship Objectives."
The Company's Developed Markets generate negative operating cash flow until
the subscriber base becomes sufficiently large for incremental revenues, net of
incremental costs, to offset fixed costs, other than depreciation and other
non-cash expenses. Certain costs, such as programming costs, generally increase
in proportion to the number of subscribers, while other costs, such as tower
rental and related maintenance costs, remain constant or increase at
proportionately lower levels. Accordingly, systems with larger subscriber bases
generally produce higher operating margins, and systems with small subscriber
bases usually produce negative operating margins. For the year ended December
31, 1996, 24 of the Company's 38 Developed Markets generated positive operating
cash flow.
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.
The Company leases many of the channels used to transmit its programming
from FCC license holders. Typically, these leases provide for payments based
upon the number of subscribers, subject in many cases to certain minimums, as
more fully discussed in the Notes to the Company's Consolidated Financial
Statements included herein. Total channel lease payments approximated 4.1% of
total revenues during the year ended December 31, 1996. Total programming
expenses approximated 31.2% of total revenues during the same period. Such
expenses vary from system to system depending upon the number of channels
offered and pay channel penetration. Marketing costs are expensed in the period
incurred. As a result, operating results in any period are negatively affected
by expenditures for marketing and promotion. Since the Company's monthly
services are billed in advance, accounts receivable are relatively small.
The Company capitalizes all installation costs (labor, subcontractor costs
and supplies). Such capitalized installation costs generally are amortized over
three years. Headend equipment is generally depreciated over ten years.
Equipment purchased and awaiting installation into subscriber premises is
classified as part of property and equipment in the Company's Consolidated
Financial Statements.
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 Company's
historically high growth rate and the number of system launches and acquisitions
during the periods presented.
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.
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
22
<PAGE> 24
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. As
further described below, the Company is pursuing relationships or transactions
with other providers of telecommunications services to facilitate access to
additional capital, among other things. See "-- Strategic Relationship
Objectives." 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.
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. See "Business -- Recent Development." 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.
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 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 years ended December 31, 1994, 1995 and 1996 were
approximately $35.5 million, $49.3 million, and $32.5 million, respectively.
Such expenditures were primarily for the construction and expansion of the
Company's wireless cable systems and the installation of equipment in new
subscribers' homes.
In addition, the Company was involved in the 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.
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 January 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, which may or may not be satisfied. There can be no
assurance that the Cincinnati Acquisition will be consummated.
In February 1996, $2.5 million of notes issued in connection with the
Company's September 1995 acquisition of Superchannels of Las Vegas, Inc. were
converted into 162,854 shares of ATI Common Stock. In May 1996, the Company
completed an offering of 1,700,000 shares of its Class A Common Stock resulting
in net proceeds of approximately $19.9 million. In August 1996, the Company
completed a private placement
23
<PAGE> 25
of 100,000 shares of its Series B Convertible Preferred Stock, resulting in net
proceeds to the Company of $9.4 million. In October 1996, the Company completed
a private placement of 150,000 shares of its Series B Convertible Preferred
Stock, resulting in net proceeds to the Company of $14.3 million. During 1996,
the Company also completed the sale of wireless cable systems in St. James,
Minnesota and Yankton, South Dakota and wireless cable channel assets in Sioux
Falls, South Dakota for cash consideration totaling $3.1 million (of which
approximately $355,000 is being held in escrow pending completion of certain
post closing events).
Under the terms of a Supplemental Indenture dated August 10, 1995,
governing the Company's Senior Discount Notes due 2004 (the "2004 Notes"), the
yield to maturity of the 2004 Notes was to be adjusted to 15 1/2% per annum
(from 14 1/2% per annum) if the Company did not, between August 10, 1995 and
November 10, 1996, issue equity securities having a value at the time of
issuance of at least $50.0 million in the aggregate. Subsequent to August 10,
1995, the Company issued equity securities which had an aggregate value at the
time of issuance in excess of $50.0 million. These issuances satisfied the
condition set forth in the Supplemental Indenture. Accordingly, the yield to
maturity of the 2004 Notes will remain at 14 1/2%.
STRATEGIC RELATIONSHIP OBJECTIVES
As described above, the Company will require significant additional capital
to fully implement its revised business strategy (including costs associated
with the provision of digital video service in certain of its Developed Markets
and the introduction of other digital wireless services such as high-speed
Internet access and telephony). 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. As of the date of this Report, other than 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.
CREDIT FACILITIES
Credit Facility
On February 26, 1997, the Company entered into a $17.0 million credit
facility the ("Credit Facility") with Banque Indosuez, New York Branch (the
"Bank"). Proceeds of the Credit Facility are to be used to repay a portion of
the Company's existing debt, for capital expenditures, to complete certain
pending acquisitions of wireless cable channel rights, and for working capital
and other general corporate purposes.
The term of the Credit Facility is up to twelve months. 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 shall 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 the Company from its
Fresno subsidiary under the Fresno Facility (as defined herein).
The Company paid the Bank a commitment fee of $340,000. At closing, the
Company paid an additional fee of $340,000 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
24
<PAGE> 26
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. The Company has deposited $1.0 million in escrow to
satisfy certain interest obligations under the Credit Facility.
Fresno Facility
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. However, no amounts were available for borrowing
under such facility as of December 31, 1996. Effective June 30, 1996, the Fresno
Facility was amended (the "Amended Agreement") to, among other things (i) permit
the incurrence by the Fresno Partnership of up to $2.3 million in subordinated
debt due ATI; (ii) permit the payment to ATI by the Fresno Partnership of a loan
fee of up to $23,000; and (iii) modify certain of the financial and other
operating covenants specified in the original agreement. In addition, past
violations of certain financial and other operating covenants associated with
the Fresno Facility were waived by the bank. In exchange for the bank's entering
into the Amended Agreement, the Fresno Partnership agreed to cause the bank's
participation in the Fresno Facility to be eliminated by March 31, 1997, through
prepayment by the Fresno Partnership of all amounts due, assignment of the
bank's participation to a third party lender or lenders (including ATI), or some
combination of the foregoing. In connection therewith, as of December 31, 1996
ATI had purchased, in the aggregate, a $5.5 million participation in the Fresno
Facility from the bank. In February 1997, ATI purchased the remaining $3.0
million participation in the Fresno Facility from the bank. As a result, the
Fresno Facility is now an obligation of the Fresno Partnership to ATI. The
Fresno Facility contains various financial and other restrictive covenants that,
among other things, prohibit the payment of dividends. As of December 31, 1996,
the Fresno Partnership was not in compliance with certain of the restrictive
covenants contained in the Fresno Facility. Outstanding borrowings under the
Fresno Facility bear interest at the banks' prime rate plus 2.25% (10.5% at
December 31, 1996). Interest expense relating to the Fresno Facility during the
year ended December 31, 1996 totaled $763,000. The Fresno Facility is secured by
the assets of the Fresno, Visalia and Merced systems.
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 Company's 14.5% Senior Discount
Notes due 2005 (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 is currently limited to approximately $8.2
million. 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
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<PAGE> 27
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 expects that negative
stockholders' equity will result before March 31, 1997. A negative tangible net
worth or stockholders' equity position has significant implications, including,
but not limited to, non-compliance with Nasdaq National Market listing criteria.
If the Company ceases to satisfy the Nasdaq National Market listing criteria,
its Class A Common Stock will be subject to delisting, unless an exception is
granted by the National Association of Securities Dealers. If an exception is
not granted, trading in the Company's Class A Common Stock would thereafter be
conducted in the over-the-counter market. Consequently, it would be more
difficult to dispose of, or to obtain accurate quotations as to the price of the
Class A Common Stock. Delisting could result in a decline in the trading market
for the Class A Common Stock, which could potentially depress the Company's
stock and bond prices, among other things. The Company believes that the
proceeds of the BellSouth Transaction, if consummated, will help bring the
Company into compliance with the Nasdaq National Market listing criteria.
However, there can be no assurance that the Company will be able to achieve or
sustain positive tangible net worth, stockholders' equity or net income in the
future.
RESULTS OF OPERATIONS
Fiscal Year 1996 Compared to Fiscal Year 1995
Service revenues increased $14.5 million, or 31.4%, during the year ended
December 31, 1996 to $60.7 million, as compared to $46.2 million during the year
ended December 31, 1995. This increase resulted primarily from the addition of
new subscribers. Subscriber increases resulted primarily from the 1996
acquisition of subscription television subscribers in Cincinnati, the 1995
acquisitions of the Redding, Las Vegas and Rapid City systems, and the
completion of construction and commencement of operation of systems in Yuba City
and Lincoln during 1995 and Anchorage and Portland during 1996. Service price
increases contributed only a small portion of the aggregate increase in service
revenues. The number of subscribers to the Company's wireless cable systems
increased to 179,800 at December 31, 1996, compared to 173,700 at December 31,
1995.
On a "same system" basis (comparing systems that were operational for all
of each of the years ended December 31, 1996 and 1995), service revenues
increased $6.7 million, or 16.9%, to $46.3 million during the year ended
December 31, 1996, as compared to $39.6 million for the year ended December 31,
1995. Same systems during these periods totaled 24 systems. The average number
of same-system subscribers increased approximately 13.2% during the year ended
December 31, 1996, as compared to the year ended December 31, 1995.
Installation revenues totaled $1.3 million in each of the years ended
December 31, 1996 and 1995. The number of installations completed during the
year ended December 31, 1996 decreased approximately 22.0% as compared to the
year ended December 31, 1995. However, this decrease was fully offset by less
discounting of installation rates. Installation rates vary widely by system
based upon competitive conditions. The Company occasionally reduces installation
charges as part of selected promotional campaigns.
Operating expenses, principally programming, site costs and other direct
expenses, aggregated $36.0 million (or 58.1% of total revenues) during the year
ended December 31, 1996, compared to $26.0 million (or 54.8% of total revenues)
during the year ended December 31, 1995. The increase of $10.0 million was
primarily the result of additional systems and subscribers, as well as increased
programming costs for additions to channel line-ups and increased pay-per-view
offerings in various systems.
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<PAGE> 28
Marketing and selling expenses totaled $7.4 million (or 12.0% of total
revenues) during the year ended December 31, 1996, compared to $8.7 million (or
18.3% of total revenues) during the year ended December 31, 1995. The decrease
in such expenses of $1.3 million resulted from decreased marketing activity, net
of marketing expenses associated with the addition of new systems. During the
year ended December 31, 1996, general and administrative expenses totaled $18.8
million (or 30.4% of total revenues), a $400,000 decrease over the year ended
December 31, 1995 ($19.2 million or 40.4% of total revenues). The decrease in
general and administrative expenses principally resulted from reductions in the
number of employees and certain non-recurring expenses totaling $1.1 million
recognized during 1995 relating to the recognition of certain lease termination
and severance costs. Such decreases were partially offset by increased general
and administrative expenses associated with the addition of new systems.
In the fourth quarter of 1996, after considering the Company's 1996
operating loss, its history of such operating losses and the expectation of
future operating losses, changes in the Company's strategic direction,
developments relating to previously scheduled industry transactions and
ventures, and the industry factors described above under
"Business -- Regulation" and "Business -- Competition", the Company evaluated
the ongoing value of its wireless cable business in each Developed Market. Based
on this valuation, the Company determined that assets with a carrying value of
$95.1 million were impaired according to the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and wrote
down the carrying value of such assets by $21.3 million to their fair value. An
evaluation was made for each of the Company's Developed Markets individually,
not for the Company's markets as a whole. Fair value was based on recent
transactions in the wireless cable industry. In addition, during the fourth
quarter of 1996, the Company prospectively revised the lives of its subscriber
premise equipment from seven years to three or four years.
The Company's loss from operations was $66.2 million during the year ended
December 31, 1996, as compared to $35.7 million during the year ended December
31, 1995. The increase in the loss from operations of $30.5 million during 1996
resulted primarily from the impairment loss of $21.3 million described above and
increased depreciation and amortization expense. Depreciation and amortization
expense (principally depreciation of property and equipment and amortization of
deferred license and leased license acquisition costs, goodwill and covenants
not-to-compete) increased $15.4 million in the year ended December 31, 1996,
compared to the year ended December 31, 1995, due to increases in deferred
license costs, goodwill and subscriber equipment resulting from the acquisition
and addition of new systems and the addition of equipment installed in new
subscribers' homes.
Interest expense increased $12.8 million during the year ended December 31,
1996 to $37.3 million, as compared to $24.5 million during the year ended
December 31, 1995. The increase in interest expense primarily resulted from
noncash interest charges associated with the Company's 2004 Notes and 2005
Notes. Interest expense associated with the 2004 Notes also increased due to an
increase in the interest rate on the 2004 Notes from 12.5% to 14.5% effected in
August 1995 in conjunction with the Company's offering of the 2005 Notes.
Loss before interest, taxes, depreciation and amortization and the
impairment write down described above totaled $253,000 for the year ended
December 31, 1996, as compared to a loss before interest, taxes, depreciation,
and amortization of $6.4 million during the year ended December 31, 1995.
Fiscal Year 1995 Compared to Fiscal Year 1994
Service revenues increased $25.5 million, or 122.5%, during the year ended
December 31, 1995 to $46.2 million, as compared to $20.7 million during the year
ended December 31, 1994. This increase resulted primarily from the addition of
new subscribers. Subscriber increases resulted not only from the 1994
acquisitions of the Bend, FEN/WEN Group, Oklahoma City, Wichita and Lakeland
systems, the 1995 acquisitions of the Medford, Sheridan, Fresno, Visalia,
Merced, Redding, Las Vegas and Rapid City systems, and the commencement of
operations in Columbus, Youngstown, Jacksonville, Lansing and Monterey during
1994 and Ft. Collins, Greeley, Yuba City, and Lincoln during 1995, but also from
increased marketing and promotional efforts in all markets. Service price
increases contributed only a small portion of the aggregate
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<PAGE> 29
increase in service revenues. The number of subscribers to the Company's
wireless cable systems increased to approximately 173,700 at December 31, 1995
compared to approximately 106,500 at December 31, 1994.
On a "same system" basis (comparing systems that were operational for all
of each of the years ended December 31, 1994 and 1995), service revenues
increased $8.0 million, or 57.5%, to $21.9 million for the year ended December
31, 1995, as compared to $13.9 million for the year ended December 31, 1994.
This increase resulted primarily from the addition of new subscribers. Same
systems during this period consisted of the Company's Colorado Springs, Orlando,
Ft. Myers, Billings, Toledo, Daytona Beach, Michiana, Denver, Little Rock and
Louisville systems. The number of subscribers in these systems increased
approximately 40.7% during the year ended December 31, 1995.
Installation revenues for the year ended December 31, 1995 totaled $1.3
million, as compared to $871,000 during the year ended December 31, 1994. The
increase in installation revenues of $441,000, or 50.6%, was primarily the net
result of more subscriber installations in each system, less the effect of lower
per-subscriber installation charges in certain systems.
Operating expenses aggregated $26.0 million (or 54.8% of total revenues)
during the year ended December 31, 1995, as compared to $13.1 million (or 60.7%
of total revenues) during the year ended December 31, 1994. The increase of
$12.9 million was primarily the result of additional systems and subscribers as
well as increased programming costs from additions to channel line-ups in
various systems. In 1995, the Company began capitalizing all subscriber
installation costs. Previously, the Company expensed an amount equal to
installation revenues and capitalized installation costs in excess of
installation revenues. This change in accounting method was effected to better
match installation costs with related subscriber service revenues. Operating
expenses for the year ended December 31, 1994 include installation costs which
were expensed of approximately $871,000.
Marketing and selling expenses totaled $8.7 million (or 18.3% of total
revenues) during the year ended December 31, 1995, as compared to $4.1 million
(or 18.8% of total revenues) during the year ended December 31, 1994. The
increase in such expenses of $4.6 million resulted primarily from the addition
of new systems, intensified sales and marketing efforts (including the
introduction of the WANTV(SM) brand name in certain of the Company's systems),
and from increased media spending. During 1995, general and administrative
expenses totaled $19.2 million (or 40.4% of total revenues), a $9.8 million
increase over the year ended December 31, 1994 (43.6% of total revenues). This
increase resulted not only from the addition of new systems and increased
corporate and regional overhead expenses, but also from the recognition of
severance costs totaling $711,000 and lease termination costs of $420,000
related to the relocation of the Company's corporate headquarters to larger
office space in Colorado Springs.
The Company's loss from operations was $35.7 million during the year ended
December 31, 1995, as compared to $17.0 million during the year ended December
31, 1994. The increase in the loss from operations of $18.7 million resulted
from increased depreciation and amortization expense, as well as from the
increases in marketing and general and administrative expenses described above.
Depreciation and amortization expense (principally depreciation of property and
equipment and amortization of deferred license and leased license acquisition
costs, goodwill and covenants not-to-compete) increased $17.2 million due to
increases in deferred license costs, goodwill and subscriber equipment resulting
from the acquisition and addition of new systems and the addition of equipment
installed in new subscribers' homes. Approximately $644,000 of the increase in
depreciation and amortization expenses was attributable to the change in
accounting for installation costs previously described.
Interest expense increased $15.2 million during the year ended December 31,
1995 to $24.5 million, as compared to $9.3 million during the year ended
December 31, 1994. The increase in interest expense primarily resulted from
noncash interest charges associated with the 2004 Notes and 2005 Notes and
additional borrowings under, and higher interest rates associated with, the
Company's various revolving credit facilities. The Company's loss before
interest, taxes, depreciation and amortization totaled $6.4 million for the year
ended December 31, 1995, as compared to $5.0 million during the year ended
December 31, 1994 (a pro forma amount of $4.1 million assuming the change in
accounting method was applied retroactively). The increase in the loss before
interest, taxes, depreciation and amortization of $1.4 million primarily
resulted from
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<PAGE> 30
proportionately larger start-up losses of the Company's systems that commenced
operation during 1994, pre-opening costs and start-up losses of the Company's
systems that commenced operations during 1995, increased marketing expenses, and
increased corporate overhead related to significant system development and
market expansion activities. Such increases were partially offset by improved
operating results from growth in the Company's other systems. The Medford,
Sheridan, Redding, Fresno, Visalia, Merced, Las Vegas and Rapid City systems
acquired during 1995 generated, in the aggregate, earnings before interest,
taxes, depreciation and amortization of $1.3 million. Excluding these
acquisitions, the Company's loss before interest, taxes, depreciation and
amortization for the year ended December 31, 1995 approximated $7.7 million.
INCOME TAX MATTERS
ATI and its subsidiaries file a consolidated federal tax return. The
Company has had no state or federal income tax expense since inception. As of
December 31, 1996, the Company had approximately $156.6 million in net operating
loss carryforwards for tax purposes, expiring through 2011. Section 382 of the
Internal Revenue Code limits the amount of loss carryforwards that a company can
use to offset future income upon the occurrence of certain changes in ownership.
The issuance of moderate amounts of certain types of new equity could limit the
Company's ability to use net operating losses to offset future gains from the
sale of assets, thus requiring the Company to pay income taxes on gains received
in such asset sales.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires impairment losses to be
recognized for long-lived assets used in operations when indicators of
impairment are present and the future undiscounted cash flows are not sufficient
to recover the assets' carrying amount. The resultant impairment loss is
measured by comparing the fair value of the asset to its carrying amount. The
Company adopted SFAS No. 121 in the first quarter of 1996. SFAS No. 121 did not
have a material effect on the Company's financial position or results of
operations at the time of adoption. As previously described, during the fourth
quarter of 1996, the Company determined that indicators of impairment were
present. As a result, a charge of $21.3 million was recognized to write down the
carrying value of certain assets to their fair value.
The Company follows the guidelines established by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock options. In October 1995,
the FASB issued SFAS No. 123, "Accounting and Disclosure of Stock-Based
Compensation," which established an alternative method of expense recognition
for stock-based compensation awards to employees based on fair values. The
Company elected not to adopt the statement for expense recognition purposes.
On March 3, 1997, the FASB 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 fiscal years ending
after December 15, 1997, and when adopted, it will require restatement of prior
years' earnings per share.
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.
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INFLATION
Inflation has not affected the Company's operations significantly during
the past three years. The Company believes that its ability to increase charges
for services in future periods will depend primarily on competitive pressures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Financial Statements included in this Report at
pages F-1 through F-25 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to the identity and
business experience of the Company's Directors is set forth in the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held on April 24,
1997, under the caption "Election of Directors," which information is hereby
incorporated herein by reference.
The information required by this Item with respect to the identity and
business experience of the Company's Executive Officers is set forth on page 18
of this Report under the Caption "Executive Officers of the Registrant."
The information required by this item with respect to compliance with
Section 16(a) of the Securities Exchange Act of 1934 is set forth in the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held on
April 24, 1997, under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is hereby incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 24, 1997,
under the captions "Compensation and Other Information Concerning Executive
Officers," and "Board of Directors Interlocks and Insider Participation," which
information is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 24, 1997,
under the caption "Stock Ownership of Certain Beneficial Owners and Management,"
which information is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 24, 1997,
under the caption "Certain Relationships and Related Transactions," which
information is hereby incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
(2) Exhibits
3.1 -- Certificate of Designation for Series B Convertible Preferred
Stock of American Telecasting, Inc. dated August 6, 1996
(incorporated by reference to Exhibit 4.1 to the Company's Form
8-K filed on August 7, 1996).
3.2 -- Amendment to Restated Certificate of Incorporation of American
Telecasting, Inc. dated April 24, 1996 (incorporated by
reference to Exhibit 3.1(i) to the Company's Quarterly Report on
10-Q for the period ended June 30, 1996).
3.3 -- Restated Certificate of Incorporation of American Telecasting,
Inc., dated April 27, 1995 (incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1995).
3.4 -- Amended and Restated By-Laws of American Telecasting, Inc.
(incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1995).
4.1 -- Specimen Common Stock Certificate (incorporated by reference to
Exhibit 2 to the Company's Registration Statement on Form 8-A
filed on December 6, 1993).
4.2 -- Specimen Class A Common Stock Certificate (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-3 filed on April 26, 1996).
4.3 -- Specimen Class B Common Stock Certificate.
4.4 -- Specimen Series B Convertible Preferred Stock Certificate.
4.5 -- Supplemental Indenture dated as of August 10, 1995 between
American Telecasting, Inc. and First Trust National Association,
Trustee, supplementing and amending the Indenture dated as of
June 23, 1994 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995).
4.6 -- Indenture dated as of June 23, 1994 between American
Telecasting, Inc. and First Trust National Association, Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the period ended December 31,
1994).
4.7 -- Form of Senior Discount Note due 2004 (included within Exhibits
4.5 and 4.6).
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<PAGE> 33
4.8 -- Supplemental Warrant Agreement dated as of August 10, 1995
between American Telecasting, Inc. and First Union National Bank
of North Carolina, as warrant agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1995).
4.9 -- Warrant Agreement dated as of June 23, 1994 between American
Telecasting, Inc. and First Union National Bank of North
Carolina, as warrant agent (incorporated by reference to Exhibit
4.4 to the Company's Annual Report on Form 10-K for the period
ended December 31, 1994).
4.10 -- Form of Warrant (included within Exhibits 4.8 and 4.9).
4.11 -- Collateral and Disbursement Agreement dated as of June 23, 1994
between First Trust National Association and American
Telecasting, Inc. (incorporated by reference to Exhibit 4.3 to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1994).
4.12 -- Indenture dated as of August 10, 1995 between American
Telecasting, Inc., as Issuer, and First Trust National
Association, as Trustee (incorporated by reference to Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995).
4.13 -- Form of Senior Discount Note due 2005 (included within Exhibit
4.12).
4.14 -- Warrant Agreement dated as of August 10, 1995 between American
Telecasting, Inc. and First Union National Bank of North
Carolina, as warrant agent (incorporated by reference to Exhibit
4.5 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995).
4.15 -- Form of Warrant (included within Exhibit 4.14).
4.16 -- Registration Rights Agreement dated as of August 10, 1995 by and
among American Telecasting, Inc. and Dillon Read & Co., Inc. and
CS First Boston Corporation (incorporated by reference to
Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.1 -- Stock Purchase and Sale Agreement dated as of June 7, 1995 by
and between Bruce Merrill and Virginia Merrill and their
successors in trust, as trustees of the Merrill Revocable Trust
dated August 20, 1982 and American Telecasting, Inc.
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995).
10.2 -- Binding Letter Agreement dated as of July 6, 1995 by and between
Red Rock Communications, Inc. and American Telecasting, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995).
10.3 -- Management Agreement dated as of February 3, 1996 between Fresno
MMDS Associates and American Telecasting Development, Inc.
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995).
10.4 -- Standard Commercial Lease Agreement, dated as of September 18,
1995, between Tech Center VI Associates, L.P., as Lessor, and
American Telecasting, Inc., as Lessee (incorporated by reference
to Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.5 -- Employment Agreement effective as of January 4, 1996 between
American Telecasting, Inc. and Robert D. Hostetler (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the period ended March 31, 1996).
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<PAGE> 34
10.6 -- Employment Agreement dated August 10, 1995 between American
Telecasting, Inc. and David K. Sentman (incorporated by
reference to Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1995).
10.7 -- First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1996 among Fresno MMDS
Associates, First Union National Bank of North Carolina, Fresno
Telsat, Inc. and Fresno Wireless Cable Television, Inc.; related
Subordination Agreement dated as of June 30, 1996 by American
Telecasting, Inc. and Fresno MMDS Associates in favor of First
Union National Bank of North Carolina; related Assignment
Acceptance and Intercreditor Agreement dated as of July 18, 1996
among First Union National Bank of North Carolina as agent and
Fresno MMDS Associates (incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1996).
10.8 -- Side agreement between Fresno Telsat, Inc. and American
Telecasting, Inc. dated July 18, 1996 (incorporated by reference
to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996).
10.9 -- Amended and Restated Revolving Credit Agreement between Fresno
MMDS Associates, First Union National Bank of North Carolina,
Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc.
dated as of September 30, 1994; related Amended and Restated
Revolving Credit Note by Fresno MMDS Associates in favor of
First Union National Bank of North Carolina; related Pledge and
Security Agreement dated as of September 30, 1994 between Fresno
MMDS Associates and First Union National Bank of North Carolina;
related Collateral Assignment and Security Agreement dated as of
September 30, 1994 by and between FMA Licensee Subsidiary, Inc.
and First Union National Bank of North Carolina (incorporated by
reference to Exhibit 10.21 to the Company's Form S-4
Registration Statement filed on September 22, 1995).
10.10 -- Credit Agreement dated as of February 26, 1997, among American
Telecasting, Inc. and Banque Indosuez, New York Branch, as
Agent, and the lending institutions listed therein (the
"Banks"); related Option Agreement dated as of February 26, 1997
among American Telecasting, Inc. and Indosuez CM II, Inc.;
related Bond Appreciation Rights Certificate dated February 26,
1997; related Securities Pledge Agreement dated as of February
26, 1997 in favor of Banque Indosuez, New York Branch, as
pledgee, assignee and secured party, in its capacity as
collateral agent for the Banks; related Securities Pledge
Agreement dated as of February 26, 1997 made by American
Telecasting of Green Bay, Inc. in favor of Banque Indosuez, New
York Branch, as pledgee, assignee and secured party, in its
capacity as collateral agent for the Banks; related General
Security Agreement dated as of February 26, 1997 made by certain
subsidiaries of American Telecasting, Inc. in favor of Banque
Indosuez, New York Branch, as pledgee, assignee and secured
party, in its capacity as collateral agent for the Banks;
related Registration Rights Agreement dated as of February 26,
1997 among American Telecasting, Inc. and the holders of the
warrants to purchase an aggregate of 141,667 shares of the Class
A Common Stock of American Telecasting, Inc.; related Securities
Pledge Agreement dated as of February 26, 1997 made by American
Telecasting, Inc. in favor of Banque Indosuez, New York Branch,
as pledgee, assignee and secured party, in its capacity as
collateral agent for the Banks.
10.11 -- Form of Underwriting Agreement dated as of May 21, 1996 among
Alex. Brown & Sons Incorporated, Dillon, Read & Co. Inc., and
American Telecasting, Inc. (incorporated by reference to Exhibit
1.1 to the Company's Registration Statement on Form S-3 filed on
April 10, 1996).
33
<PAGE> 35
10.12 -- Stock Purchase Agreement dated as of August 6, 1996 by and among
American Telecasting, Inc., Museum Assets Ltd., and Ashline,
Ltd. (incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
1996).
10.13 -- Stock Purchase Agreement dated October 25, 1996 by and among
American Telecasting, Inc., Wartone Property Holdings, Ltd.,
Harleko Ltd., and Tarian Properties, Ltd. (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1996).
10.14 -- Agreement for Purchase and Sale of Assets dated June 28, 1996
among Novner Enterprises, Inc., Alvin Novick, Phyllis Novick,
American Telecasting of Cincinnati, Inc. and American
Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996).
10.15 -- Management Agreement dated as of June 28, 1996 between Novner
Enterprises, Inc. and American Telecasting of Cincinnati, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1996).
10.16 -- Agreement for Exchange of Assets dated July 10, 1996 among
Heartland Wireless Communications, Inc., Heartland Wireless
South Dakota Properties, Inc., Heartland Wireless Florida
Properties, Inc. and American Telecasting, Inc. (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1996).
10.17 -- American Telecasting, Inc. 1990 Stock Option Program, As Amended
(Effective April 25, 1996) (incorporated by reference to Exhibit
10.6 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1996).
10.18 -- Form of Registration Rights Agreement between American
Telecasting, Inc. and Stockholder (incorporated by reference to
Exhibit 10.40 to the Company's Form S-1 Registration Statement
filed on October 8, 1993).
11.1 -- Statement regarding computation of per share earnings.
21.1 -- Subsidiaries of American Telecasting, Inc.
23.1 -- Consent of Independent Public Accountants.
27.1 -- Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
34
<PAGE> 36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996....................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996........... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Telecasting, Inc.:
We have audited the accompanying consolidated balance sheets of American
Telecasting, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Telecasting, Inc.
and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
February 21, 1997 (except with respect to the
Facility and the BellSouth Transaction
discussed in Notes 1 and 7, as to which
the date is March 18, 1997)
F-2
<PAGE> 38
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 32,514 $ 18,476
Trade accounts receivable, net of allowance for
uncollectible accounts of $916 and $687,
respectively........................................... 2,171 1,867
Notes receivable from officers and employees.............. 543 322
Prepaid expenses and other current assets................. 2,331 2,468
-------- --------
Total current assets.............................. 37,559 23,133
Property and equipment, net................................. 112,377 99,271
Deferred license and leased license acquisition costs,
net....................................................... 143,006 139,537
Goodwill, net............................................... 16,030 15,163
Deferred financing costs, net............................... 5,268 4,704
Other assets, net........................................... 2,809 1,764
-------- --------
Total assets...................................... $317,049 $283,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 20,003 $ 15,022
Current portion of long-term obligations.................. 11,062 5,852
Customer deposits......................................... 605 397
-------- --------
Total current liabilities......................... 31,670 21,271
Deferred income taxes....................................... 6,131 2,834
Long-term obligations, net of current portion:
2004 Notes................................................ 116,864 135,484
2005 Notes................................................ 100,262 116,480
Notes payable............................................. 6,938 2,434
Capital lease obligations................................. 1,432 1,053
Minority interest and other............................... 16 903
-------- --------
Total long-term obligations, net of current
portion......................................... 225,512 256,354
-------- --------
Total liabilities................................. 263,313 280,459
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity (Notes 2, 8 and 9):
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 and
110,000 shares outstanding............................. -- 13,237
Class A Common Stock, $.01 par value; 30,000,000 shares
authorized; 16,435,974 and 20,784,238 shares issued and
outstanding, respectively.............................. 164 208
Class B Common Stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding........... -- --
Additional paid-in capital................................ 135,364 176,091
Common Stock warrants outstanding......................... 10,130 10,129
Accumulated deficit....................................... (91,922) (196,552)
-------- --------
Total stockholders' equity........................ 53,736 3,113
-------- --------
Total liabilities and stockholders' equity........ $317,049 $283,572
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 39
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Service and other..................................... $ 20,758 $ 46,189 $ 60,713
Installation.......................................... 871 1,312 1,319
----------- ----------- -----------
Total revenues.......................................... 21,629 47,501 62,032
Costs and Expenses:
Operating............................................. 13,128 26,021 36,029
Marketing............................................. 4,056 8,678 7,429
General and administrative............................ 9,430 19,192 18,827
Depreciation and amortization......................... 12,032 29,276 44,665
Impairment of wireless cable assets................... -- -- 21,271
----------- ----------- -----------
Total costs and expenses................................ 38,646 83,167 128,221
----------- ----------- -----------
Loss from operations.................................... (17,017) (35,666) (66,189)
Interest expense........................................ (9,349) (24,473) (37,281)
Interest income......................................... 2,062 2,178 1,106
Other income (expense), net............................. 16 (5) 687
----------- ----------- -----------
Loss before income tax benefit.......................... (24,288) (57,966) (101,677)
Income tax benefit...................................... 8,810 2,270 3,297
----------- ----------- -----------
Loss before extraordinary charge and cumulative effect
of
change in accounting for installation costs........... (15,478) (55,696) (98,380)
Extraordinary charge on early retirement of debt........ -- (11,541) --
Cumulative effect of change in accounting for
installation
costs, net of income taxes of $369 in 1995............ -- 602 --
----------- ----------- -----------
Net loss................................................ (15,478) (66,635) (98,380)
Dividend embedded in conversion of Series B Convertible
Preferred Stock....................................... -- -- (6,250)
----------- ----------- -----------
Net loss applicable to Class A Common Stock............. $ (15,478) $ (66,635) $ (104,630)
=========== =========== ===========
Net income (loss) per share (pro forma for 1994 -- see
Note 2):
Loss per share applicable to Class A Common Stock
before extraordinary charge and cumulative effect
of accounting change............................. $ (1.07) $ (3.49) $ (5.78)
Loss per share from extraordinary charge........... -- (0.72) --
Income per share from cumulative effect of
accounting change................................ -- 0.04 --
----------- ----------- -----------
Net loss per share applicable to Class A Common
Stock............................................ $ (1.07) $ (4.17) $ (5.78)
=========== =========== ===========
Weighted average number of shares outstanding........... 14,445,405 15,977,377 18,095,961
=========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 40
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON
------------------ ------------------ PAID-IN STOCK ACCUMULATED
SHARES PAR VALUE SHARES PAR VALUE CAPITAL WARRANTS DEFICIT TOTAL
------ --------- ------ --------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993.............. 2,014 $ 20 11,559 $115 $ 87,890 $ 840 $ (9,809) $ 79,056
Conversion of Series A Convertible
Preferred Stock..................... (2,014) (20) 2,014 20 -- -- -- --
Issuance of Class A Common Stock
pursuant to initial public offering,
net of stock issuance costs of
$217................................ -- -- 172 2 2,886 -- -- 2,888
Exercise of Class A Common Stock
warrants............................ -- -- 225 2 2,062 (828) -- 1,236
Income tax benefit of deduction for
income tax purposes on exercise of
stock options....................... -- -- -- -- 491 -- -- 491
Exercise of Class A Common Stock
options............................. -- -- 93 1 220 -- -- 221
Issuance of Class A Common Stock for
acquisitions........................ -- -- 1,186 12 19,875 -- -- 19,887
Issuance of Class A Common Stock
warrants............................ -- -- -- -- -- 5,490 -- 5,490
Deferred compensation pursuant to
issuance of Class A Common Stock
options............................. -- -- -- -- 52 -- -- 52
Net loss.............................. -- -- -- -- -- -- (15,478) (15,478)
------ -------- ------ ---- -------- ------- --------- --------
Balance, December 31, 1994.............. -- -- 15,249 152 113,476 5,502 (25,287) 93,843
Exercise of Class A Common Stock
warrants............................ -- -- 3 -- 30 (12) -- 18
Exercise of Class A Common Stock
options............................. -- -- 176 2 491 -- -- 493
Issuance of Class A Common Stock for
acquisitions........................ -- -- 1,008 10 15,806 -- -- 15,816
Issuance of Class A Common Stock
warrants............................ -- -- -- -- -- 10,130 -- 10,130
Amendment of 1994 Warrants............ -- -- -- -- 5,490 (5,490) -- --
Deferred compensation pursuant to
issuance of Class A Common Stock
options............................. -- -- -- -- 71 -- -- 71
Net loss.............................. -- -- -- -- -- -- (66,635) (66,635)
------ -------- ------ ---- -------- ------- --------- --------
Balance, December 31, 1995.............. -- -- 16,436 164 135,364 10,130 (91,922) 53,736
Exercise of Class A Common Stock
warrants............................ -- -- 62 1 172 (1) -- 172
Exercise of Class A Common Stock
options............................. -- -- 85 1 484 -- -- 485
Issuance of Class A Common Stock for
acquisitions........................ -- -- 64 1 706 -- -- 707
Issuance of Class A Common Stock
pursuant to public offering, net of
issuance costs of $1,532.............. -- -- 1,700 17 19,913 -- -- 19,930
Issuance of Series B Convertible
Preferred Stock, net of issuance costs
of $1,233............................. 250 23,766 -- -- -- -- -- 23,766
Dividend embedded in conversion of
Series B Convertible Preferred
Stock................................. -- 6,250 -- -- -- -- (6,250) --
Conversion of Series B Convertible
Preferred Stock....................... (140) (16,779) 2,274 23 16,860 -- -- 104
Conversion of note payable.............. -- -- 163 1 2,524 -- -- 2,525
Deferred compensation pursuant to
issuance of Class A Common Stock
options............................... -- -- -- -- 68 -- -- 68
Net loss................................ -- -- -- -- -- -- (98,380) (98,380)
------ -------- ------ ---- -------- ------- --------- --------
Balance, December 31, 1996.............. 110 $ 13,237 20,784 $208 $176,091 $10,129 $(196,552) $ 3,113
====== ======== ====== ==== ======== ======= ========= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 41
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (15,478) $(66,635) $(98,380)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 12,032 29,276 44,665
Impairment of wireless cable assets.................. -- -- 21,271
Deferred income taxes................................ (8,810) (2,270) (3,297)
Amortization of debt discount and deferred financing
costs.............................................. 7,311 21,363 35,402
Minority interest income............................. -- -- (708)
Extraordinary charge on early retirement of debt..... -- 11,541 --
Cumulative effect of change in accounting for
installation costs, net of income taxes............ -- (602) --
Gain on disposition of wireless cable systems and
assets............................................. -- -- (157)
Other................................................ (79) 379 267
Changes in operating assets and liabilities, net of
acquisitions:
Trade accounts receivable.......................... (258) (906) 307
Prepaid expenses and other current assets.......... (768) 65 214
Other assets....................................... (13) (249) (247)
Accounts payable and other current liabilities..... 3,476 4,387 (6,876)
--------- -------- --------
Net cash used in operating activities........... (2,587) (3,651) (7,539)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments..................... (26,500) -- --
Maturities of short-term investments.................... 6,498 20,002 --
Collections of (and loans to) related parties and
others............................................... (623) (170) 252
Purchases of property and equipment..................... (35,465) (49,342) (32,474)
Additions to deferred license and leased license
acquisition costs.................................... (6,217) (7,412) (12,492)
Proceeds from disposition of wireless cable systems and
assets............................................... -- -- 2,776
Net cash used in acquisitions........................... (52,588) (21,653) (1,956)
--------- -------- --------
Net cash used in investing activities........... (114,895) (58,575) (43,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock, net of stock
issuance costs....................................... 4,345 511 20,587
Proceeds from issuance of Series B Convertible Preferred
Stock, net of stock issuance costs................... -- -- 23,766
Proceeds from issuance of Common Stock warrants......... 5,490 5,480 --
Proceeds from issuance of 2004 Notes.................... 91,185 -- --
Proceeds from issuance of 2005 Notes.................... -- 91,001 --
Borrowings under revolving credit facilities............ 925 24,600 200
Principal payments on revolving credit facilities....... (2,584) (35,429) (5,500)
Increase in deferred financing costs.................... (3,413) (1,976) --
Contributions by minority interest holder............... -- -- 1,240
Principal payments on notes payable..................... (1,230) (2,359) (2,030)
Principal payments on capital lease obligations......... (284) (417) (868)
--------- -------- --------
Net cash provided by financing activities....... 94,434 81,411 37,395
--------- -------- --------
Net increase (decrease) in cash and cash equivalents.... (23,048) 19,185 (14,038)
Cash and cash equivalents, beginning of year............ 36,377 13,329 32,514
--------- -------- --------
Cash and cash equivalents, end of year.................. $ 13,329 $ 32,514 $ 18,476
========= ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 42
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
Organization
American Telecasting, Inc. ("ATI") owns and operates a network of wireless
cable television systems providing subscription television service to
residential and commercial customers. ATI and its subsidiaries are collectively
referred to herein as the "Company." As of December 31, 1995 and 1996, 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 Facility (see Note 7) 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 (as defined below) will provide further resources to help finance
the Company's operations and development plans.
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. As
of the date of this Report, except for the BellSouth Transaction, the
F-7
<PAGE> 43
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 2004 Notes and 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.
Recent Development
On March 18, 1997, the Company entered into a definitive agreement with
BellSouth Corporation and BellSouth Wireless Corporation ("BellSouth Wireless")
providing for the sale of all of the Company's Florida and Louisville, Kentucky
wireless cable assets (the "Southeastern Assets") to BellSouth Wireless (the
"BellSouth Transaction"). Depending upon the number of wireless cable channel
rights that are ultimately transferred to BellSouth Wireless, the purchase price
will range from $67.9 million to $103.2 million. A first closing is expected to
occur when all necessary third party and governmental consents to the assignment
of a minimum number of channel positions in Orlando, Jacksonville, Daytona
Beach, Ft. Myers, Miami, Lakeland, Bradenton and Louisville have been obtained,
which the Company expects will occur prior to the end of the fourth quarter of
1997. The remainder of the Southeastern Assets will be sold upon the
satisfaction of certain closing conditions that are specific to the markets
involved, but in no event later than two years after the date of the first
closing. The 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 also has granted to BellSouth Wireless an option to purchase
for $9.0 million the Company's wireless cable channel rights in Yuba City,
California and the Company's Yuba City and Sacramento, California BTA
authorizations. The option can be exercised by BellSouth Wireless at any time
within 18 months after the date of the agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of ATI and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 December 31, 1995 and 1996,
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.
F-8
<PAGE> 44
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets
Long-lived assets and identifiable assets to be held and used are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount should be addressed. Impairment is measured by comparing the
carrying value to the estimated undiscounted future cash flows expected to
result from the use of the assets and their eventual dispositions for each of
the Company's markets. The Company considers relevant cash flow, estimated
future operating results, trends and other available information including the
fair value of frequency rights owned, in assessing whether the carrying value of
the asset can be recovered.
In the fourth quarter of 1996, after considering the Company's 1996
operating loss, its history of such operating losses and the expectation of
future operating losses, changes in the Company's strategic direction,
developments relating to previously scheduled industry transactions and ventures
and certain industry factors, the Company evaluated the ongoing value of its
wireless cable business in each Developed Market. Based on this valuation, the
Company determined that assets with a carrying value of $95.1 million were
impaired according to the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
and wrote down the carrying value of such assets by $21.3 million to their fair
value. An evaluation was made for each of the Company's Developed Markets
individually, not for the Company's markets as a whole. Fair value was based on
recent transactions in the wireless cable industry.
The Company's estimates of anticipated gross revenues, the remaining
estimated lives of tangible and intangible assets, or both, could be reduced
significantly in the future due to changes in technology, regulation, available
financing or competitive pressures in any of the Company's individual markets.
As a result, the carrying amount of long-lived assets and intangibles including
goodwill could be reduced materially in the future.
Property and Equipment. Property and equipment are stated at cost.
Depreciation and amortization, including amortization of assets acquired
under capitalized lease agreements, are recorded on a straight-line basis
for financial reporting purposes. Repair and maintenance costs are charged
to expense when incurred. Renewals and betterments are capitalized.
Subscriber installation costs are capitalized and amortized over a three
year period, the approximate average subscription term of a subscriber.
Prior to January 1, 1995, the Company expensed subscriber installation
costs to the extent of installation revenues and capitalized installation
costs in excess of installation revenues. The cumulative effect of this
change in accounting method for the periods prior to January 1, 1995 was a
reduction in the Company's net loss of approximately $602,000, net of
deferred income taxes of approximately $369,000. The effect of this change
on the Company's results of operations for the year ended December 31, 1995
was to decrease the net loss before cumulative effect of change in
accounting method by approximately $668,000. Pro forma net loss and net
loss per share for the years ended December 31, 1994 and 1995, assuming the
change in accounting for installation costs was applied retroactively, were
$(15,352,000) and $(1.07), and $(67,237,000) and $(4.21), respectively.
Deferred License and Leased License Acquisition Costs. Deferred
license and leased license acquisition costs include costs incurred to
develop or acquire wireless cable licenses. Costs incurred to acquire or
lease licenses issued by the Federal Communications Commission ("FCC") are
deferred and are amortized ratably over useful lives of 20 years beginning
with inception of service in each respective market, or charged to expense
if development is not pursued. As of December 31, 1996, approximately $15.8
million of the Company's deferred license and leased license acquisition
costs were not yet subject to amortization. Accumulated amortization
related to deferred license and leased license acquisition costs
approximated $7.7 million and $14.9 million at December 31, 1995 and 1996,
respectively.
F-9
<PAGE> 45
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill. Goodwill is amortized on a straight-line basis for financial
reporting purposes over a period of 20 years. Accumulated amortization
related to goodwill was approximately $1.3 million and $2.2 million at
December 31, 1995 and 1996, respectively.
Deferred Financing Costs. Deferred financing costs represent fees and
other costs incurred in connection with the issuance of long-term debt.
These costs are amortized over the term of the related debt using the
effective interest rate method.
Other Assets. Other assets, net of accumulated amortization, consist of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Covenants not-to-compete, net.............................. $1,890 $ 648
Long-term deposits......................................... 83 394
Other...................................................... 836 722
------ ------
Other assets, net.......................................... $2,809 $1,764
====== ======
</TABLE>
Covenants not-to-compete are amortized over their respective terms, which
is typically three years. Accumulated amortization related to covenants
not-to-compete and other intangible assets was $2.5 million and $3.6 million as
of December 31, 1995 and 1996, respectively.
Revenue Recognition
Monthly service fees are recognized in the period service is provided.
Installation revenue is recognized upon origination of service to a customer to
the extent of direct selling costs incurred. To date, direct selling costs have
exceeded installation revenues.
Operating Costs and Expenses
Operating costs and expenses consist principally of programming fees,
channel lease costs, tower rental and other costs of providing services. The
Company capitalizes certain pre-launch costs for non-operating systems. These
costs include tower and site rentals and channel lease payments. The total of
such costs capitalized in 1994, 1995 and 1996 approximated $163,000, $411,000
and $445,000, respectively.
Marketing and Direct Selling Costs
Marketing and direct selling costs are expensed as incurred.
Net Loss Per Share
Net loss per share is computed on the weighted-average number of common
shares outstanding for the respective periods. All Common Stock equivalents are
excluded as they are antidilutive. Fully diluted loss per share is not presented
as it would not materially differ from primary loss per share.
Pursuant to the requirements of the Securities and Exchange Commission,
Common Stock issued by the Company during the 12 months immediately preceding
the Company's initial public offering (see Note 8), plus the number of Common
Stock equivalent shares which became issuable during the same period, were
treated as if they were outstanding for all periods presented prior to the
offering using the Treasury Stock method. The effect of other Common Stock
equivalents for periods prior to the offering have been excluded from the
calculation as their effect would be antidilutive. Historical net loss per share
and weighted-average number of shares outstanding were $(1.08) and 14,357,116
for the year ended December 31, 1994. The number of pro forma weighted-average
shares outstanding is computed as described above and also gives
F-10
<PAGE> 46
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
effect to the conversion in January 1994 of all outstanding shares of Series A
Convertible Preferred Stock into 2,014,098 shares of Common Stock.
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 fiscal years ending after December 15, 1997, and when adopted, it
will require restatement of prior years' earnings per share.
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.
Reclassifications
Certain amounts from the prior years' consolidated financial statements
have been reclassified to conform with the 1996 presentation.
Supplemental Cash Flow Disclosures
Noncash investing and financing activities consisted of the acquisition of
vehicles and equipment by acceptance of bank notes, capitalized leases and other
financing arrangements totaling approximately $992,000, $1.9 million, and
$604,000 during 1994, 1995 and 1996, respectively. Cash paid during 1994, 1995
and 1996 for interest approximated $2.0 million, $2.9 million and $2.0 million,
respectively. As discussed in Notes 3 and 7, the Company acquired property and
equipment, leased licenses, covenants not-to-compete and other assets in
acquisitions for notes totaling $6.8 million, Class A Common Stock valued at
$19.9 million and assumed liabilities of approximately $1.5 million during the
year ended December 31, 1994; notes totaling $3.8 million, Class A Common Stock
valued at $15.8 million, assumption of certain liabilities totaling $11.2
million during the year ended December 31, 1995, and Class A Common Stock valued
at $707,000 during the year ended December 31, 1996. During 1994, 1995 and 1996,
the Company acquired certain wireless cable channel rights for which the final
purchase consideration of approximately $1.7 million, $1.1 million and $1.0
million, respectively, was payable upon the FCC's consent to the assignment of
such licenses (see Note 6). Of such amounts, approximately $1.0 million remained
payable at December 31, 1996.
3. ACQUISITIONS AND DIVESTITURES
1994 Acquisitions
During 1994, the Company acquired wireless cable systems in Bend, Oregon
(from Central Vision, Inc.), a total of seven operating wireless cable systems
operating in Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin (the
"FEN/WEN Group") (from Family Entertainment Network, Inc. and Wireless
Entertainment Network, Inc.), Oklahoma City, Oklahoma and Wichita, Kansas (from
Multimedia Cablevision, Inc.), and Lakeland, Florida (from People's Cable,
Inc. -- "People's Cable"). In addition, the Company acquired wireless cable
frequency rights in a number of other U.S. markets in connection with the
acquisition of the FEN/WEN Group. The aggregate purchase price for these
acquisitions of approximately $80.6 million was paid through a combination of
cash ($53.4 million, of which approximately $6.8 million was funded from the
proceeds of debt -- see Note 7), shares of ATI Common Stock (1,151,950 shares
valued at approximately
F-11
<PAGE> 47
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$19.7 million), and assumption of certain liabilities (approximately $7.5
million, of which approximately $6.0 million was retired immediately subsequent
to closing). In addition, the Company recognized a deferred income tax liability
of approximately $5.0 million for the excess of the value allocated to certain
of the assets acquired over their related tax basis.
1995 Acquisitions
During 1995, the Company acquired wireless cable systems in Medford, Oregon
(from Cardiff Communications Partners III), Sheridan, Wyoming (from Cardiff
Communications Partners I), Redding, California (from the Cardiff Communications
Partners IV), and Rapid City, South Dakota (from Rapid Choice TV, Inc.). Also
during 1995, the Company acquired Fresno Wireless Cable Television, Inc.
("FWCTI") and a 58% ownership interest in Superchannels of Las Vegas, Inc.
("Superchannels"). FWCTI is the 65% general partner of Fresno MMDS Associates
which owns wireless cable systems and frequency rights in the Fresno, Visalia
and Merced, California markets. Superchannels operates a wireless cable system
in the Las Vegas, Nevada market. The aggregate purchase price for these
acquisitions of approximately $46.7 million was paid through a combination of
cash ($16.5 million), notes ($3.8 million), shares of ATI Common Stock
(approximately 964,000 shares valued at approximately $15.2 million), and
assumption of certain liabilities (approximately $11.2 million). In addition,
the Company recognized a deferred income tax liability of approximately $6.3
million for the excess of the value allocated to certain of the assets acquired
over their related tax basis. In February 1996, $2.5 million of the notes issued
in connection with the acquisition of the Las Vegas system were converted into
162,854 shares of ATI Common Stock.
All of the Company's acquisitions have been accounted for as purchases for
financial reporting purposes. The Company's consolidated statements of
operations for the years ended December 31, 1994 and 1995 include the results of
operations for each of the entities described above from their respective
acquisition dates. The aggregate purchase prices for the acquisitions completed
during 1994 and 1995 were allocated as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Deferred license and leased license acquisition costs....... $54,323 $ 33,999
Property and equipment...................................... 23,662 11,579
Goodwill.................................................... 5,019 6,335
Covenants not-to-compete.................................... 2,170 425
Cash, receivables and other assets.......................... 442 682
Deferred income taxes....................................... (5,019) (6,335)
Assumed liabilities......................................... (1,685) (14,972)
------- --------
$78,912 $ 31,713
======= ========
</TABLE>
The unaudited pro forma information presented below for the year ended
December 31, 1995 reflects the 1995 acquisitions of the Medford, Sheridan,
Redding, Las Vegas and Rapid City systems and FWCTI as if each had occurred on
January 1, 1995. These results are not necessarily indicative of future
operating results or of what would have occurred had the acquisitions been
consummated at that time (dollars in thousands, except per share amounts).
<TABLE>
<S> <C>
Revenues.................................................... $ 52,979
Loss before extraordinary charge and cumulative effect of
accounting change......................................... (57,939)
Net loss.................................................... (68,878)
Loss per share before extraordinary charge and cumulative
effect of
accounting change......................................... (3.55)
Net loss per share.......................................... (4.22)
</TABLE>
F-12
<PAGE> 48
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1996, the Company acquired certain subscription television assets in
Cincinnati, Ohio for aggregate consideration of approximately $2.2 million and
wireless cable channel rights in various markets for aggregate consideration of
$1.1 million. The Company also acquired the remaining interest in its Little
Rock, Arkansas operating system for $707,000 in Class A Common Stock. Also
during 1996, the Company sold its wireless cable systems in St. James, Minnesota
and Yankton, South Dakota and its wireless cable channel assets in Sioux Falls,
South Dakota for aggregate cash consideration totaling $3.1 million (of which
approximately $355,000 is being held in escrow pending completion of certain
post-closing events). On June 28, 1996 the Company entered into a definitive
agreement to acquire wireless cable assets in Cincinnati, Ohio for approximately
$3.0 million. The pro forma effects of 1996 acquisitions and divestitures on
revenues, net loss and net loss per share as if such acquisitions and
divestitures had been made as of the beginning of the year are not presented as
they do not differ materially from historical results. During the years ended
December 31, 1994 and 1995, the Company acquired wireless cable channel rights
in various markets for aggregate consideration of $186,000 (Class A Common
Stock) and $7.0 million (cash -- $6.3 million and Class A Common Stock valued at
$653,000), respectively.
The Company was involved in the 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.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Miscellaneous receivables................................... $ 341 $ 859
Prepaid rent and other...................................... 512 731
Prepaid insurance........................................... 712 422
Prepaid programming and channel leases...................... 111 251
Equipment and other short-term deposits..................... 564 162
Accrued investment income................................... 91 43
------ ------
Total prepaid expenses and other current assets... $2,331 $2,468
====== ======
</TABLE>
F-13
<PAGE> 49
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1995 1996 LIFE
-------- -------- ----------------
<S> <C> <C> <C>
Subscriber premises equipment................ $ 58,674 $ 58,773 3-4 years
Deferred installation costs.................. 42,665 28,631 3 years
Transmission equipment and system
construction costs......................... 34,505 39,278 10 years
Office furniture and equipment............... 6,260 8,108 3-5 years
Vehicles..................................... 3,276 3,827 3-4 years
Land, building and leasehold improvements.... 1,248 1,780 Lesser of useful
-------- -------- life or duration
of lease
Total property and equipment................. 146,628 140,397
Accumulated depreciation and amortization.... (34,251) (41,126)
-------- --------
Property and equipment, net.................. $112,377 $ 99,271
======== ========
</TABLE>
During the fourth quarter of 1996, the Company prospectively revised the
lives of its subscriber premise equipment to three to four years. As described
in Note 2, this revision was a result of a change in the Company's strategic
direction and certain industry factors. The revision decreased net income for
the year ended December 31, 1996 by approximately $600,000.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Accounts payable............................................ $11,474 $ 6,996
Accrued payroll and related taxes........................... 1,721 2,114
Accrued programming......................................... 1,718 1,673
Accrued property and sales taxes............................ 1,484 1,173
Acquisition of channel rights payable....................... 1,140 1,070
Accrued interest and other.................................. 886 1,253
Deferred revenue............................................ 449 476
Accrued lease termination costs............................. 420 188
Accrued severance........................................... 711 79
------- -------
Total accounts payable and accrued expenses................. $20,003 $15,022
======= =======
</TABLE>
7. LONG-TERM DEBT
Senior Discount Notes
On June 23, 1994, ATI issued Units (the "1994 Units Offering") consisting
of Senior Discount Notes due 2004 (the "2004 Notes") which mature on June 15,
2004 and warrants to purchase Common Stock. The 1994 Units Offering resulted in
net proceeds to the Company of approximately $100.1 million (including amounts
attributable to the issuance of the 1994 Warrants (see Note 8) and before
payment of underwriting discounts and other issuance costs aggregating
approximately $4.4 million). On August 10, 1995, ATI issued Units (the "1995
Units Offering") consisting of Senior Discount Notes due 2005 (the "2005 Notes")
which
F-14
<PAGE> 50
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
mature on August 15, 2005 and warrants to purchase Common Stock. The 1995 Units
Offering resulted in net proceeds to the Company of approximately $94.9 million,
including amounts attributable to the issuance of the 1995 Warrants (see Note
8), and after payment of underwriting discounts and other issuance costs
aggregating approximately $5.1 million.
The 2004 Notes bear interest at a rate of 14.5%, computed on a semi-annual
bond equivalent basis. The aggregate principal balance at stated maturity of the
2004 Notes approximates $196.9 million. Cash interest will not be payable on the
2004 Notes prior to June 15, 1999. Commencing December 15, 1999, cash interest
on the 2004 Notes will be payable on June 15 and December 15 of each year at a
rate of 14.5% per annum.
The issue price of the 2005 Notes represents a yield to maturity of 14.50%
per annum computed on a semi-annual bond equivalent basis. Cash interest will
not be payable on the 2005 Notes prior to August 15, 2000. Commencing February
15, 2001, cash interest on the 2005 Notes will be payable on February 15 and
August 15 of each year at a rate of 14.50% per annum. The 2005 Notes have an
aggregate principal balance at stated maturity of $201.7 million.
Both the 2004 Notes and the 2005 Notes are effectively subordinated to all
indebtedness of ATI's subsidiaries, including trade payables, and rank pari
passu with all existing and future unsubordinated and unsecured indebtedness of
ATI.
Both the 2004 Notes and the 2005 Notes were issued pursuant to Indentures
which contain certain restrictive covenants and limitations. Among other things,
the Indentures limit the incurrence of additional debt, limit the making of
restricted payments (as defined) including the declaration and/or payment of
dividends, place limitations on dividends and other payments by ATI's
subsidiaries, prohibit ATI and its subsidiaries from engaging in any business
other than the transmission of video, voice and data and related businesses and
services, and place limitations on liens, certain asset dispositions and
merger/sale of assets activity.
Pursuant to the Indentures, the Company may not incur additional debt,
other than Permitted Debt (as defined), unless after giving effect to the
incurrence of such debt and the receipt and application of the net proceeds
thereof on a pro forma basis, the Company's consolidated debt to annualized
operating cash flow (as defined) ratio would be less than 5.0 to 1.0 in the case
of any such incurrence. Permitted Debt is defined as (a) the 2004 Notes and the
2005 Notes; (b) debt of up to $100.0 million in aggregate principal amount lent
by a strategic equity investor (as defined), provided, that such debt (i) is
subordinated in right of payment to the prior payment in full of all obligations
(including principal, interest and premium, if any) of the Company under the
2004 Notes and the 2005 Notes and related Indentures, (ii) is not guaranteed by
any of the Company's subsidiaries and is not secured by any lien on any property
or asset of the Company or any subsidiary of the Company, and (iii) has no
scheduled maturity of principal earlier than a date at least one year after the
scheduled maturity of the 2004 Notes and the 2005 Notes; (c) debt of up to $35.0
million under one or more credit agreements, under other existing debt
facilities, or to a seller, vendor or bank or other financial institution that
has financed or refinanced the purchase or lease of property, materials or a
business, not to exceed $17.5 million until the Company's number of basic
subscribers exceeds 200,000; (d) any debt of the Company (other than debt
described in clause (a), (b), or (c) above) in an amount outstanding not
exceeding, at the time of incurrence, the product of the Company's number of
basic subscribers in excess of 200,000 multiplied by (1) $375, if such debt is
incurred prior to January 1, 1998, (2) $325, if such debt is incurred thereafter
and prior to January 1, 1999, and (3) $275, if such debt is incurred thereafter,
if the net proceeds of such debt are invested exclusively in the transmission of
video, voice and data and related businesses and services conducted by the
Company and its subsidiaries; and (e) replacements, renewals, refundings or
extensions of any debt referred to in clauses (a) - (d) above, subject to
certain restrictions. As a result of such limitations, the Company's additional
borrowing capacity approximated $8.2 million at December 31, 1996.
F-15
<PAGE> 51
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 2004 Notes and the 2005 Notes are redeemable, at the option of ATI at
any time, in whole or in part, on or after June 15, 1999 and August 15, 2000,
respectively, at specified redemption prices, plus accrued and unpaid interest,
if any, to the date of redemption. The redemption prices are as follows:
<TABLE>
<CAPTION>
YEAR 2004 NOTES 2005 NOTES
---- ---------- ----------
<S> <C> <C>
1999................................................ 107.250% --
2000................................................ 104.833% 107.250%
2001................................................ 102.417% 104.833%
2002................................................ 100.000% 102.417%
2003 and thereafter................................. 100.000% 100.000%
</TABLE>
Both the 2004 Notes and the 2005 Notes are subject to mandatory redemption
provisions in the event of a change of control (as defined) of ATI. Upon the
occurrence of such an event, each holder of the 2004 Notes will have the right
to require ATI to repurchase all of such holder's 2004 Notes at 101% of the
accreted value (as defined) thereof, or, in the case of any such repurchase on
or after June 15, 1999, 101% of the principal amount at stated maturity thereof
plus accrued and unpaid interest, if any, to the date of repurchase. Similarly,
in the event of a change of control of ATI, each holder of the 2005 Notes will
have the right to require ATI to repurchase all of such holder's 2005 Notes at
101% of the accreted value (as defined) thereof, or, in the case of any such
repurchase on or after August 15, 2000, 101% of the principal amount at stated
maturity thereof plus accrued and unpaid interest, if any, to the date of
repurchase. In addition, in the event of a sale by ATI prior to August 15, 1998
of at least $10 million of its capital stock to a strategic equity investor, up
to a maximum of 35% of the aggregate accreted value of outstanding 2005 Notes
may be redeemed at ATI's option within 30 days after such sale from the net cash
proceeds thereof at 113.50% of accreted value to the date of redemption;
provided that there remain outstanding 2005 Notes having an aggregate principal
amount at maturity equal to at least 65% of the aggregate principal amount at
maturity of all 2005 Notes originally issued.
Future debt service payments on the 2004 Notes and the 2005 Notes
representing interest only, for the next five years are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR 2004 NOTES 2005 NOTES TOTAL
---- ---------- ---------- -------
<S> <C> <C> <C>
1997...................................... $ -- $ -- $ --
1998...................................... -- -- --
1999...................................... 14,273 -- 14,273
2000...................................... 28,546 -- 28,546
2001...................................... 28,546 30,518 59,064
</TABLE>
Fresno Facility
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 December 31, 1996, no amounts were available
for borrowing under the Fresno Facility. The Fresno Facility was required to be
fully assigned to ATI by March 31, 1997. All amounts due to the bank under the
Fresno Facility were repaid by ATI in February 1997 with proceeds from the
Facility (as defined below). Outstanding borrowings under the Fresno Facility
bore interest at the banks' prime rate plus 2.25% (10.5% at December 31, 1996).
Interest expense relating to this facility during the year ended December 31,
1996 totaled $763,000. The facility was secured by the assets of the Fresno,
Visalia and Merced systems. The Fresno Facility also contained various financial
convenants and other restrictive covenants that, among other things, prohibited
the payment of dividends. As of September 30 and December 31, 1996, the Fresno
Partnership was not in compliance with certain of the restrictive covenants of
the Fresno Facility.
F-16
<PAGE> 52
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit Facility
On February 26, 1997, the Company entered into a $17,000,000 credit
facility (the "Facility") with Banque Indosuez, New York Branch (the "Bank").
The term of the Facility is up to twelve months. 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 Facility bears interest at a rate of 12.5%, which
rate shall increase by 0.50% per quarter. Borrowings under the Facility are
secured by a security interest in favor of the Bank in substantially all of the
assets of ATI and its subsidiaries. The 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 the Company from its Fresno subsidiary under the Fresno
Facility.
The Company paid the Bank a commitment fee of $340,000. At closing, the
Company paid an additional fee of $340,000 and reimbursed the Bank for its out
of pocket expenses incurred in conjunction with the making of the loan. During
the term of the 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 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. The Company has deposited $1.0 million in escrow to satisfy
certain interest obligations under the Facility.
Retired Facilities
Interest expense related to retired revolving credit facilities
approximated $982,000, $1.6 million and $27,000 during the years ended December
31, 1994, 1995 and 1996, respectively.
The following table summarizes the book and fair values of the Company's
debt facilities at December 31, 1996 (dollars in thousands). Fair values for the
Company's 2004 Notes and 2005 Notes are based on quoted market prices. The fair
value of the Company's Fresno Facility and notes payable are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. The carrying
amount of accrued interest approximates its fair value.
<TABLE>
<CAPTION>
BOOK VALUE FAIR VALUE
---------- ----------
<S> <C> <C>
2004 Notes.................................................. $135,484 $ 76,779
2005 Notes.................................................. 116,480 74,629
Fresno Facility............................................. 2,950 2,762
Notes payable............................................... 4,455 3,462
-------- --------
$259,369 $157,632
======== ========
</TABLE>
F-17
<PAGE> 53
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of amounts outstanding under the Company's long-term debt
facilities as of December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
REVOLVING
2004 2005 CREDIT NOTES
YEAR ENDING DECEMBER 31, NOTES NOTES FACILITIES PAYABLE TOTAL
------------------------ -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
1997................................ $ -- $ -- $2,950 $2,026 $ 4,976
1998................................ -- -- -- 2,314 2,314
1999................................ -- -- -- 44 44
2000................................ -- -- -- 46 46
2001................................ -- -- -- 25 25
Thereafter.......................... 196,869 201,700 -- -- 398,569
Unamortized discount................ (61,385) (85,220) -- -- (146,605)
-------- -------- ------ ------ --------
Total.......................... $135,484 $116,480 $2,950 $4,455 $259,369
======== ======== ====== ====== ========
</TABLE>
8. COMMON STOCK, STOCK OPTIONS AND WARRANTS
Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options is equal to
the market price of the underlying stock on the date of the grant, no
compensation expense is recognized. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting and Disclosure of Stock-Based Compensation," which
established an alternative method of expense recognition for stock-based
compensation awards to employees based on fair values. The Company elected not
to adopt SFAS No. 123 for expense recognition purposes.
The Company maintains a stock option plan reserving 1,525,000 shares of
Class A Common Stock to be issued to officers and key employees under terms and
conditions to be set by the Company's Board of Directors. The options vest over
periods of up to three years and expire eight years from the date of issuance.
As of December 17, 1996, the Company repriced options for all exempt employees
at the fair market value on that date.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 6.31%
during each period; dividend yields of 0.0% during each period; volatility
factors of the expected market price of the Company's common stock of .61 and
.64, and a weighted-average expected life of the option of four years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
The weighted average fair value of options granted during 1995 and 1996 was
$7.43 and $3.91, respectively. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options'
vesting period. The Company's pro forma net loss and pro forma net loss per
share applicable to Class A Common Stock as if the Company had used the fair
value accounting provisions of
F-18
<PAGE> 54
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS No. 123 were $67.0 million and $4.19 and $105.7 million and $5.84 for the
years ended December 31, 1995 and 1996, respectively.
A summary of the Company's stock option activity, and related information
for the years ended December 31, 1994, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------ ------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
------- -------------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of
year............... 574,000 $ 3.49 559,000 $ 6.16 696,000 $ 9.55
Granted.............. 85,000 21.68 390,000 13.02 752,000 9.12
Exercised............ (92,500) 17.75 (176,500) 15.47 (85,000) 15.53
Forfeited............ (7,500) 2.69 (76,500) 18.91 (628,200) 13.76
------- -------- --------
Options outstanding
at end of year..... 559,000 $ 6.16 696,000 $ 9.55 734,800 $ 5.96
======= ======== ========
Exercisable at end of
year............... 330,500 $ 2.77 249,250 $ 4.79 178,000 $ 2.69
======= ======== ========
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -------------------------------------
NUMBER OUTSTANDING WEIGHTED AVERAGE WEIGHTED NUMBER EXERCISABLE WEIGHTED
RANGE OF AS OF DECEMBER 31, REMAINING AVERAGE AS OF DECEMBER 31, AVERAGE EXERCISE
EXERCISE PRICES 1996 CONTRACTUAL LIFE EXERCISE PRICE 1996 PRICE
- --------------- ------------------ ---------------- -------------- ------------------ ----------------
<C> <C> <C> <C> <C> <C>
$ 2.00-$ 2.00 110,000 1.82 $ 2.00 110,000 $ 2.00
2.69- 2.69 50,000 2.33 2.69 50,000 2.69
5.50- 5.50 22,500 4.73 5.50 15,000 5.50
6.88- 6.88 538,500 7.96 6.88 -- 0.00
13.75- 13.75 5,800 6.95 13.75 1,800 13.75
14.25- 14.25 1,200 6.22 14.25 1,200 14.25
15.00- 15.00 6,800 7.32 15.00 -- 0.00
------- -------
$ 2.00-$15.00 734,800 6.54 $ 5.96 178,000 $ 2.69
======= =======
</TABLE>
Warrants
In conjunction with the 1995 Units Offering described in Note 7, ATI issued
201,700 warrants (the "1995 Warrants") to purchase an aggregate of 943,956
shares of ATI's Common Stock at an exercise price of $12.65 per share, subject
to adjustment under certain circumstances. Warrant holders may exercise the 1995
Warrants at any time on or after August 10, 1996 and on or prior to August 10,
2000. The 1995 Warrants will terminate and become void at the close of business
on August 10, 2000. Approximately $5.5 million of the proceeds from the 1995
Units Offering was allocated to the 1995 Warrants. As of December 31, 1996, no
1995 Warrants had been exercised.
In conjunction with the 1994 Units Offering described in Note 7, ATI issued
915,000 warrants (the "1994 Warrants") to purchase an equal number of shares of
ATI's Common Stock. The 1994 Warrants have an exercise price of $12.68 per
share. Warrant holders may exercise the 1994 Warrants for cash at any time after
June 23, 1995 and on or prior to June 23, 1999. The 1994 Warrants will terminate
and become void at the close of business on June 23, 1999. As described in Note
7, the unamortized debt discount (approximately $5.1 million) for amounts
ascribed to the 1994 Warrants was written-off in August 1995 upon execution of
the
F-19
<PAGE> 55
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Supplemental Indenture. The 1994 Warrants, as amended, were valued at
approximately $4.6 million. As of December 31, 1996, 1994 Warrants for the
purchase of 100 shares had been exercised.
During the year ended December 31, 1996, additional warrants for the
purchase of 62,286 shares of Common Stock were exercised at a price of $2.74 per
share while warrants for the purchase of 61,284 shares at a price of $4.67 per
share expired unexercised.
9. SERIES B CONVERTIBLE PREFERRED STOCK
During August and October 1996, the Company completed private placements of
a total of 250,000 shares of Series B Convertible Preferred Stock, resulting in
net proceeds to the Company of $23.8 million. The shares of Series B Convertible
Preferred Stock have a preferential, cumulative 5% dividend and are non-voting.
Each share of Series B Preferred Stock is convertible, at the option of the
holder, into that number of shares of Common Stock that is 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 is equal to 80% of the prevailing market
price of the Class A Common Stock, provided that the Conversion Price cannot
exceed $12.50 or be less than $2.00. Accordingly, the Company recognized the
discount on the conversion as a dividend in the amount of $6,250,000.
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
at conversion prices ranging from $4.33 to $7.87. Aggregate dividends paid or
payable to holders of the Series B Convertible Preferred Stock totaled
approximately $201,000 and are reflected in the accompanying statements of
operations as interest expense. As of December 31, 1996, 110,000 shares of
Series B Convertible Preferred Stock were outstanding.
10. LEASES
Channel Lease Commitments
The Company has entered into various agreements to lease FCC channel
authorizations to provide wireless cable services. Certain of these lease
agreements provide buy-out options to the Company based upon the number of
subscribers at the time of such buy-out. The leases typically provide for
five-year minimum terms and renewals thereafter at the option of the Company.
The Company's obligations under certain of the leases are subject to receipt by
the lessor of all necessary FCC approvals to begin providing service. Channel
lease expense during 1994, 1995 and 1996 approximated $951,000, $1.9 million and
$2.6 million, respectively.
As of December 31, 1996, aggregate minimum annual channel lease payments
are summarized as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $1,443
1998........................................................ 1,203
1999........................................................ 990
2000........................................................ 728
2001........................................................ 579
Thereafter.................................................. 2,053
------
Total....................................................... $6,996
======
</TABLE>
The Company assigned certain of its channel licenses to a group affiliated
with the Company in November 1993 and entered into agreements to lease those
channels for an initial term of five years, renewable at the Company's option,
for an unlimited number of one-year terms thereafter. Annual lease payments
F-20
<PAGE> 56
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
required to be paid by the Company in connection with the aforementioned channel
leases were nominal. The majority of such licenses were reassigned to the
Company during 1996.
Operating Leases
The Company leases various office, warehouse and transmission tower space
and certain office equipment, furniture and vehicles. Rent expense during 1994,
1995 and 1996 was approximately $1.2 million, $2.4 million and $2.7 million,
respectively. Future minimum commitments as of December 31, 1996 under these
leases are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 2,762
1998........................................................ 2,408
1999........................................................ 1,818
2000........................................................ 1,469
2001........................................................ 858
Thereafter.................................................. 1,892
-------
Total....................................................... $11,207
=======
</TABLE>
Capital Leases
The Company leases certain vehicles and office equipment under
noncancelable capital leases. Equipment capitalized under such leases as of
December 31, 1995 and 1996 was approximately $3.1 million and $2.2 million,
respectively. Future minimum payments for capital leases as of December 31, 1996
are approximately $1,051,000, $896,000, $225,000, $15,000 and $1,000 for the
years ending December 31, 1997 through 2001, respectively, including interest of
approximately $251,000.
11. COMMITMENTS AND CONTINGENCIES
Seattle Agreement
Pursuant to a consulting agreement, the Company issued 10% of the Common
Stock of American Telecasting of Seattle, Inc., to a third party, and is
required to issue up to an additional 5% in the event that a certain subscriber
level is achieved in the Seattle system once it becomes operational.
Programming Agreements
The Company has entered into a series of noncancelable agreements to
purchase entertainment programming for rebroadcast which expire through 2005.
The agreements generally require monthly payments based upon the number of
subscribers to the Company's systems, subject to certain minimums. Such expenses
totaled approximately $5.9 million, $14.4 million and $19.3 million in 1994,
1995 and 1996, respectively.
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 (in an
unspecified amount but estimated by the plaintiff to be no less than $5 million)
and exemplary damages against all defendants, costs, and other relief. The
complaint alleges, among other claims, that all defendants, including the
Company, participated in a conspiracy to misappropriate corporate opportunities
belonging to Fresno Telsat. Although the ultimate outcome of this matter cannot
be predicted, management believes, based on its review of this claim and
discussion with legal counsel, that the resolution of this matter will not have
a material impact on the Company's financial position or future results of
operations.
F-21
<PAGE> 57
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
12. INCOME TAXES
As of December 31, 1996, the Company had net operating loss carryforwards
("NOLs") for Federal income tax purposes of approximately $156.6 million. The
NOLs expire in years 2003 through 2011. The use of the NOLs is subject to
statutory and regulatory limitations regarding changes in ownership. SFAS No.
109 requires that the tax benefit of NOLs for financial reporting purposes be
recorded as an asset. To the extent that management assesses the realization of
deferred tax assets to be less than "more likely than not," a valuation reserve
is established.
The temporary differences which give rise to deferred tax assets and
liabilities as of December 31, 1995 and 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 41,123 $ 59,494
Interest expense not currently deductible................. 9,758 22,278
Other..................................................... 1,881 664
-------- --------
Total gross deferred tax assets............................. 52,762 82,436
Deferred tax liabilities:
Basis differences attributable to purchase accounting
(Choice TV Group, People's Cable and FWCTI -- see Note
3)..................................................... (16,643) (20,897)
Property and equipment, principally due to differences in
depreciation and capitalized installation costs........ (14,964) (9,654)
-------- --------
Total deferred tax liabilities.............................. (31,607) (30,551)
Less valuation reserve...................................... (27,286) (54,719)
-------- --------
Net deferred tax liability.................................. $( 6,131) $( 2,834)
======== ========
</TABLE>
F-22
<PAGE> 58
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax benefit for the years ended December 31, 1995 and 1996 is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1996
------ ------
<S> <C> <C>
Currently Payable:
Federal................................................... $ -- $ --
State..................................................... -- --
Deferred:
Federal................................................... 1,907 2,769
State..................................................... 363 528
------ ------
$2,270 $3,297
====== ======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax benefit for the years ended December 31, 1995 and 1996 is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1995 1996
---- ----
<S> <C> <C>
Tax at U.S. statutory rates................................. 35% 35%
Effect of graduated rates................................... (1) (1)
State income taxes, net of federal tax benefit.............. 4 4
Losses not benefited for financial reporting purposes....... (32) (26)
Other, net.................................................. (2) (9)
--- ---
4% 3%
=== ===
</TABLE>
13. BENEFIT PLANS
The Company sponsors a defined contribution profit sharing plan, the
"American Telecasting, Inc. 401(K) Retirement Plan" (the "Plan"). Substantially
all of the Company's employees are eligible to participate in the Plan, which
commenced existence on September 1, 1994. Company contributions to the Plan are
based on a percentage of employee's contributions, subject to certain maximum
limits. The cost of the Plan for the years ended December 31, 1994, 1995 and
1996 approximated $52,000, $249,000 and $122,000, respectively.
The Company also sponsors an employee stock ownership plan, the "American
Telecasting, Inc. Associate Stock Purchase Plan" (the "Stock Purchase Plan").
Generally, all full-time employees who have been employed by the Company for at
least one year are eligible to participate in the Stock Purchase Plan. The
purchase price of each share of the Company's Class A Common Stock purchased by
Stock Purchase Plan participants is 90% of the closing price of the Class A
Common Stock on the last day of each calendar quarter. The shares are purchased
in the open market and the Company pays ten percent of the purchase price and
all administrative costs. An aggregate of 250,000 shares of the Company's Class
A Common Stock may be sold pursuant to the Stock Purchase Plan. As of December
31, 1996, 245,764 additional shares may be sold pursuant to the Stock Purchase
Plan. Employer contributions and administrative costs paid by the Company
related to the Stock Purchase Plan aggregated $16,000 and $22,000 during the
years ended December 31, 1995 and 1996, respectively.
F-23
<PAGE> 59
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. RELATED PARTY TRANSACTIONS
As of December 31, 1995 and 1996, the Company had loans in the form of
demand promissory notes to officers, employees and others totaling $543,000 and
$322,000, respectively. Such notes generally bear interest at rates ranging from
the prime rate plus 1.0% to the prime rate plus 1.25% and are due on demand.
15. QUARTERLY RESULTS OF OPERATIONS
The following summarizes the Company's unaudited quarterly results of
operations for 1996 and 1995 (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
Total revenues.......................... $ 15,423 $ 15,422 $ 15,456 $ 15,731
Loss from operations.................... (10,419) (10,111) (11,360) (34,299)
Net loss................................ (18,749) (18,396) (20,212) (41,023)
Net loss applicable to Class A Common
Stock................................ (18,749) (18,396) (20,212) (47,273)
Net loss per share applicable to Class A
Common Stock......................... $ (1.13) $ (1.06) $ (1.09) $ (2.38)
Year Ended December 31, 1995:
Total revenues.......................... $ 9,444 $ 10,987 $ 13,009 $ 14,061
Loss from operations.................... (6,146) (6,744) (8,146) (14,630)
Loss before extraordinary charge and
cumulative effect of accounting
change............................... (7,711) (10,764) (14,351) (22,870)
Net loss................................ (7,109) (10,764) (25,892) (22,870)
Loss per share before extraordinary
charge and cumulative effect of
accounting change.................... $ (0.51) $ (0.68) $ (0.88) $ (1.39)
Net loss per share...................... (0.47) (0.68) (1.58) (1.39)
</TABLE>
During the fourth quarter of 1996, the Company recognized an impairment
loss on its wireless cable assets of approximately $21.3 million and a preferred
dividend of approximately $6.3 million relating to its Series B Convertible
Preferred Stock. During the fourth quarter of 1995, the Company recognized
approximately $1.3 million related to certain severance, lease termination and
other costs.
The total of net loss per share for the 1996 and 1995 quarters does not
equal net loss per share for the respective years as per share amounts for each
quarter and for the year are computed based on their respective discrete
periods.
F-24
<PAGE> 60
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. VALUATION AND QUALIFYING ACCOUNTS (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
PERIOD EXPENSES DEDUCTIONS(1) PERIOD
------------ ---------- ------------- ----------
<S> <C> <C> <C> <C>
For the Year ended December 31, 1994
Deducted from asset accounts:
Allowance for uncollectible
accounts........................... $156 $ 986(2) $ 598 $544
==== ====== ====== ====
For the Year ended December 31, 1995
Deducted from asset accounts:
Allowance for uncollectible
accounts........................... $544 $2,714(3) $2,342 $916
==== ====== ====== ====
For the Year ended December 31, 1996
Deducted from asset accounts:
Allowance for uncollectible
accounts........................... $916 $2,322 $2,551 $687
==== ====== ====== ====
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Includes additions of $155 attributable to purchase accounting.
(3) Includes additions of $287 attributable to purchase accounting.
F-25
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ ROBERT D. HOSTETLER
----------------------------------
Robert D. Hostetler
President, Chief Executive Officer
and Director
Date: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
By: /s/ DONALD R. DEPRIEST Chairman of the Board and Director
-------------------------------------------------
Donald R. DePriest
By: /s/ ROBERT D. HOSTETLER President, Chief Executive Officer and
------------------------------------------------- Director (Principal Executive Officer)
Robert D. Hostetler
By: /s/ RICHARD F. SENEY Vice Chairman of the Board, Secretary and
------------------------------------------------- Director
Richard F. Seney
By: /s/ DAVID K. SENTMAN Senior Vice President, Chief Financial Officer
------------------------------------------------- and Treasurer (Principal Financial Officer)
David K. Sentman
By: /s/ FRED C. PATTIN, JR. Controller (Principal Accounting Officer)
-------------------------------------------------
Fred C. Pattin, Jr.
By: /s/ MITCHELL R. HAUSER Director
-------------------------------------------------
Mitchell R. Hauser
By: /s/ JAMES S. QUARFORTH Director
-------------------------------------------------
James S. Quarforth
By: /s/ CARL A. ROSBERG Director
-------------------------------------------------
Carl A. Rosberg
</TABLE>
<PAGE> 62
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
3.1 -- Certificate of Designation for Series B Convertible Preferred
Stock of American Telecasting, Inc. dated August 6, 1996
(incorporated by reference to Exhibit 4.1 to the Company's Form
8-K filed on August 7, 1996).
3.2 -- Amendment to Restated Certificate of Incorporation of American
Telecasting, Inc. dated April 24, 1996 (incorporated by
reference to Exhibit 3.1(i) to the Company's Quarterly Report on
10-Q for the period ended June 30, 1996).
3.3 -- Restated Certificate of Incorporation of American Telecasting,
Inc., dated April 27, 1995 (incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1995).
3.4 -- Amended and Restated By-Laws of American Telecasting, Inc.
(incorporated by reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1995).
4.1 -- Specimen Common Stock Certificate (incorporated by reference to
Exhibit 2 to the Company's Registration Statement on Form 8-A
filed on December 6, 1993).
4.2 -- Specimen Class A Common Stock Certificate (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-3 filed on April 26, 1996).
4.3 -- Specimen Class B Common Stock Certificate.
4.4 -- Specimen Series B Convertible Preferred Stock Certificate.
4.5 -- Supplemental Indenture dated as of August 10, 1995 between
American Telecasting, Inc. and First Trust National Association,
Trustee, supplementing and amending the Indenture dated as of
June 23, 1994 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1995).
4.6 -- Indenture dated as of June 23, 1994 between American
Telecasting, Inc. and First Trust National Association, Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K for the period ended December 31,
1994).
4.7 -- Form of Senior Discount Note due 2004 (included within Exhibits
4.5 and 4.6).
4.8 -- Supplemental Warrant Agreement dated as of August 10, 1995
between American Telecasting, Inc. and First Union National Bank
of North Carolina, as warrant agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1995).
4.9 -- Warrant Agreement dated as of June 23, 1994 between American
Telecasting, Inc. and First Union National Bank of North
Carolina, as warrant agent (incorporated by reference to Exhibit
4.4 to the Company's Annual Report on Form 10-K for the period
ended December 31, 1994).
4.10 -- Form of Warrant (included within Exhibits 4.8 and 4.9).
4.11 -- Collateral and Disbursement Agreement dated as of June 23, 1994
between First Trust National Association and American
Telecasting, Inc. (incorporated by reference to Exhibit 4.3 to
the Company's Annual Report on Form 10-K for the period ended
December 31, 1994).
<PAGE> 63
EXHIBIT NO. DESCRIPTION
4.12 -- Indenture dated as of August 10, 1995 between American
Telecasting, Inc., as Issuer, and First Trust National
Association, as Trustee (incorporated by reference to Exhibit
4.3 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995).
4.13 -- Form of Senior Discount Note due 2005 (included within Exhibit
4.12).
4.14 -- Warrant Agreement dated as of August 10, 1995 between American
Telecasting, Inc. and First Union National Bank of North
Carolina, as warrant agent (incorporated by reference to Exhibit
4.5 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1995).
4.15 -- Form of Warrant (included within Exhibit 4.14).
4.16 -- Registration Rights Agreement dated as of August 10, 1995 by and
among American Telecasting, Inc. and Dillon Read & Co., Inc. and
CS First Boston Corporation (incorporated by reference to
Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for
the period ended June 30, 1995).
10.1 -- Stock Purchase and Sale Agreement dated as of June 7, 1995 by
and between Bruce Merrill and Virginia Merrill and their
successors in trust, as trustees of the Merrill Revocable Trust
dated August 20, 1982 and American Telecasting, Inc.
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995).
10.2 -- Binding Letter Agreement dated as of July 6, 1995 by and between
Red Rock Communications, Inc. and American Telecasting, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1995).
10.3 -- Management Agreement dated as of February 3, 1996 between Fresno
MMDS Associates and American Telecasting Development, Inc.
(incorporated by reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995).
10.4 -- Standard Commercial Lease Agreement, dated as of September 18,
1995, between Tech Center VI Associates, L.P., as Lessor, and
American Telecasting, Inc., as Lessee (incorporated by reference
to Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.5 -- Employment Agreement effective as of January 4, 1996 between
American Telecasting, Inc. and Robert D. Hostetler (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report
on 10-Q for the period ended March 31, 1996).
10.6 -- Employment Agreement dated August 10, 1995 between American
Telecasting, Inc. and David K. Sentman (incorporated by
reference to Exhibit 10 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1995).
10.7 -- First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1996 among Fresno MMDS
Associates, First Union National Bank of North Carolina, Fresno
Telsat, Inc. and Fresno Wireless Cable Television, Inc.; related
Subordination Agreement dated as of June 30, 1996 by American
Telecasting, Inc. and Fresno MMDS Associates in favor of First
Union National Bank of North Carolina; related Assignment
Acceptance and Intercreditor Agreement dated as of July 18, 1996
among First Union National Bank of North Carolina as agent and
Fresno MMDS Associates (incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on 10-Q for the period
ended June 30, 1996).
<PAGE> 64
EXHIBIT NO. DESCRIPTION
10.8 -- Side agreement between Fresno Telsat, Inc. and American
Telecasting, Inc. dated July 18, 1996 (incorporated by reference
to Exhibit 10.5 to the Company's Quarterly Report on 10-Q for
the period ended June 30, 1996).
10.9 -- Amended and Restated Revolving Credit Agreement between Fresno
MMDS Associates, First Union National Bank of North Carolina,
Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc.
dated as of September 30, 1994; related Amended and Restated
Revolving Credit Note by Fresno MMDS Associates in favor of
First Union National Bank of North Carolina; related Pledge and
Security Agreement dated as of September 30, 1994 between Fresno
MMDS Associates and First Union National Bank of North Carolina;
related Collateral Assignment and Security Agreement dated as of
September 30, 1994 by and between FMA Licensee Subsidiary, Inc.
and First Union National Bank of North Carolina (incorporated by
reference to Exhibit 10.21 to the Company's Form S-4
Registration Statement filed on September 22, 1995).
10.10 -- Credit Agreement dated as of February 26, 1997, among American
Telecasting, Inc. and Banque Indosuez, New York Branch, as
Agent, and the lending institutions listed therein (the
"Banks"); related Option Agreement dated as of February 26, 1997
among American Telecasting, Inc. and Indosuez CM II, Inc.;
related Bond Appreciation Rights Certificate dated February 26,
1997; related Securities Pledge Agreement dated as of February
26, 1997 in favor of Banque Indosuez, New York Branch, as
pledgee, assignee and secured party, in its capacity as
collateral agent for the Banks; related Securities Pledge
Agreement dated as of February 26, 1997 made by American
Telecasting of Green Bay, Inc. in favor of Banque Indosuez, New
York Branch, as pledgee, assignee and secured party, in its
capacity as collateral agent for the Banks; related General
Security Agreement dated as of February 26, 1997 made by certain
subsidiaries of American Telecasting, Inc. in favor of Banque
Indosuez, New York Branch, as pledgee, assignee and secured
party, in its capacity as collateral agent for the Banks;
related Registration Rights Agreement dated as of February 26,
1997 among American Telecasting, Inc. and the holders of the
warrants to purchase an aggregate of 141,667 shares of the Class
A Common Stock of American Telecasting, Inc.; related Securities
Pledge Agreement dated as of February 26, 1997 made by American
Telecasting, Inc. in favor of Banque Indosuez, New York Branch,
as pledgee, assignee and secured party, in its capacity as
collateral agent for the Banks.
10.11 -- Form of Underwriting Agreement dated as of May 21, 1996 among
Alex. Brown & Sons Incorporated, Dillon, Read & Co. Inc., and
American Telecasting, Inc. (incorporated by reference to Exhibit
1.1 to the Company's Registration Statement on Form S-3 filed on
April 10, 1996).
10.12 -- Stock Purchase Agreement dated as of August 6, 1996 by and among
American Telecasting, Inc., Museum Assets Ltd., and Ashline,
Ltd. (incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on 10-Q for the period ended September 30,
1996).
10.13 -- Stock Purchase Agreement dated October 25, 1996 by and among
American Telecasting, Inc., Wartone Property Holdings, Ltd.,
Harleko Ltd., and Tarian Properties, Ltd. (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
10-Q for the period ended September 30, 1996).
10.14 -- Agreement for Purchase and Sale of Assets dated June 28, 1996
among Novner Enterprises, Inc., Alvin Novick, Phyllis Novick,
American Telecasting of Cincinnati, Inc. and American
Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on 10-Q for the period ended June
30, 1996).
<PAGE> 65
EXHIBIT NO. DESCRIPTION
10.15 -- Management Agreement dated as of June 28, 1996 between Novner
Enterprises, Inc. and American Telecasting of Cincinnati, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on 10-Q for the period ended June 30, 1996).
10.16 -- Agreement for Exchange of Assets dated July 10, 1996 among
Heartland Wireless Communications, Inc., Heartland Wireless
South Dakota Properties, Inc., Heartland Wireless Florida
Properties, Inc. and American Telecasting, Inc. (incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
10-Q for the period ended June 30, 1996).
10.17 -- American Telecasting, Inc. 1990 Stock Option Program, As Amended
(Effective April 25, 1996) (incorporated by reference to Exhibit
10.6 to the Company's Quarterly Report on 10-Q for the period
ended June 30, 1996).
10.18 -- Form of Registration Rights Agreement between American
Telecasting, Inc. and Stockholder (incorporated by reference to
Exhibit 10.40 to the Company's Form S-1 Registration Statement
filed on October 8, 1993).
11.1 -- Statement regarding computation of per share earnings.
21.1 -- Subsidiaries of American Telecasting, Inc.
23.1 -- Consent of Independent Public Accountant.
27.1 -- Financial Data Schedule.
<PAGE> 1
EXHIBIT 4.3
<TABLE>
<S> <C>
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF SHARES
0 DELAWARE
CLASS B COMMON
AMERICAN TELECASTING, INC.
TOTAL AUTHORIZED ISSUE 43,000,000 SHARES
30,000,000 Class A Common Shares 10,000,000 Class B Common Shares 3,000,000 Preferred Shares
With A Par Value of $0.01 Each With A Par Value of $0.01 Each With A Par Value of $0.01 Each
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF
AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
This is to Certify that is the owner of
fully paid and
non-assessable CLASS B COMMON shares of AMERICAN TELECASTING, INC. transferable only on the books of the Corporation by the
holder hereof in person or by the duly authorized Attorney upon surrender of this certificate properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized officers.
Dated
SECRETARY PRESIDENT
</TABLE>
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
-------------------------------
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants in common Act
---------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Shares
represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated 19
In presence of
-----------------------------
- -----------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4.4
<TABLE>
<S> <C>
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF SHARES
0 DELAWARE
SERIES B
CONVERTIBLE PREFERRED
AMERICAN TELECASTING, INC.
TOTAL AUTHORIZED ISSUE 3,500,000 SHARES
500,000 Series B Convertible Preferred Shares 3,000,000 Preferred Shares
With A Par Value of $0.01 Each With A Par Value of $0.01 Each
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF
AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
This is to Certify that is the owner of
fully paid and
non-assessable PREFERRED shares of American Telecasting, Inc. transferable only on the books of the Corporation by the
holder hereof in person or by the duly authorized Attorney upon surrender of this certificate properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized officers.
Dated
SECRETARY PRESIDENT
</TABLE>
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
-------------------------------
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants in common Act
---------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Shares
represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated 19
In presence of
-----------------------------
- -----------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
================================================================================
CREDIT AGREEMENT
among
AMERICAN TELECASTING, INC.
and
BANQUE INDOSUEZ, NEW YORK BRANCH,
AS AGENT,
and
THE LENDING INSTITUTIONS LISTED HEREIN
and
THE LENDING INSTITUTIONS LISTED HEREIN
-----------------------------
Dated as of February 26, 1997
-----------------------------
$17,000,000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Minimum Amount of Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04. Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06. Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.08. Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.09. Total Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10. Commitment Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.01. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.02. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.03. Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.04. Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.01. Conditions Precedent to the Effective Date . . . . . . . . . . . . . . . . . . . . . 9
3.02. Conditions Precedent to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4. Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . 14
4.01. Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.02. Corporate Power and Authority; Business . . . . . . . . . . . . . . . . . . . . . . . 15
4.03. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.04. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.05. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.06. Governmental Approvals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.07. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.08. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.09. True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10. Financial Condition; Financial Statements; Projections . . . . . . . . . . . . . . . 17
4.11. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.12. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.14. Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.15. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.16. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.17. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.18. Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.19. Indebtedness Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.20. Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.21. Business, System Agreements and Other Material Agreements . . . . . . . . . . . . . . 24
4.22. Tower Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.01. Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.02. Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.04. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.05. Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.06. Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.07. ERISA 32
5.08. Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.09. End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.12. Environmental Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13. Equal Security for Loans and Notes; No Further Negative Pledges . . . . . . . . . . . 34
5.14. Pledge of Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.15. Channel Lessor Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.16. Tower Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.17. Pledge of Las Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.18. Debt Warrant Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.01. Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.02. Amendments or Waivers of Certain Documents . . . . . . . . . . . . . . . . . . . . . 36
6.03. Liens 36
6.04. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.05. Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.06. Prepayments of Indebtedness, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.07. Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.08. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.09. Issuance of Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.10. Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.11. Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12. ERISA 42
6.13. Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.14. Additional System Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.01. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.02. Representations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.03. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.04. Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.05. Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.06. ERISA 45
7.07. Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.08. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.09. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.10. Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 9. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.01. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.02. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.03. Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.04. Reliance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.06. Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . 66
9.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.08. The Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . 67
9.09. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.10. Resignation by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.01. Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.02. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.04. Benefit of Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.05. No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.06. Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.07. Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.08. Governing Law; Submission to Jurisdiction; Venue . . . . . . . . . . . . . . . . . . 73
10.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.10. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.11. Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.12. Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.13. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.14. Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.16. Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ANNEX I - List of Banks
ANNEX II - Bank Addresses
ANNEX 3.01(J) - Summary of Corporate Insurance Policies
ANNEX 3.01(M) - Consent Exceptions
ANNEX 4.05 - Certain Expenditures
ANNEX 4.17(a) - Options
ANNEX 4.17(b) - Schedule of Subsidiaries
ANNEX 4.19 - Outstanding Indebtedness
ANNEX 4.21(a) - System
ANNEX 4.21(b) - System Exceptions
ANNEX 5.15 - Certain Markets
ANNEX 6.10 - Certain Assets Disposition
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
EXHIBIT B-2 - Form of Opinion of McDermott, Will & Emery
EXHIBIT B-3 - Form of FCC Counsel Opinion
EXHIBIT B-4 - Form of Local Colorado Counsel Opinion
EXHIBIT C-1 - Form of General Security Agreement
EXHIBIT C-2 - Form of Securities Pledge Agreement
EXHIBIT D-1 - Form of Notice of Assignment
EXHIBIT D-2 - Form of Assignment and Assumption Agreement
EXHIBIT E - Form of Notice of Borrowing
EXHIBIT F - Form of Officers' Solvency Certificate
EXHIBIT G - Form of Escrow Agreement
EXHIBIT H - Form of Subsidiary Guarantee
EXHIBIT I - Form of Management Subordination Agreement
EXHIBIT J - Form of Channel Lessor Consent
EXHIBIT K - Form of FCC Opinion
</TABLE>
-iv-
<PAGE> 6
CREDIT AGREEMENT, dated as of February 26, 1997, among
American Telecasting, Inc., a Delaware corporation (the "Borrower" or "ATel"),
the lending institutions listed in Annex I (each a "Bank" and, collectively,
the "Banks") and the New York branch of Banque Indosuez ("Indosuez") as the
agent and collateral agent for the Banks (in such capacity, the "Agent").
Unless otherwise defined herein, all capitalized terms used herein and defined
in Section 8 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, ATel desires to enter into the Loan Facility which,
among other things, provides for the making of Loans to ATel pursuant to the
terms and conditions of this Credit Agreement; and
WHEREAS, the Banks are willing to make available the Loan
Facility provided for in this Credit Agreement.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01. Commitments. Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees at any time and from
time to time on and after the Effective Date and prior to the Loan Commitment
Termination Date, to make a Loan or Loans to ATel, which Loans shall be drawn
under the Loan Facility, as set forth below. Such Loans are herein referred to
as the "Loans."
1.02. Minimum Amount of Each Borrowing. The minimum
aggregate principal amount of a Borrowing of Loans shall be $500,000 and, if
greater, shall be in integral multiples of $100,000.
1.03. Notice of Borrowings. Whenever ATel desires that the
Banks make Loans under the Loan Facility it shall give the Agent at the Agent's
Office prior to 10:00 A.M. (New York time) at least one Business Day's written
notice (or telephonic notice promptly confirmed in writing) of each such
Borrowing. Each such notice, which shall be substantially in the form of
Exhibit E hereto (each a "Notice of Borrowing"), shall be irrevocable, shall be
deemed a representation by ATel that all conditions precedent to such Borrowing
have been satisfied and shall specify (i) the aggregate principal amount in
U.S. dollars of the Loans to be made pursuant to such Borrowing and
<PAGE> 7
- 2 -
(ii) the date of Borrowing (which shall be a Business Day). The Agent shall as
promptly as practicable give each Bank written notice (or telephonic notice
promptly confirmed in writing) of each proposed Borrowing, of such Bank's
proportionate share thereof and of the other matters covered by the Notice of
Borrowing.
1.04. Disbursement of Funds. (a) No later than 1:00 P.M.
(New York time) on the date specified in each Notice of Borrowing, each Bank
will make available to the Agent in New York its pro rata portion of each
Borrowing requested to be made on such date in the manner provided below.
(b) Each Bank shall make available all amounts it is to fund
under any Borrowing on or after the Effective Date in immediately available
funds to the Agent to the account specified therefor by the Agent or if no
account is so specified at the Agent's Office and the Agent will make such
funds available to ATel by depositing to the account specified therefor by ATel
or if no account is so specified to its account at the Agent's Office the
aggregate of the amounts so made available in the type of funds received.
Unless the Agent shall have been notified by any Bank prior to the date of any
such Borrowing that such Bank does not intend to make available to the Agent
its portion of the Borrowing or Borrowings to be made on such date, the Agent
may assume that such Bank has made such amount available to the Agent on such
date of Borrowing, and the Agent, in reliance upon such assumption, may (in its
sole discretion and without any obligation to do so) make available to ATel a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank and the Agent has made available same to
ATel, the Agent shall be entitled to recover such corresponding amount from
such Bank. If such Bank does not pay such corresponding amount forthwith upon
the Agent's demand therefor, the Agent shall promptly notify ATel, and ATel
shall immediately pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from such Bank or ATel, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to ATel to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to
(x) if paid by such Bank, the Federal Funds Rate or (y) if paid by ATel, the
then applicable rate of interest, calculated in accordance with Section 1.07,
for the respective Loans. The Agent shall also be entitled to recover from any
Bank an amount equal to any other losses incurred by the Agent as a result of
the failure of such Bank to provide such amount as provided in this Credit
Agreement.
<PAGE> 8
- 3 -
(c) Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitment hereunder or to prejudice any rights
which ATel may have against any Bank as a result of any default by such Bank
hereunder.
1.05. Notes. (a) ATel's obligation to pay the principal of
and interest on all the Loans made to it by each Bank shall be evidenced by a
promissory note (each, a "Note" and, collectively, the "Notes") duly executed
and delivered by ATel substantially in the form of Exhibit A hereto, with
blanks appropriately completed in conformity herewith.
(b) The Note of ATel issued to each Bank shall (i) be
executed by ATel, (ii) be payable to the order of such Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Loan
Commitment of such Bank and be payable in the aggregate principal amount of the
Loans evidenced thereby, (iv) mature, with respect to each Loan evidenced
thereby, on the Final Maturity Date, (v) be subject to mandatory prepayment as
provided in Section 2.02, (vi) bear interest as provided in Section 1.07 and
(vii) be entitled to the benefits of this Credit Agreement and the other
applicable Credit Documents.
(c) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect ATel's obligations hereunder or under the other
applicable Credit Documents in respect of such Loans.
1.06. Pro Rata Borrowings. All Borrowings under this
Agreement shall be loaned by the Banks pro rata on the basis of their Loan
Commitments. No Bank shall be responsible for any default by any other Bank in
its obligation to make Loans hereunder and each Bank shall be obligated to make
the Loans provided to be made by it hereunder, regardless of the failure of any
other Bank to fulfill its commitments hereunder.
1.07. Interest. (a) The unpaid principal amount of each
Loan shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum of 12.50%, which
rate shall increase by 0.50% on each February 16, May 16, August 16 and
November 16, commencing May 16, 1997.
<PAGE> 9
- 4 -
(b) Following the occurrence and during the continuance of
any Event of Default under Section 7.01 hereof or with respect to any breach of
the covenants set forth in Section 5 or Section 6 hereof, each Loan (including
overdue principal and, to the extent permitted by law, overdue interest in
respect of any Loan) shall bear interest at the rate of interest applicable
thereto plus 2%.
(c) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable quarterly in arrears on each February 15, May 15, August 15 and
November 15 beginning on May 15, 1997.
1.08. Capital Requirements. If any Bank shall have
determined that the adoption or effectiveness after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank or such
Bank's parent with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency (including in each case any such change proposed or published
prior to the date hereof), has or would have the effect of reducing the rate of
return on such Bank's or such Bank's parent's capital or assets as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank or such Bank's parent could have achieved but for such adoption,
effectiveness or change or as a consequence of an increase in the amount of
capital required to be maintained by such Bank (including in each case, without
limitation, with respect to any Bank's Commitment or any Loan), then from time
to time, within 15 days after demand by such Bank (with a copy to the Agent),
ATel shall pay to such Bank such additional amount or amounts as will
compensate such Bank or such Bank's parent, as the case may be, for such
reduction. Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.08, will give prompt written
notice thereof to ATel, which notice shall set forth in reasonable detail the
basis of the calculation of such additional amounts, although any delay in
giving any notice shall not release or diminish any of ATel's obligations to
pay additional amounts pursuant to this Section 1.08.
1.09. Total Loan Commitments. The aggregate amount of the
Total Loan Commitments is $17,000,000. Anything con-
<PAGE> 10
- 5 -
tained in this Credit Agreement to the contrary notwithstanding, in no event
shall the aggregate principal amount of all Loans of any Bank at any time
exceed such Bank's portion of the Total Loan Commitments.
1.10. Commitment Commission. ATel agrees to pay the Agent a
commitment commission ("Commitment Commission") for the account of each Bank
for the period from and including the Effective Date to but not including the
date the Total Loan Commitments have been terminated, computed at a rate equal
to .50% per annum on the daily average Unutilized Commitment of such Bank.
Accrued Commitment Commission shall be due and payable in arrears on the
fifteenth day of each February, May, August and November commencing on the
fifteenth day of May 1997 and on the Loan Commitment Termination Date.
SECTION 2. Payments.
2.01. Voluntary Prepayments. ATel shall have the right to
prepay Loans in whole or in part from time to time, without premium or penalty,
on the following terms and conditions: (i) ATel shall give the Agent at the
Agent's Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans and the amount of such prepayment,
which notice shall be given by ATel at least one Business Day prior to the date
of such prepayment and which notice shall promptly be transmitted by the Agent
to each of the Banks; and (ii) each partial prepayment shall be in an aggregate
principal amount of at least $100,000 and integral multiples of $100,000 in
excess of that amount. All payments made under this Section 2.01 shall reduce
the Total Loan Commitments on a pro rata basis.
2.02. Mandatory Prepayments.
(A) Requirements:
(a) ATel shall prepay the outstanding principal amount of the
Loans on any date on which the aggregate outstanding principal amount
of such Loans (after giving effect to any other repayments or
prepayments on such day) exceeds the Total Loan Commitments in the
amount of such excess.
(b) On the day following the receipt thereof by ATel, an
amount equal to 100% of the proceeds received by ATel in Cash or Cash
Equivalents (net of underwriting discounts and commissions and other
costs and expenses di-
<PAGE> 11
- 6 -
rectly associated therewith) of the sale after the Effective Date of
equity securities shall be applied as provided in Section 2.02(B).
(c) On the day following receipt thereof by ATel, an amount
equal to 100% of any insurance proceeds received (net of direct
expenses of recovery, including reasonable and customary legal fees),
less any portion of such proceeds not in excess of $100,000 that is
promptly applied to repair or replace the damaged property in respect
of which such proceeds were received (provided that, if the damaged
property constituted Collateral, any such replacement property shall
be made subject to the Lien of the Security Documents), shall be
applied as provided in Section 2.02(B).
(d) On the day following the receipt thereof by ATel, an
amount equal to 100% of any tax refund made to ATel (net of direct
expenses of recovery, including reasonable and customary legal fees)
shall be applied as provided in Section 2.02(B).
(B) Application: With respect to each prepayment of Loans
required by Section 2.02(A), ATel shall give the Agent two Business Days'
notice. All prepayments shall include payment of accrued interest on the
principal amount so prepaid and shall be applied to the payment of interest
before application to principal. All payments required under this Section 2.02
shall reduce the Total Loan Commitments on a pro rata basis.
2.03. Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments under this Credit Agreement shall be
made to the Agent, for the ratable account of the Banks entitled thereto, not
later than 1:00 P.M. (New York time) on the date when due and shall be made in
immediately available funds in lawful money of the United States of America to
the account specified therefor by the Agent or if no account has been so
specified at the Agent's Office, it being understood that written notice by
ATel to the Agent to make a payment from the funds in ATel's account at the
Agent's Office shall constitute the making of such payment to the extent of
such funds held in such account. The Agent will thereafter cause to be
distributed on the same day (if payment is actually received by the Agent in
New York prior to 1:00 P.M. (New York time) on such day) funds relating to the
payment of principal or interest or fees ratably to the Banks entitled to
receive any such payment in accordance with the terms of this Credit Agreement.
If and to the extent that any such distribution
<PAGE> 12
- 7 -
shall not be so made by the Agent in full on the same day (if payment is
actually received by the Agent prior to 1:00 P.M. (New York time) on such day),
the Agent shall pay to each Bank its ratable amount thereof and each such Bank
shall be entitled to receive from the Agent, upon demand, interest on such
amount at the Federal Funds Rate for each day from the date such amount is paid
to the Agent until the date the Agent pays such amount to such Bank.
(b) Any payments under this Credit Agreement which are made
by ATel later than 1:00 P.M. (New York time) shall be deemed to have been made
on the next succeeding Business Day. Whenever any payment to be made hereunder
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable during such extension at
the applicable rate in effect immediately prior to such extension.
2.04. Net Payments. (a) All payments by ATel to or for the
account of any Bank or the Agent under any Credit Document shall be made
without set-off or counterclaim and in such amounts as may be necessary in
order that all such payments (after deduction or withholding for or on account
of any present or future taxes, levies, imposts, duties or similar charges
imposed by any government or any political subdivision or taxing authority
thereof on the payment to or for the account of any Bank or the Agent under any
Credit Document, other than any tax on or measured by the income of a Bank
(including any franchise or similar tax so measured) pursuant to the income tax
laws of the United States or of the jurisdiction in which it is incorporated or
organized or the jurisdiction where such Bank's lending office is located
(collectively, such non-excluded taxes hereinafter referred to as "Taxes"))
shall not be less than the amounts otherwise specified to be paid under any
Credit Document. A Bank to which additional amounts are payable will provide
ATel with a certificate setting forth in sufficient detail the calculation and
amount of such additional amounts payable to such Bank under this Section
2.04(a). With respect to each deduction or withholding for or on account of
any Taxes, ATel shall promptly furnish to each Bank such certificates, receipts
and other documents as may be required (in the reasonable judgment of such
Bank) to establish any tax credit to which such Bank may be entitled.
(b) Without prejudice to the provisions of clause (a) of
this Section 2.04, if any Bank, or the Agent on its behalf, is required by law
to make any payment on account
<PAGE> 13
- 8 -
of Taxes on or in relation to any sum received or receivable under any Credit
Document by such Bank, or the Agent on its behalf, ATel will promptly indemnify
such person against such Tax payment, together with any interest and penalties
payable or incurred in connection therewith, computed in a manner consistent
with clause (a) of this Section 2.04 upon receipt of a certificate by such Bank
providing in sufficient detail the calculation and amount of such payments.
(c) Each Bank organized under the laws of a jurisdiction
outside the United States, on or contemporaneously with the date of its
execution and delivery of this Agreement in the case of each Bank listed on the
signature pages hereof and on or prior to the date on which it becomes a Bank
in the case of each other Bank, and from time to time thereafter if requested
in writing by ATel (but only so long as such Bank remains lawfully able to do
so), shall provide ATel with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which reduces the rate of the withholding
tax on payments of interest or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct of a trade or
business in the United States. If the form provided by a Bank at the time such
Bank first becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from "Taxes" as defined in Section 2.04(a).
(d) For any period with respect to which a Bank has
failed to provide ATel with the appropriate form pursuant to Section 2.04(c)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 2.04(a) or
2.04(b) with respect to Taxes imposed by the United States; provided, however,
that should a Bank which is otherwise exempt from or subject to a reduced rate
of withholding tax become subject to Taxes because of its failure to deliver a
form required hereunder, ATel shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(e) If ATel is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 2.04, then such Bank will
change the jurisdiction of its lending office so as to eliminate or reduce any
such additional payment
<PAGE> 14
- 9 -
which may thereafter accrue if such change is not, in the sole judgment of such
Bank, disadvantageous to such Bank.
SECTION 3. Conditions Precedent.
3.01. Conditions Precedent to the Effective Date. The
effectiveness of this Agreement on the Effective Date is subject to the
satisfaction of the following conditions:
(A) Officer's Certificate. On the Effective Date, the Agent
shall have received a certificate dated such date signed by an
appropriate officer of ATel on behalf of ATel stating that all of the
applicable conditions set forth in Sections 3.01 and 3.02 (in each
case disregarding any reference therein that such condition be deemed
satisfactory by the Agent and/or the Required Banks) have been
satisfied or waived as of such date.
(B) Opinions of Counsel. On the Effective Date, the Agent
shall have received an opinion or opinions addressed to each of the
Banks and dated the Effective Date, each in form and substance
satisfactory to the Agent, from (i) Skadden, Arps, Slate, Meagher &
Flom LLP, counsel to ATel, which opinion shall address the matters
contained in Exhibit B-1 hereto, (ii) McDermott, Will & Emery, which
opinion shall address the matters contained in Exhibit B-2 hereto,
(iii) Gurman, Blask & Freedman, special FCC counsel to ATel, which
opinion shall address the matters contained in Exhibit B-3 hereto, and
(iv) local Colorado counsel to ATel, which opinion shall address the
matters contained in Exhibit B-4 hereto.
(C) Corporate Proceedings. All corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by the Credit Documents shall be
satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates,
documents and papers, including records of corporate proceedings and
governmental approvals, if any, which the Agent reasonably may have
requested from ATel in connection therewith, such documents and papers
where appropriate to be certified by proper corporate or governmental
authorities. Without limiting the foregoing, the Agent shall have
received (i) resolutions of the Board of Directors of ATel or any
other Credit Party approving and authorizing such documents and
actions as are contemplated hereby in form and substance satisfactory
to the Agent including without
<PAGE> 15
- 10 -
limitation the execution and delivery of all Credit Documents,
certified by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment, and
(ii) signature and incumbency certificates of officers of ATel or any
Credit Party executing instruments, documents or agreements required
to be executed in connection with this Credit Agreement.
(D) Organizational Documentation, etc. On or prior to the
Effective Date, the Banks shall have received copies of a true and
complete certified copy of the following documents of ATel, the
provisions of which shall be reasonably satisfactory to the Agent and
the Required Banks:
(1) Its Articles of Incorporation, which shall be
certified and be accompanied by a good standing certificate
from the Secretary of State of the State of Delaware and good
standing certificates from the jurisdictions in which it is
qualified to do business as a foreign corporation, each to be
dated a recent date prior to the Effective Date;
(2) Its By-laws, certified as of the Effective
Date by its corporate secretary.
(E) Subsidiaries. On or prior to the Effective Date, the
Banks shall have received a true and complete certified copy of the
corporate organizational documents of each Credit Party other than
ATel, accompanied by a good standing certificate of the Secretary of
State of each such entity's jurisdiction of organization.
(F) Notes. There shall have been delivered to the Agent for
the account of each of the Banks the Notes executed by ATel in the
amount and maturity and as otherwise provided herein.
(G) Escrow. ATel shall have deposited $1 million with the
Escrow Agent pursuant to the terms of the Escrow Agreement.
(H) Certain Fees. All costs, fees and expenses (including,
without limitation, reasonable legal fees and expenses) payable to
Indosuez by ATel on or before the Effective Date pursuant to the
letter agreement between ATel and Indosuez dated January 15, 1997 (the
"Letter") shall have been paid in full and ATel shall have paid or
have caused to be paid the commitment and other fees and ex-
<PAGE> 16
- 11 -
penses (including, without limitation, reasonable legal fees and
expenses) contemplated hereby and/or in connection with the other
Credit Documents.
(I) Financial Statements, etc. Prior to the Effective Date,
the Agent shall have received financial statements including a balance
sheet and statements of income and retained earnings and cash flow of
ATel for the fiscal years ended December 31, 1995 and 1996 (which
shall have been audited by Arthur Andersen). ATel shall have
delivered to the Agent financial projections for fiscal year 1997 with
respect to ATel, accompanied by a statement by ATel that such
projections are based on assumptions believed by ATel in good faith to
be reasonable as to the future financial performance of ATel,
reasonably satisfactory to the Agent.
(J) Insurance. Set forth on Annex 3.01(J) is a summary of
all insurance policies maintained by ATel and its Subsidiaries, and
the insurance coverage provided for ATel and its Subsidiaries by such
insurance policies shall be reasonably satisfactory to the Agent. On
or prior to the Effective Date, there shall have been delivered to the
Agent the insurance certificates required under the Security
Documents.
(K) Indebtedness, etc. ATel and its Subsidiaries shall have
outstanding no Indebtedness other than the Indebtedness (the "Existing
Indebtedness") set forth on Annex 4.19.
(L) Security Documents; Guarantees. The Security Documents
shall have been duly executed and delivered by the parties thereto and
there shall have been delivered to the Collateral Agent (i) stock
certificates representing all Pledged Securities which are equity
securities, together with executed and undated stock powers and/or
assignments in blank, and the Fresno Note, (ii) evidence of the filing
(or of the making of arrangements to file contemporaneously with the
Effective Date) of appropriate financing statements under the
provisions of the UCC or other applicable laws, rules or regulations
in each of the offices where such filing is necessary or appropriate
and to grant the Collateral Agent a perfected first priority Lien in
such Collateral superior to and prior to the rights of all third
persons other than Prior Liens relating to such Collateral and subject
to no other Liens except Liens which are expressly permitted under the
appli-
<PAGE> 17
- 12 -
cable Security Document to the full extent required by the Security
Documents and this Agreement to be perfected on or contemporaneously
with the Effective Date, (iii) UCC, tax lien and judgment searches
naming the Borrower and each other Credit Party or debtor in each
state jurisdiction in which any Collateral of such debtor is located
and for which notices of security interests or other liens therein may
be filed, none of which shall encumber the Collateral except for Prior
Liens or with respect to which provision satisfactory to the Agent has
been made to effect their release or subordination and (iv) such other
security and other documents as may be necessary or, in the opinion of
Agent, desirable to perfect the Liens created, or purported or
intended to be created, by the Security Documents. Each of the
Guarantors shall have executed a Guarantee and a Guarantor
Subordination Agreement.
(M) Consents, Etc. Except as set forth on Annex 3.01(M)
hereto, all governmental and third-party approvals and consents
(including, without limitation, all approvals and consents required in
connection with any environmental statutes, rules or regulations), if
any, in connection with the transactions contemplated by the Credit
Documents, and otherwise referred to herein or therein to be completed
on or before the Effective Date shall have been obtained and remain in
effect. There shall not exist any judgment, order, injunction or
other restraint issued or filed with respect to the making of the
Loans hereunder.
(N) Solvency. On or before the Effective Date, the Banks
shall have received the Officers' Solvency Certificate, in form and
substance satisfactory to the Agent and the Required Banks.
(O) Capitalization and Corporate Structure. The corporate
and capital structure of ATel shall be reasonably satisfactory to the
Agent in all respects. ATel shall have no Subsidiaries other than the
Subsidiaries set forth on Annex 4.17.
(P) Partial Discharge of Fresno Note. All principal amounts,
prepayment charges, if any, accrued interest, and fees, charges and
other obligations of Fresno MMDS Associates to any party other than
ATel in respect of the Fresno Note shall have been paid and discharged
in full, and the Agent shall have received the originals or copies
authenticated to its satisfaction of (i) duly executed discharge
letter and receipts evidencing payment in full of all
<PAGE> 18
- 13 -
amounts due thereunder, (ii) duly executed releases and UCC-3
Termination Statements satisfactory in form and substance to the
Agent, effectively releasing and discharging all Liens incurred by
each Credit Party other than Fresno MMDS Associates in connection with
such Fresno Note, in proper form for filing or recording, as
applicable, (iii) duly executed amendments to any financing statements
naming Fresno MMDS Associates as debtor in connection with such Fresno
Note substituting ATel as secured party thereunder for any party other
than ATel, satisfactory in form and substance to the Agent, and (iv)
such other documents as the Agent may reasonably request in order to
evidence the discharge of such Fresno Note and the release or
amendments of the Liens in connection therewith.
(Q) Equity Documents. The Option Agreements, the Debt
Warrants, the Equity Warrants, the Bond Appreciation Rights and the
Registration Rights Agreement shall have been duly executed and
delivered by the parties thereto.
All of the certificates, legal opinions and other documents
and papers referred to in this Section 3.01, unless otherwise specified, shall
be delivered to the Agent at the Agent's Office (or such other location as may
be specified by the Agent) for the account of each of the Banks and in
sufficient counterparts for each of the Banks and shall be satisfactory in form
and substance to the Agent.
3.02. Conditions Precedent to All Loans. The obligation of
the Banks to make all Loans is subject, at the time of each such Loan, to the
satisfaction of the following conditions:
(A) Effectiveness. This Agreement shall have become
effective as provided in Section 10.10.
(B) No Default; Representations and Warranties. At the time
of the making of each Loan and also after giving effect thereto (i)
there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in the other Credit
Documents in effect at such time shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on and as of the date of the making of
such Loan, unless such representation and warranty expressly indicates
that it is being made as of any other specific date in which case on
and as of such other date.
<PAGE> 19
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(C) Adverse Change, etc. Since December 31, 1996, nothing
shall have occurred or become known which the Required Banks or the
Agent shall have determined has a Materially Adverse Effect.
(D) Margin Rules. On the date of each Borrowing of Loans,
neither the making of any Loan nor the use of the proceeds thereof
will violate the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
The acceptance of the proceeds of each Borrowing of Loans
shall constitute a representation and warranty by ATel to each of the Banks
that all of the applicable conditions specified in Section 3.02 (in each case
disregarding any reference therein that such condition be deemed satisfactory
by the Agent and/or the Required Banks) have been satisfied or waived.
All of the certificates, legal opinions and other documents
and papers requested by the Agent, unless otherwise specified, shall be
delivered to the Agent at the Agent's Office (or such other location as may be
specified by the Agent) for the account of each of the Banks and in sufficient
counterparts for each of the Banks and shall be reasonably satisfactory in form
and substance to the Agent.
SECTION 4. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans
provided for herein, ATel makes the following representations and warranties
to, and agreements with, the Banks, all of which shall survive the execution
and delivery of this Agreement and the making of the Loans (with the execution
and delivery of this Agreement and the making of each Loan thereafter being
deemed to constitute a representation and warranty that the matters specified
in this Section 4 are true and correct in all material respects as of the date
of each such Loan unless such representation and warranty expressly indicates
that it is being made as of any specific date):
4.01. Corporate Status. Each Credit Party (i) is a duly
organized and validly existing corporation in good standing under the laws of
its respective jurisdiction of incorporation; (ii) has the corporate or other
organizational power and authority and has obtained with respect to its present
business, and prior to any part of ATel's network being installed or becoming
operational will obtain, all requisite governmental licenses, authorizations,
consents and approvals to own and op-
<PAGE> 20
- 15 -
erate its property and assets and to transact the business in which it is
engaged and presently proposes to engage, except for those governmental
licenses, authorizations, consents or approvals the failure of which to be so
obtained would not have a Materially Adverse Effect; and (iii) is duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Materially Adverse Effect.
4.02. Corporate Power and Authority; Business. Each Credit
Party has the corporate power and authority to execute, deliver and carry out
the terms and provisions of the Credit Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. Each Credit Party
has duly executed and delivered each Credit Document to which it is a party and
each such Credit Document constitutes the legal, valid and binding obligation
of such entity enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
4.03. No Violation. Neither the execution, delivery and
performance by each Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or (other than
pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of such Credit Party pursuant to the terms of any indenture, mortgage,
deed of trust, material agreement or other material instrument to which such
Credit Party is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of the
charter or by-laws of such Credit Party, except where such contravention,
conflict, inconsistency, breach, default, creation, imposition, obligation or
violation would not have a Materially Adverse Effect. ATel and its
Subsidiaries have all easements, licenses and rights of way necessary to
conduct
<PAGE> 21
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their business except where failure to have the same will not have a Materially
Adverse Effect.
4.04. Litigation. There are no actions, judgments, suits or
proceedings pending or, to ATel's knowledge, threatened with respect to ATel or
its Subsidiaries that are likely, individually or in the aggregate, to have a
Materially Adverse Effect.
4.05. Use of Proceeds. (a) The proceeds of all Loans to be
made to ATel hereunder shall be utilized to repay outstanding Indebtedness of
ATel or its Subsidiaries and for general corporate purposes, including to
finance the working capital requirements of ATel or its Subsidiaries, or for
any of the capital expenditures and acquisitions of channel rights set forth on
Annex 4.05 hereto. $1 million of the initial Borrowing hereunder shall be
deposited with the Escrow Agent under the terms of the Escrow Agreement.
(b) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
4.06. Governmental Approvals, etc. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any third party or any governmental or
public body or authority, or by any subdivision thereof, including but not
limited to any radio, television or other license, permit, certificate or
approval granted or issued by the FCC or any other Governmental Authority
(including without limitation any MDS, MMDS, ITFS, business radio, earth
station operational fixed service, local MDS, or experimental licenses or
permits issued by the FCC) (other than those orders, consents, approvals,
licenses, authorizations or validations which have previously been obtained or
made and except for filings to perfect security interests granted pursuant to
the Security Documents, all of which will be accomplished on or prior to the
Closing Date), is required to authorize or is required in connection with (i)
the execution, delivery and performance of any Credit Document or the
transactions contemplated therein or (ii) the legality, validity, binding
effect or enforceability of any Credit Document; provided, however, to the
extent the performance of any Credit Document or the transactions contemplated
therein involves a transfer of control
<PAGE> 22
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or assignment of any license, permit, certificate or other authorization issued
by the FCC, then FCC approval may be required prior to such transfer of control
or assignment. At the time of the making of the Loans, there does not exist
any judgment, order, injunction or other restraint issued or filed with respect
to the making of loans or the performance by the Credit Parties of their
respective obligations under the Credit Documents.
4.07. Investment Company Act. ATel is not, nor will it be
after giving effect to the transactions contemplated hereby, an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.08. Public Utility Holding Company Act. ATel is not, nor
will be after giving effect to the transactions contemplated hereby, a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
4.09. True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
ATel in writing to any Bank for purposes of or in connection with this Credit
Agreement or any transaction contemplated herein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of ATel in
writing to any Bank will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any material fact necessary to make such information not
misleading at such time in light of the circumstances under which such
information was provided. The projections and pro forma financial information
contained in such materials are based on good faith estimates and assumptions
believed by ATel to be reasonable at the time made, it being recognized by the
Banks that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ materially from the projected results. There is no fact
known to ATel which materially and adversely affects the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of ATel and its Subsidiaries, taken as a whole, which
has not been disclosed herein or in such other documents, certificates and
written statements furnished to the Banks.
4.10. Financial Condition; Financial Statements; Projections.
(a) ATel and its Subsidiaries are not entering
<PAGE> 23
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into the arrangements contemplated hereby and by the other Credit Documents,
nor intends to make any transfer or incur any obligations hereunder or
thereunder, with actual intent to hinder, delay or defraud either present or
future creditors. On and as of the Effective Date, on a pro forma basis after
giving effect to all Indebtedness incurred and Liens created, or to be created,
by ATel and its Subsidiaries in connection herewith, (w) ATel does not expect
that final judgments against ATel or its Subsidiaries in actions for money
damages with respect to pending or threatened litigation will be rendered at a
time when, or in an amount such that, ATel and its Subsidiaries, on a
consolidated basis, will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable amount
of such judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered and the cash available to ATel or its
Subsidiaries, after taking into account all other anticipated uses of the cash
of ATel or its Subsidiaries (including the payments on or in respect of debts
(including its Contingent Obligations)); (x) ATel and its Subsidiaries will not
have incurred nor intends to, nor believes that they will, incur debts beyond
their ability to pay such debts as such debts mature (taking into account the
timing and amounts of cash to be received by ATel and its Subsidiaries from any
source, and of amounts to be payable on or in respect of debts of ATel and its
Subsidiaries and the amounts referred to in the preceding clause (w)); (y) ATel
and its Subsidiaries, on a consolidated basis, after taking into account all
other anticipated uses of the cash of ATel and its Subsidiaries, anticipates
being able to pay all amounts on or in respect of debts of ATel and its
Subsidiaries when such amounts are required to be paid; and (z) ATel and its
Subsidiaries, on a consolidated basis, will have sufficient capital with which
to conduct its present and proposed business and the property of ATel and its
Subsidiaries does not constitute unreasonably small capital with which to
conduct its present or proposed business. For purposes of this Section 4.10,
"debt" means any liability on a claim, and "claim" means a (i) right to payment
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured; or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right
to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured. On the date of each
Borrowing (and after giving effect to all Borrowings as of such date), the
representations set forth in this Section
<PAGE> 24
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4.10(a) shall be true and correct with respect to ATel and its Subsidiaries on
such date.
(b) ATel has heretofore delivered to the Banks the financial
statements set forth in Section 3.01(I). All the financial statements referred
to in the preceding sentence were prepared in accordance with GAAP consistently
applied, except in the case of interim financial statements for normal year-end
adjustments and the absence of footnote disclosures. Such financial statements
fairly present in all material respects the financial position of ATel for each
of the periods covered thereby. Except as disclosed to the Banks prior to the
Effective Date, since December 31, 1996 no event or events have occurred that
could reasonably be expected to have a Materially Adverse Effect.
(c) There have heretofore been delivered to the Banks pro
forma consolidated income projections for ATel, pro forma consolidated balance
sheet projections for ATel and pro forma consolidated cash flow projections for
ATel, all for the fiscal year ending December 31, 1997 (the "Projected
Financial Statements"). The Projected Financial Statements present a good
faith estimate of the consolidated financial information contained therein at
the date thereof.
(d) As of the Effective Date, except as fully reflected or
reserved against in the financial statements and the notes thereto described in
Section 4.10(b), there were no liabilities or obligations with respect to ATel
or its Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due) which, either individually or
in aggregate, would reasonably be expected to be material to ATel. As of the
Effective Date, ATel does not know of any basis for the assertion against ATel
or its Subsidiaries of any liability or obligation of any nature whatsoever
that is not fully reflected in the financial statements described in Section
4.10(b) or (c) which, either individually or in the aggregate, could reasonably
be expected to be material to ATel and its Subsidiaries, taken as a whole.
4.11. Security Interests. The Security Documents, once
executed and delivered, create, as security for the obligations purported to be
secured thereby, a valid and enforceable perfected first priority security
interest in and Lien in favor of the Collateral Agent for the benefit of the
Banks on all of the Collateral, superior to and prior to the rights of all
third persons other than Prior Liens relating to such Collateral and subject to
no other Liens except Liens which are
<PAGE> 25
- 20 -
expressly permitted under the applicable Security Document, except to the
extent otherwise provided therein. As of the Effective Date and thereafter,
each Credit Party has (or on and after the time it executes each Security
Document, will have) good and marketable title to all items of Collateral
covered by such Security Document free and clear of all Liens except any Prior
Lien relating to such Collateral or other Liens which are expressly permitted
under the applicable Security Document. Other than as contemplated in Section
3.01(L), no filings or recordings are required in order to perfect the security
interests created under the Security Documents except for filings or recordings
required in connection with the Security Documents which shall have been made
prior to or contemporaneously with the execution and delivery thereof or have
been otherwise made.
4.12. Tax Returns and Payments. ATel has filed all material
tax returns required to be filed by it and has paid all material taxes and
assessments payable by it which have become due, other than those not yet
delinquent and except for those being diligently contested in good faith and by
appropriate proceedings. ATel has provided adequate tax reserves in accordance
with GAAP. ATel knows of no proposed tax assessment against it that could
reasonably be expected to have a Materially Adverse Effect.
4.13. ERISA. (A) Each of ATel and the ERISA Affiliates is
in compliance in all material respects with all applicable provisions of ERISA
and the regulations and published interpretations thereunder with respect to
all employee benefit plans, Pension Plans and Multiemployer Plans currently
maintained by ATel or any of its ERISA Affiliates.
(B) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan which resulted or could
reasonably be expected to result in a material liability to ATel or any ERISA
Affiliate.
(C) As of the Effective Date, neither ATel nor any ERISA
Affiliate maintains or contributes to any Title IV Plan or Multiemployer Plan.
Neither ATel nor any ERISA Affiliate has incurred or reasonably expects to
incur any material withdrawal liability under Section 4201 et seq. of ERISA to
any Multiemployer Plan or any employee benefit plan of the type described in
Sections 4063 and 4064 of ERISA or in Section 413(c) of the Code.
<PAGE> 26
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(D) Neither ATel nor any ERISA Affiliate has incurred any
accumulated funding deficiency (whether or not waived) with respect to any
Pension Plan.
(E) Neither ATel nor any ERISA Affiliate has or reasonably
expects to become subject to a Lien in favor of any Pension Plan under Section
302(f) or 307 of ERISA or Section 401(a)(29) or 412(n) of the Code.
As used in this Section 4.13, the term "accumulated funding
deficiency" has the meaning specified in Section 302 of ERISA and Section 412
of the Code, and the term "employee benefit plan" has the meaning specified in
Section 3(3) of ERISA.
4.14. Patents, etc. ATel and its Subsidiaries have obtained
all material patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that are
necessary for the operation of their respective businesses as presently
conducted and as proposed to be conducted.
4.15. Compliance with Laws, etc. ATel (i) is in compliance
with all laws and regulations, including without limitation those relating to
pollution and environmental control, equal employment opportunity and employee
safety, in all jurisdictions in which it is presently doing business, including
all FCC rules and regulations, and rules and regulations of the U.S. Copyright
Office, and (ii) will comply and cause each of its Subsidiaries to comply with
all such laws and regulations which may be imposed in the future in
jurisdictions in which it or such Subsidiary may then be doing business, other
than those noncompliances in clauses (i) and (ii) above which would not have a
Materially Adverse Effect.
4.16. Properties. ATel and each of its Subsidiaries have
good and marketable title to and beneficial ownership of all their respective
material properties owned by them, including after the Effective Date all
property reflected in the most recent balance sheet referred to in Section
4.10(b) and except as sold or otherwise disposed of since the date of such
balance sheet in the ordinary course of business, free and clear of all Liens,
other than, with respect to property constituting Collateral, Prior Liens and
other liens expressly permitted under the applicable Security Document, and
with respect to property not constituting Collateral, Permitted Encumbrances.
ATel, and each Subsidiary thereof, holds all material licenses, certificates of
occupancy or operation and similar certificates and clearances of municipal and
other authorities necessary to own
<PAGE> 27
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and operate its properties in the manner and for the purposes currently
operated by such party. ATel, and each of its Subsidiaries, has easements or
rights-of-way adequate for the operations and maintenance of its transmission
and distribution lines. There are no actual, threatened or alleged defaults of
a material nature with respect to any leases of real property under which ATel,
or any of its Subsidiaries, is lessor or lessee.
4.17. Securities. (a) The Common Stock of ATel is duly
authorized, issued and delivered and is fully paid, nonassessable and free of
preemptive rights. Except as set forth on Annex 4.17(a), there are not, as of
the Effective Date, any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, rights, agreements, commitments or
arrangements for any person to acquire any capital stock of ATel or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any such capital stock.
(b) ATel has no Subsidiaries other than as set forth on Annex
4.17(b). Except as set forth on Annex 4.17(a), there are not, as of the
Effective Date, any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, rights, agreements, commitments or
arrangements for any person to acquire any interest of any direct or indirect
Subsidiary of ATel or any other securities convertible into, exchangeable for
or evidencing the right to subscribe for any such interest.
4.18. Collective Bargaining Agreements. Neither ATel nor any
of its Subsidiaries has, as of the date hereof, any collective bargaining or
similar agreements between or applicable to ATel and its Subsidiaries and any
union, labor organization or other bargaining agent in respect of the employees
of ATel or its Subsidiaries.
4.19. Indebtedness Outstanding. Set forth on Annex 4.19
hereto is a list and description of all Indebtedness of ATel and its
Subsidiaries that will be outstanding immediately prior to the Effective Date.
Annex 4.19 identifies which portions of such Indebtedness will be repaid with
the proceeds of the Loans.
4.20. Environmental Protection. Except as would not have a
Materially Adverse Effect,
(A) ATel and each of its Subsidiaries have obtained all
permits, licenses and other authorizations
<PAGE> 28
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(collectively "Authorizations") which are required with respect to the
operation of the business of ATel and its Subsidiaries, in each case
taken as a whole, under any Environmental Law and each such
Authorization is in full force and effect.
(B) ATel and each of its Subsidiaries are in compliance with
all terms and conditions of the Authorizations specified in subsection
4.20(A) above, and is also in compliance with all other requirements
contained in any Environmental Laws applicable to it and its business,
assets, operations and properties, including without limitation those
arising under the Resource Conservation and Recovery Act of 1976, as
amended ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("CERCLA"), the Federal
Water Pollution Control Act, as amended, the Federal Clean Air Act, as
amended, the Toxic Substances Control Act, and the FCC rules and
regulations pertaining to radio frequency (RF) radiation.
(C) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter or request for information pending
or, to ATel's knowledge, threatened against ATel or any of its
Subsidiaries under any Environmental Law.
(D) Neither ATel nor any of its Subsidiaries has received
notice that it has been identified as a potentially responsible party
under CERCLA or RCRA or any comparable state law nor has ATel or any
of its Subsidiaries received any notification that any hazardous
substances or any pollutant or contaminant, as defined in CERCLA and
its implementing regulations, or any toxic substance, hazardous waste,
hazardous constituents, hazardous materials, asbestos or asbestos
containing material, petroleum, including crude oil and any fractions
thereof, or other wastes, chemicals, substances or materials regulated
by any Environmental Laws (collectively "Hazardous Materials") that it
or any of their respective predecessors in interest has used,
generated, stored, treated, handled, transported or disposed of, has
been found at any site at which any governmental agency or private
party is conducting a remedial investigation or other action pursuant
to any Environmental Law.
<PAGE> 29
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(E) There have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping) of
Hazardous Materials by ATel or any of its Subsidiaries on, upon, into
or from any of its properties, except in compliance with law. To the
knowledge of ATel, there have been no such releases on, upon, under or
into any real property in the vicinity of any of its properties that,
through soil, surface water or groundwater migration or contamination,
may be located on, in or under its properties.
(F) To the knowledge of ATel, there is no asbestos or
asbestos containing material in, on or at any of its properties or any
facility or equipment of ATel or any of its Subsidiaries that is
required to be removed or remediated pursuant to any Environmental
Law.
(G) To the knowledge of ATel, no properties of ATel or any of
its Subsidiaries are (i) listed or proposed for listing on the
National Priorities List under CERCLA or (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any governmental authority.
(H) There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent compliance with any Environmental
Law, or which may give rise to any common law or legal liability,
including, without limitation, liability under CERCLA or similar state
or local laws, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing or notice of violation, study or
investigation, based on or related to the manufacture, processing,
distribution, use, generation, treatment, storage, disposal,
transport, shipping or handling, or the emission, discharge, release
or threatened release into the environment, of any Hazardous
Materials.
4.21. Business, System Agreements and Other Material
Agreements. (a) Annex 4.21(a) attached hereto accurately and completely
lists, with respect to the System, all System Agreements and other material
agreements with respect to the System (copies of which have been delivered to
the Banks) presently in effect in connection with the present or anticipated
conduct of the business of the Credit Parties.
<PAGE> 30
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(b) Except as disclosed on Annex 4.21(b) hereto, (i) the
Credit Parties have obtained and possess all System Agreements, patents,
copyrights, certificates of confirmation, licenses, permits, trademarks, and
trade names, or rights thereto, necessary to conduct its business substantially
as proposed to be conducted (except where the failure to obtain any of the
foregoing would be reasonably likely not to have a Materially Adverse Effect),
and, to the Credit Parties' knowledge, the Credit Parties are not in violation
of any valid rights of others with respect to any of the foregoing; (ii) each
of the foregoing is in full force and effect, has been validly assigned to, or
issued in the name of, the Credit Parties, the Credit Parties have fulfilled
and performed all of their material obligations with respect thereto, and the
Credit Parties know of the occurrence of no event, investigation or threatened
investigation which permits, or after passage of time or giving of notice or
both would permit, revocation or termination of any of the foregoing; (iii) all
consents necessary to the assignment of the System Agreements to the Credit
Parties have been approved by final orders of all Governmental Authorities and
other Persons as to which all applicable administrative and judicial appeal,
review and reconsideration periods have expired other than those which would
not, individually or in the aggregate, materially diminish the value of any
market; (iv) no other license, permit or franchise is necessary to the
operation by the Credit Parties of the System as now conducted or proposed to
be conducted other than those which would not, individually or in the
aggregate, materially diminish the value of any market; and (v) the Credit
Parties have obtained and possess all licenses, leases, conduit use, equipment
rental and microwave or satellite relay agreements necessary for the operation
of each System as required by the System Agreements other than those which
would not, individually or in the aggregate, materially diminish the value of
any market.
(c) Except as disclosed on Annex 4.21(b) hereto, as of the
Closing Date (1) each System Agreement listed under Annex 4.21(a) hereto is in
full force and effect and no other approval, application, filing, registration,
consent or other action of any Governmental Authority (except for FCC
requirements) is required to enable the Credit Parties to operate under any
such System Agreement other than those which would not, individually or in the
aggregate, materially diminish the value of any market, (2) none of the Credit
Parties nor, to the Credit Parties' knowledge, any other Person has received
any notice from any Governmental Authority or other Person with respect to any
<PAGE> 31
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breach of any covenant under, or any default with respect to, any such System
Agreement or with respect to any breach of any covenant under, or any default
with respect to, any license or permit issued to the licensor or lessor to such
System Agreement.
4.22. Tower Registration. Except as to the matters which
would not, individually or in the aggregate, materially diminish the value of
any market, ATel has timely registered, and has filed with the FCC all required
information and reports pertaining to, any towers which it owns and on which
are located any transmission or reception antennas, regardless of whether those
antennas are owned by ATel or its Subsidiaries or by any other person or entity
operating a facility licensed by the FCC.
SECTION 5. Affirmative Covenants. ATel covenants and agrees
that on the Effective Date and thereafter for so long as this Agreement is in
effect and until the Commitments have terminated and the Loans together with
interest, fees and all other Obligations incurred hereunder are paid in full:
5.01. Information Covenants. ATel will furnish or cause to
be furnished to each Bank:
(a) As soon as available and in any event within 90 days
after the close of each fiscal year of ATel, the consolidated balance
sheets of ATel and its Subsidiaries as at the end of such fiscal year
and the related consolidated statements of operations, of
stockholders' equity and of cash flows for such fiscal year, setting
forth comparative consolidated figures for the preceding fiscal year,
and an unqualified report on such consolidated balance sheets and
financial statements by independent certified public accountants of
recognized national standing.
(b) As soon as available and in any event within 45 days
after the close of each of the first three quarterly accounting
periods in each fiscal year of ATel, commencing with the fiscal
quarter ending on March 31, 1997, the consolidated balance sheet of
ATel and its Subsidiaries as at the end of such quarterly period and
the related consolidated statements of operations, of stockholders'
equity and of cash flows for such quarterly period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly
period, and in each case setting forth comparative consolidated
figures for the related periods in the prior fiscal year, subject to
normal year-end audit adjustments.
<PAGE> 32
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(c) As soon as practicable and in any event within 30 days
after the end of the first full month ending after the Closing Date,
(i) the consolidated balance sheet of ATel as at the end of such
period and (ii) the related statements of income and cash flows of
ATel, in each case for such fiscal month and for the period from the
beginning of the then current fiscal year to the end of such fiscal
month, setting forth in comparative form the corresponding periods of
the prior fiscal year.
(d) Together with each delivery of consolidated financial
statements of ATel together with its Subsidiaries pursuant to
subsection (a) above, a written statement by the independent public
accountants giving the report thereon (i) stating that their audit
examination has included a review of such terms of Sections 5, 6, 7
and 8 of this Agreement which solely relate to accounting matters but
without having conducted any special auditing procedures in connection
therewith, (ii) stating whether, in connection with their audit
examination, any condition or event which constitutes a Default or
Event of Default has come to their attention, and if such a condition
or event has come to their attention, specifying the nature and period
of existence thereof; provided that such accountants shall not be
liable by reason of any failure to obtain knowledge of any such
Default or Event of Default that would not be disclosed in the course
of their audit examination, and (iii) stating that based on their
audit examination nothing has come to their attention which causes
them to believe that as of the end of such fiscal year of ATel there
existed a Default or an Event of Default related to the breach of any
covenant set forth in Section 5 or 6 which solely relates to
accounting matters or, if a Default or Event of Default so existed,
describing such Default or Event of Default.
(e) On or prior to the commencement of each fiscal year,
budgets of ATel and its Subsidiaries in reasonable detail for each
month of such fiscal year, as customarily prepared by management for
its internal use, setting forth, with appropriate discussion, the
principal assumptions upon which such budgets are based. Together
with each delivery of financial statements pursuant to Sections
5.01(a), (b) and (c), a comparison of the current year to date
financial results against the budgets required to be submitted
pursuant to this subsection (e) shall be presented.
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(f) At the time of the delivery of the financial statements
provided for in Sections 5.01(a) and (b), a certificate of the chief
financial officer, controller, chief accounting officer or other
Authorized Officer of ATel to the effect that no Default or Event of
Default exists, or, if any Default or Event of Default does exist,
specifying the nature and extent thereof.
(g) Promptly upon receipt thereof, a copy of each annual
"management letter" submitted to ATel by its independent accountants
in connection with any annual audit made by them of the books of ATel
or any of its Subsidiaries.
(h) Promptly upon their becoming available, copies of all
consolidated financial statements, reports, notices and proxy
statements sent or made available generally by ATel or any Subsidiary
of ATel to its security holders as security holders, of all regular
and periodic reports and all registration statements and prospectuses,
if any, filed by ATel or any of its Subsidiaries with any securities
exchange or with the SEC and of all press releases and other
statements made available generally by ATel or any Subsidiary of ATel
to the public concerning material developments in the business of ATel
and its Subsidiaries.
(i) Promptly upon any officer of ATel or any of its
Subsidiaries obtaining knowledge (w) of any condition or event which
constitutes a Default or Event of Default, or becoming aware that any
Bank has given any notice or taken any other action with respect to a
claimed Default or Event of Default under this Agreement, (x) that any
Person has given any notice to ATel or any Subsidiary of ATel or
taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 7.04, or (y) of a
material adverse change in the business, operations, properties,
assets, nature of assets, condition (financial or otherwise) or
prospects of ATel and its Subsidiaries taken as a whole, an Officers'
Certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by
such holder or Person and the nature of such claimed Default, Event of
Default, event or condition, or material adverse change, and what
action ATel has taken, is taking and proposes to take with respect
thereto.
<PAGE> 34
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(j) (i) Promptly upon any officer of ATel or its Subsidiaries
obtaining knowledge of the institution of, or written threat of, any
action, suit, proceeding, governmental investigation or arbitration
against or affecting ATel or any of its Subsidiaries or any property
of ATel or any of its Subsidiaries not previously disclosed to the
Banks, which action, suit, proceeding, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out
of the same general allegations or circumstances which seek) recovery
from ATel or any of its Subsidiaries aggregating $100,000 or more
(exclusive of claims covered by insurance policies of ATel or any of
its Subsidiaries unless the insurers of such claims have disclaimed
coverage or reserved the right to disclaim coverage on such claims),
ATel shall give notice thereof to the Banks and provide such other
information as may be reasonably available to enable the Banks and
their counsel to evaluate such matters; (ii) as soon as practicable
and in any event within 45 days after the end of each fiscal quarter,
ATel shall provide a quarterly report to the Banks covering the
institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration (not previously reported)
against or affecting ATel or any of its Subsidiaries or any property
of ATel or any of its Subsidiaries not previously disclosed to the
Banks, which action, suit, proceedings, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out
of the same general allegations or circumstances which seek) recovery
from ATel or any of its Subsidiaries aggregating $100,000 or more
(exclusive of claims covered by insurance policies of ATel or any of
its Subsidiaries unless the insurers of such claims have disclaimed
coverage or reserved the right to disclaim coverage on such claims),
and shall provide such other information at such time as may be
reasonably available to enable the Banks and their counsel to evaluate
such matters; (iii) in addition to the requirements set forth in
clauses (i) and (ii) of this Section 5.01(j), ATel upon request shall
promptly give notice of the status of any action, suit, proceeding,
governmental investigation or arbitration covered by a report
delivered to the Banks pursuant to clause (i) or (ii) above to the
Banks and provide such other information as may be reasonably
available to it to enable the Banks and their counsel to evaluate such
matters and (iv) promptly upon any officer of ATel or any of its
Subsidiaries obtaining
<PAGE> 35
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knowledge of any material dispute in respect of or the institution of,
or written threat of, any action, suit, proceeding, governmental
investigation or arbitration in respect of any material contract of
ATel or any of its Subsidiaries, ATel shall give notice thereof to the
Banks and shall provide such other information as may be reasonably
available to enable the Banks and their counsel to evaluate such
matters; provided, however, that ATel shall not be obligated to
provide any information pursuant to this Section 5.01(j) to the extent
that to do so would, in the reasonable opinion of counsel for ATel,
waive or otherwise cause to be inoperative an attorney-client or
similar privilege that is reasonably expected to be asserted in such
action, suit, proceeding, governmental investigation or arbitration.
(k) To the extent reasonably requested by the Agent, as soon
as practicable and in any event within ten days of the later of such
request and the making of any such amendment or waiver, copies of
amendments or waivers with respect to Indebtedness of ATel or any of
its Subsidiaries, any Leases to which any of such Persons is a party.
(l) Advance notice of any purchase or sale of the capital
stock of either Fresno MMDS Associates or Superchannels of Las Vegas,
Inc.
(m) With reasonable promptness, such other information and
data with respect to ATel or any of its Subsidiaries or any other
similar entity in which ATel or any Subsidiary has an investment, as
from time to time may be reasonably requested by any Bank.
5.02. Books, Records and Inspections. ATel will, and will
cause each of its Subsidiaries to, keep true books of records and accounts in
which full and correct entries will be made of all their business transactions,
and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP. ATel will, and will
cause each of its Subsidiaries to, permit, upon reasonable prior notice to the
chief financial officer, controller or any other Authorized Officer of ATel,
officers and designated representatives of the Agent or any Bank to visit and
inspect any of the properties or assets of ATel and any of its Subsidiaries in
whomsoever's possession (subject to obtaining any required third party
consents, which ATel shall use its reasonable best efforts to obtain), and to
examine the books of account of ATel and any of its Subsidiaries and discuss
the affairs, finances
<PAGE> 36
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and accounts of ATel and of any of its Subsidiaries with, and be advised as to
the same by, its and their officers and independent accountants (in the
presence of such officers), all at such reasonable times and intervals and to
such reasonable extent as the Agent or any Bank may reasonably request.
5.03. Maintenance of Property; Insurance. (a) ATel and each
Subsidiary will exercise commercially reasonable efforts to maintain or cause
to be maintained in good repair, working order and condition (subject to normal
wear and tear) all properties used in its businesses and from time to time will
make or cause to be made all appropriate repairs, renewals and replacements
thereof and will maintain and renew as necessary to operate its business in the
ordinary course all easements, rights-of-way, licenses, permits and other
clearances necessary to use and occupy such properties of ATel and each
Subsidiary, as the case may be, including without limitation all licenses,
permits and other authorizations or registrations issued by the FCC.
(b) ATel and each Subsidiary will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged
in the same or similar businesses and similarly situated, of such types and in
such amounts as are customarily carried under similar circumstances by such
other corporations to the extent that such types and such amounts of insurance
are available at commercially reasonable rates. ATel or each Subsidiary, as
applicable, will furnish to each Bank, upon reasonable request, information as
to the insurance carried.
5.04. Payment of Taxes. All material taxes, assessments and
governmental charges or levies imposed upon ATel or any of its Subsidiaries
will be paid and discharged; provided that no such tax, assessment, charge,
levy or claim shall be required to be paid to the extent that it is being
diligently contested in good faith and by appropriate proceedings.
5.05. Corporate Franchises. ATel will do, and will cause
each Subsidiary to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence, rights and authority, except
where such failure to keep in full force and effect such rights and authority
would not have a Materially Adverse Effect.
<PAGE> 37
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5.06. Compliance with Statutes, etc. ATel will, and will
cause each Subsidiary to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) other than
non-compliance which could not reasonably be expected to have a Materially
Adverse Effect.
5.07. ERISA. ATel will furnish to each of the Banks:
(a) promptly upon ATel knowing or having reason to know of
the occurrence of any (i) Termination Event, or (ii) "prohibited
transaction," within the meaning of Section 406 of ERISA or Section
4975 of the Code, in connection with any Pension Plan or any trust
created thereunder, which in the case of all such events described in
clause (i) or (ii) results or could reasonably be expected to result
in a liability of ATel or its ERISA Affiliates in the aggregate in
excess of $100,000, a written notice specifying the nature thereof,
what action ATel or its ERISA Affiliates have taken, are taking or
propose to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service, Department of
Labor, PBGC or Multiemployer Plan sponsor with respect thereto.
(b) with reasonable promptness copies of (i) all notices
received by ATel or any of its ERISA Affiliates of PBGC's intent to
terminate any Title IV Plan or to have a trustee appointed to
administer any Title IV Plan, the notice of which event is required
pursuant to the preceding paragraph (a); (ii) upon the request of the
Agent each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by ATel or any of its ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan; (iii)
upon the request of the Agent, the most recent actuarial valuation
report for each Title IV Plan; and (iv) all notices received by ATel
or any of its ERISA Affiliates from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant
to Section 4202 of ERISA, the notice of which event is required
pursuant to the preceding paragraph (a).
5.08. Performance of Obligations. ATel will, and will cause
each of its Subsidiaries to, perform in all material
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respects all of its obligations under the terms of each mortgage, indenture,
security agreement, other debt instrument and material contract by which it is
bound or to which it is a party, except where such nonperformance would not
have a Materially Adverse Effect.
5.09. End of Fiscal Years; Fiscal Quarters. ATel will, for
financial reporting purposes, and will cause each of its Subsidiaries to, have
its (i) fiscal years end on December 31, and (ii) fiscal quarters end on or
about March 31, June 30, September 30 and December 31.
5.10. Use of Proceeds. All proceeds of the Loans shall be
used as provided in Section 4.05.
5.11. Security Interests. ATel and its Subsidiaries shall
perform any and all acts and execute any and all documents (including, without
limitation, the execution, amendment or supplementation of any financing
statement and continuation statement) for filing in any appropriate
jurisdiction under the provisions of the UCC, local law or any statute, rule or
regulation of any applicable jurisdiction which are necessary in order to
maintain or confirm in favor of the Collateral Agent for the ratable benefit of
the Banks a valid and perfected Lien on the Collateral (including all assets of
ATel acquired after the Effective Date which would have constituted Collateral
as of the Effective Date), subject to no Liens except for any Prior Lien
relating to such Collateral or other Liens which are expressly permitted under
the applicable Security Document. ATel shall, as promptly as practicable after
the filing of any financing statements referred to below, deliver to the
Collateral Agent acknowledgment copies of, or copies of lien search reports
confirming the filing of, financing statements duly filed under the UCC of all
jurisdictions as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the Lien created, or purported or
intended to be created, by the Security Documents.
5.12. Environmental Events. (i) ATel will promptly give
notice to the Agent upon becoming aware (a) of any violation of any
Environmental Law, (b) of any inquiry, proceeding, investigation or other
action, including a request for information or a notice of potential
environmental liability from any federal, state or local environmental agency,
or (c) of the discovery of the release of any Hazardous Material at, on, under
or from any of its properties or any facility or equipment in excess of
reportable or allowable standards or levels under any Environmental Law, or in
a manner and/or
<PAGE> 39
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amount which could reasonably be expected to result in liability under any
Environmental Law, in each case which would have a Materially Adverse Effect.
(ii) In the event of the presence of any Hazardous Material on any of
its properties which is in violation of, or which could reasonably be
expected to result in liability under, any Environmental Law, in each
case which would have a Materially Adverse Effect, ATel or any of its
Subsidiaries, upon discovery thereof, shall take all necessary steps
to initiate and expeditiously complete all remedial, corrective and
other action to mitigate and eliminate any such adverse effect, and
shall keep the Agent informed of their actions and the results.
5.13. Equal Security for Loans and Notes; No Further Negative
Pledges. (a) If ATel shall create or assume any Lien upon any of its property
or assets, whether now owned or hereafter acquired and whether or not such
property or assets constitutes Collateral, other than Prior Liens relating to
such Collateral or other Liens which are expressly permitted under the
applicable Security Document, (unless prior written consent to the creation or
assumption thereof shall have been obtained from the Agent and the Required
Banks), it shall make or cause to be made effective provisions whereby the
Obligations will be secured by such Lien equally and ratably with any and all
other Indebtedness thereby secured as long as any such Indebtedness shall be
secured; provided that this covenant shall not be construed as consent by the
Agent and the Required Banks to any violation by ATel of the provisions of
Section 6.03.
(b) Except with respect to prohibitions against other
encumbrances on specific property encumbered to secure payment of particular
Indebtedness permitted hereunder (which Indebtedness relates solely to the
acquisition or improvement of such specific property), ATel shall not enter
into any agreement prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
5.14. Pledge of Additional Collateral. Subject to Section
5.13(b), promptly, and in any event within 30 days after the acquisition of
assets of the type that would have constituted Collateral (if the person
acquiring such assets had executed an appropriate Security Document on the
Effective Date) at the Effective Date (the "Additional Collateral"), ATel will
take all necessary action, including delivering to the Agent an amended Annex
4.21(a) to this Credit Agreement and
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amended schedules to the Security Agreements, and the filing of appropriate
financing statements under the provisions of the UCC, applicable foreign,
domestic or local laws, rules or regulations in each of the offices where such
filing is necessary or appropriate to grant to the Collateral Agent a perfected
Lien in such Collateral pursuant to and to the full extent required by the
Security Agreements and this Agreement. All actions taken by the parties in
connection with the pledge of Additional Collateral, including, without
limitation, costs of counsel for the Agent, shall be for the account of ATel,
which shall pay all sums due on demand.
5.15. Channel Lessor Consents. The Credit Parties shall use
commercially reasonable efforts to (i) on or before September 1, 1997 obtain
Channel Lessor Consents with respect to its rights under non-assignable channel
leases in the markets set forth on Column A on Annex 5.15 and deliver to the
Agent an opinion of Gurman, Blask & Freedman or other counsel reasonably
acceptable to the Agent, substantially in the form of Exhibit K with respect to
the markets on Column B on Annex 5.15 and (ii) on or before December 1, 1997
(a) transfer all licenses relating to Systems held by any Credit Party that
conducts business in the markets set forth on Column B on Annex 5.15 to a
separate Subsidiary, which shall hold no other Collateral and (b) deliver to
the Agent an opinion of Gurman, Blask & Freedman, or other FCC counsel
reasonably acceptable to the Agent, substantially in the form of Exhibit K with
respect to the markets on Column A on Annex 5.15. All Channel Lessor Consents
shall be satisfactory to the Agent in form and substance.
5.16. Tower Registration. ATel shall file on a timely basis
all information, reports or applications required to register with the FCC any
towers that it owns on which are located any reception facilities owned by any
entity.
5.17. Pledge of Las Vegas. At the Agent's request, ATel will
take all necessary action to deliver to the Agent a first priority perfected
security interest in the capital stock owned by ATel and its Subsidiaries of
SuperChannels of Las Vegas, Inc., including, at the request of the Agent, a
first priority perfected security interest in all of the capital stock of a
newly formed subsidiary, which shall own all the capital stock of Superchannels
of Las Vegas, Inc. owned by ATel and its subsidiaries.
5.18. Debt Warrant Exercise. Upon the exercise of any of the
Debt Warrants in accordance with their terms and to
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the extent permitted by ATel's contractual obligations, the holders of such
Debt Warrants shall be deemed a Bank hereunder and to own a Loan and a Loan
Commitment in a principal amount equal to the amount of Debt Warrants exercised
and ATel shall issue to such holder a Note in accordance with Section 1.05.
SECTION 6. Negative Covenants. ATel hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated and the Loans
together with interest, fees and all other Obligations incurred hereunder are
paid in full:
6.01. Changes in Business. ATel will not, and will not
permit any of its Subsidiaries to, materially alter the character of its
businesses from that conducted by ATel or such Subsidiary at the Effective
Date.
6.02. Amendments or Waivers of Certain Documents. ATel will
not, and will not permit any of its Subsidiaries to, amend or otherwise change
the terms of any Indebtedness in a manner adverse to the Banks without the
prior written consent of the Required Banks.
6.03. Liens. ATel will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon or with
respect to any item constituting Collateral except for the Lien of the Security
Documents relating thereto, the Prior Liens applicable thereto and other Liens
expressly permitted by such Security Documents. ATel will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon or with respect to any property or assets of ATel or such Subsidiary
which does not constitute Collateral, whether now owned or hereafter acquired,
or sell any such property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets or assign any
right to receive income, or file or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute, except the following (collectively referred to as
"Permitted Encumbrances"):
(a) Liens upon real or tangible personal property acquired by
ATel or its Subsidiaries after the date hereof; provided that (i) any such Lien
is created solely for the purpose of securing Indebtedness representing, or
incurred to finance, the cost of the item of property subject thereto, (ii) the
principal amount of the Indebtedness does not exceed
<PAGE> 42
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100%, of the fair value (as determined in good faith by the board of directors
of ATel) of the respective property at the time it was so acquired, (iii) such
Lien does not extend to or cover any other property other than such item of
property (and any renewal thereof, accession thereto or proceeds from the sale
thereof) and (iv) the incurrence of such Indebtedness secured by such Lien is
permitted by Section 6.04;
(b) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, landlords and other similar Liens arising by
operation of law or otherwise, not waived in connection herewith, for amounts
that are not yet due and payable or which are being diligently contested in
good faith by ATel by appropriate proceedings;
(c) Attachment or judgment Liens individually or in the
aggregate not in excess of $25,000 (exclusive of (i) any amounts that are duly
bonded to the reasonable satisfaction of the Agent or (ii) any amount
adequately covered by insurance as to which the insurance company has not
disclaimed or disputed in writing its obligations for coverage);
(d) Liens for taxes, assessments or other governmental
charges not yet due and payable or which are being diligently contested in good
faith by ATel by appropriate proceedings;
(e) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance;
(f) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of business;
(g) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially detract
from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of ATel or any Subsidiary;
(h) Liens previously existing on property acquired hereafter
(other than Collateral) and assumed by ATel or any of its Subsidiaries in
connection with such acquisition;
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(i) Liens arising from precautionary UCC-1 financing
statement filings regarding operating leases entered into in the ordinary
course of business;
(j) Liens created by leases or subleases granted to third
Persons by ATel or any of its Subsidiaries not interfering in any material
respect with the business of ATel or any such Subsidiary; and
(k) Extensions and renewals of the foregoing permitted Liens;
provided that the aggregate amount of such extended or renewed Liens is not
increased and such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed.
6.04. Indebtedness. ATel will not, and will not permit any
of its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit Documents;
provided that the aggregate Indebtedness incurred pursuant to this Agreement
shall in no event exceed the Total Loan Commitments;
(b) $500,000 of Indebtedness, including Indebtedness incurred
to finance the cost of the acquisition of real or personal tangible property
(including Capital Leases); provided that such Indebtedness shall not exceed
100% of the fair value of such property; and provided, further, that such
Indebtedness is not secured by any Lien other than a Lien referred to in clause
(a) of Section 6.03;
(c) Contingent Obligations permitted under Section 6.11;
(d) Existing Indebtedness;
(e) Indebtedness of a Wholly Owned Subsidiary of ATel to
ATel; provided that such Indebtedness is held by ATel and the note evidencing
such Indebtedness is pledged to the Collateral Agent;
(f) up to $750,000 of Indebtedness of Fresno MMDS Associates
to ATel; provided that such Indebtedness is held by ATel and the note
evidencing such Indebtedness is pledged to the Collateral Agent; and
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(g) up to 250,000 of Indebtedness of American Telecasting of
Seattle, Inc. to ATel; provided that the proceeds of such Indebtedness are used
to purchase equipment, such Indebtedness is held by ATel and the note
evidencing such Indebtedness is pledged to the Collateral Agent.
6.05. Advances, Investments and Loans. ATel will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to
any Person, except:
(a) investments in Cash and Cash Equivalents;
(b) receivables owing to them and advances to customers and
suppliers, in each case if created, acquired or made in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(c) to a Credit Party, in the ordinary course of business
consistent with past practice;
(d) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and customers and
in settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(e) investments up to $1,300,000 in Superchannels of Las
Vegas, Inc.; provided that the proceeds of such investment is used to pay
accounts payable incurred in connection with the purchase of equipment;
(f) general payroll loans and advances to Fresno MMDS
Associates and Superchannels of Las Vegas, Inc. made in the ordinary course of
business consistent with past practices; provided that such loans and advances
do not exceed, with respect to Fresno MMDS Associates, the amount specified in
Section 6.04(f) together with any Indebtedness incurred pursuant to Section
6.04(f), and, with respect to Superchannels of Las Vegas, Inc., the amount
specified in Section 6.05(e) together with any investments made pursuant to
Section 6.05(c);
(g) investments and loans made pursuant to Section 6.04(f)
and (g); and
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(h) additional loans, advances and/or investments of a nature
not contemplated by the foregoing clauses (a) through (d); provided that all
loans, advances and investments made pursuant to this clause (g) shall not
exceed $50,000 in the aggregate at any time outstanding; and provided, further,
that all Securities or other instruments evidencing such loans, investments or
advances shall be pledged pursuant to an appropriate Security Document in the
event that such Securities or other instruments shall have been acquired for
aggregate consideration in excess of $25,000.
6.06. Prepayments of Indebtedness, etc. ATel will not: (a)
after the issuance thereof, amend or modify (or permit the amendment or
modification of) any of the terms or provisions, to the extent any such
amendment or modification would be adverse to the issuer thereof or to the
interests of the Banks, of any of the Indebtedness (or any agreement relating
thereto) of the type described in Section 6.04(b) or (d); (b) make (or give any
notice in respect of) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including, without limitation, by way
of depositing with any trustee with respect thereto money or securities before
such Indebtedness is due for the purpose of paying such Indebtedness when due)
or exchange of any such Indebtedness; and/or (c) amend, modify or change any of
its respective organizational documents, or any agreement entered into by ATel
with respect to its capital stock, or enter into any new agreement with respect
to capital stock of ATel the result of which is reasonably likely to be adverse
to the interest of the Banks.
6.07. Dividends, etc. ATel will not, and will not permit any
of its Subsidiaries to, declare or pay any dividends or return any capital to,
its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for any consideration,
any shares of any class of its capital stock now or hereafter outstanding (or
any warrants for or options or stock appreciation rights in respect of any of
such shares), or make any loans or advances to Affiliates of ATel, or set aside
any funds for any of the foregoing purposes, or permit any of its Subsidiaries
to purchase or otherwise acquire for consideration any shares of any class of
the capital stock of ATel or any other Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock appreciation rights
issued by such Person with respect to its capital stock) (all of the foregoing,
"Dividends"), except that (i) any Subsidiary of ATel may pay Dividends to ATel
and (ii) any Subsidi-
<PAGE> 46
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ary of ATel may pay to ATel any amounts required for the payment of any taxes
payable (x) by ATel or (y) by ATel and/or its Subsidiaries on a consolidated,
combined or unitary basis; provided that, with respect to both (i) and (ii)
above, no Default or Event of Default exists at the time of and after giving
effect to any such payment.
6.08. Transactions with Affiliates. ATel will not, and will
not permit any Subsidiary to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
Affiliate of ATel other than on terms and conditions substantially as favorable
to ATel or such Subsidiary as would be obtainable by ATel or such Subsidiary at
the time in a comparable arm's-length transaction with an Affiliate; provided
that the foregoing restrictions shall not apply to transactions between ATel
and any of its Wholly-Owned Subsidiaries.
6.09. Issuance of Subsidiary Stock. ATel will not permit any
of its Subsidiaries directly or indirectly to issue, sell, assign, pledge or
otherwise encumber or dispose of any shares of its capital stock or other
securities (or warrants, rights or options to acquire capital stock or
convertible securities or other equity securities) of such Subsidiary other
than to ATel or a Wholly Owned Subsidiary of ATel.
6.10. Disposition of Assets. ATel will not, and will not
permit any of its Subsidiaries to, sell, lease, assign, transfer or otherwise
dispose of all or any part of its interest in any asset other than (i)
Inventory in the ordinary course of business, (ii) excess, obsolete or worn-out
property disposed of in the ordinary course of business, (iii) commercially
reasonable dispositions of assets; provided however, that (x)(a) such
dispositions are for fair market value, (b) at least 80% of the consideration
for such dispositions is in the form of Cash or Cash Equivalent and is used to
pay down the Loans, and (c) the consideration for such disposition that is not
in the form of Cash or Cash Equivalent is pledged to the Collateral Agent, or
(y)(a) such dispositions are Systems for fair market value and are not in
excess of 50,000 number of line of site homes in any single transaction and
300,000 number of line of site homes in the aggregate, (b) the consideration
for such dispositions that is in the form of Cash or Cash Equivalents is used
to pay down the loans, and (c) the consideration for such dispositions that is
not in the form of Cash or Cash Equivalents is pledged to the Collateral Agent,
or (z)(a) the consideration received is assets of equal or greater value than
the greater of the fair market value or
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the liquidation value of the assets disposed, (b) the Collateral Agent consents
to such asset disposition, which consent will not be unreasonably withheld, and
(c) the value of the Collateral as a whole has not adversely been affected,
(iv) the disposition of assets listed on Annex 6.10; provided however, that
with respect to the dispositions listed under column A thereof, the
consideration for such disposition is used to pay down the Loans and pays the
Obligations in full, and (v) other dispositions of assets that do not
constitute Collateral; provided, however, that (a) such other dispositions are
for fair market value, (b) at least 75% of the consideration for such other
dispositions is in the form of Cash or Cash Equivalents and (c) such
consideration is either (1) reinvested in the business of ATel or its
Subsidiaries or (2) used to pay down the Loans. To the extent any asset sale
permitted by this Section 6.10 shall include Collateral, such asset shall be
released upon satisfaction of the applicable conditions of this Section 6.10
and the applicable General Security Agreement.
6.11. Contingent Obligations. ATel will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create or become or
be liable with respect to any Contingent Obligation except:
(i) guarantees resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) damage bonds currently existing or required to
proceed with new construction incurred in the ordinary course of
business; and
(iii) other Contingent Obligations not to exceed $25,000
outstanding at any one time.
6.12. ERISA. ATel will not, and will not permit any of its
ERISA Affiliates to:
(i) engage in any transaction in connection with which
ATel or any of its ERISA Affiliates could be subject to either a tax
imposed by Section 4975(a) of the Code or the corresponding civil
penalty assessed pursuant to Section 502(i) of ERISA, which penalties
and taxes for all such transactions could reasonably be expected to be
in an aggregate amount in excess of $100,000;
(ii) permit to exist any accumulated funding deficiency,
for which a waiver has not been obtained from the
<PAGE> 48
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Internal Revenue Service, with respect to any Pension Plan;
(iii) permit to exist any failure to make contributions or
any unfunded benefits liability which creates, or with the passage of
time would create, a statutory lien or requirement to provide security
under ERISA or the Code in favor of the PBGC or any Pension Plan,
Multiemployer Plan or other entity;
(iv) permit the sum of the amount of unfunded benefit
liabilities (determined in accordance with Statement of Financial
Accounting Standards No. 35) under all Title IV Plans (excluding each
Title IV Plan with an amount of unfunded benefit liabilities of zero
or less) to exceed $100,000 for a period in excess of twelve months;
or
(v) fail to make any payment to any Multiemployer Plan
that it or any of its ERISA Affiliates may be required to make under
such Multiemployer Plan, any agreement relating to such Multiemployer
Plan, or any law pertaining thereto.
(vi) As used in this Section 6.12, the term "accumulated
funding deficiency" has the meaning specified in Section 302 of ERISA
and Section 412 of the Code, and the term "amount of unfunded benefit
liabilities" has the meaning specified in Section 4001(a)(18) of
ERISA.
6.13. Sale or Discount of Receivables. ATel will not, nor
will it permit any of its Subsidiaries to, sell, with or without recourse, or
discount (other than in connection with trade discounts in the ordinary course
of business consistent with past practice) or otherwise sell for less than the
face value thereof, notes or accounts receivable.
6.14. Additional System Agreements. No Credit Party shall
enter into any System Agreement after the Closing Date unless such System
Agreement shall be assignable by its terms as Pledged Collateral pursuant to
the General Security Agreements; provided that this Section 6.14 shall not
apply to System Agreements which are unassignable in their entirety pursuant to
the Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
<PAGE> 49
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SECTION 7. Events of Default. Upon the occurrence and during
the continuance of any of the following specified events (each an "Event of
Default"):
7.01. Payments. ATel shall (i) default in the payment when
due of any principal of the Loans, (ii) default, and such default shall
continue for two or more Business Days, in the payment when due of any interest
on the Loans or under any other Credit Document or (iii) fail to pay any other
amounts owing hereunder for five days after receiving notice thereof; or
7.02. Representations, etc. Any written representation,
warranty or statement made or deemed made by ATel herein or in any other Credit
Document or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
7.03. Covenants. ATel shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 5.13, 5.14 or 5.15 or Section 6 hereof or (b) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement or any Security Agreement (other than those
referred to in Section 7.01, 7.02 or clause (a) of this Section 7.03) and such
default shall continue unremedied for a period of at least thirty days after
ATel has actual knowledge of such default; or
7.04. Default Under Other Agreements. (a) ATel shall (i)
default in any payment with respect to any Indebtedness (other than
Obligations) having a principal amount in excess of $25,000 individually or
$50,000 in the aggregate, for ATel and its Subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness was created, (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity or (iii)
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit any other party to any such
agreement to cause, the termination of
<PAGE> 50
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such agreement or the imposition of a monetary penalty in excess of $25,000
or a material limitation on ATel's rights under such agreement; or (b) any
Indebtedness of ATel or any of its Subsidiaries shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment (but not including any prepayment required by reason of sale of
assets, excess cash flow, change of control or other customary mandatory
prepayment events), prior to the stated maturity thereof.
7.05. Bankruptcy, etc. ATel or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
ATel or any of its Subsidiaries and the petition is not controverted within 10
days, or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of ATel or any of its
Subsidiaries; or ATel or any of its Subsidiaries commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to ATel or any of its Subsidiaries;
or there is commenced against ATel or any of its Subsidiaries any such
proceeding which remains undismissed for a period of 60 days; or ATel or any of
its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or ATel or any
of its Subsidiaries suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or ATel or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
ATel or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
7.06. ERISA. (i) Any "reportable event" as described in
Section 4043 of ERISA or the regulations thereunder (excluding those events for
which the requirement for notice has been waived by the PBGC) which could
reasonably be expected to result in the termination of any Title IV Plan shall
have occurred or a condition described in Section 4042 of ERISA shall exist by
reason of which the PBGC would be entitled to cause the termination of a Title
IV Plan or to obtain the appointment by the appropriate United States District
Court of a trustee to administer or liquidate any Title IV Plan; or
<PAGE> 51
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(ii) A trustee shall be appointed by a United States
District Court to administer any Title IV Plan; or
(iii) The PBGC shall institute proceedings to terminate any
Title IV Plan or to appoint a trustee to administer any Title IV Plan; or
(iv) ATel or any of its ERISA Affiliates shall become
liable to the PBGC or any other party under Section 4062, 4063 or 4064 of ERISA
with respect to any Title IV Plan; or
(v) ATel or any of its ERISA Affiliates shall become
liable to any Multiemployer Plan under Section 4201 et seq. of ERISA;
if the sum of each of ATel's and its ERISA Affiliates' various liabilities
(such liabilities to include, without limitation, any liability to the PBGC or
to any other party under Section 4062, 4063 or 4064 of ERISA with respect to
any Title IV Plan, or to any Multiemployer Plan under Section 4201 et seq. of
ERISA, and to be calculated after giving effect to the tax consequences
thereof) as a result of such events listed in subclauses (i) through (v) above
exceeds $500,000 and is unpaid for a period of 45 days; or
7.07. Security Documents. The Security Documents shall cease
to be in full force and effect in all material respects, or shall cease to give
the Collateral Agent the Liens, rights, powers and privileges purported to be
created thereby, in favor of the Collateral Agent, superior to and prior to the
rights of all third Persons other than Prior Liens subject to such Collateral
and subject to no other Liens except for Liens which are expressly permitted
under the applicable Security Document; or
7.08. Guarantees. The Guarantees (prior to their termination
in accordance with the terms thereof) or any provisions thereof shall cease to
be in full force or effect in all material respects, or any Guarantor
thereunder or Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such Guarantee or any Guarantor
shall default in the due performance or observance of any term, covenant or
agreement for the payment of money on its part to be performed or observed
pursuant to any Guarantee; or
7.09. Judgments. One or more judgments or decrees shall be
entered against ATel or any of its Subsidiaries involving a liability of
$25,000 or more in the case of any one
<PAGE> 52
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such judgment or decree and $50,000 or more in the aggregate for all such
judgments and decrees for ATel and its Subsidiaries (in either case in excess
of the amount covered by insurance as to which the insurance company has
acknowledged coverage) and any such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof; or
7.10. Ownership. (i) any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as such term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have beneficial ownership
of all shares that such person has a right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 30% or more of the capital stock or voting power of ATel; (ii)
individuals who constituted the Board of Directors of ATel on the Effective
Date (together with any new directors whose proposal for election by the
shareholders of ATel was approved by a vote of 51% of the directors of ATel
then still in office who either were directors on the Effective Date or whose
election or nomination for election was previously so approved) shall cease for
any reason to constitute a majority of the members of the Board of Directors of
ATel still in office; (iii) any "person" or "group" (as defined in clause (i)
above) shall have the right to designate or ability to appoint or nominate a
majority of the members of the Board of Directors of ATel; (iv) ATel conveys,
transfers or leases all or substantially all of its assets to any Person other
than a wholly owned Subsidiary of ATel; or (v) the approval by stockholders of
ATel of any plan or proposal for the liquidation, dissolution or winding up of
ATel;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request of
the Required Banks, by written notice to ATel, take any or all of the following
actions, without prejudice to the rights of the Agent or any Bank to enforce
its claims against ATel, except as otherwise specifically provided for in this
Agreement (provided that, if an Event of Default specified in Section 7.05
shall occur, with respect to ATel, the result which would occur upon the giving
of written notice by the Agent as specified in clauses (i) and (ii) below shall
occur automatically without the giving of any such notice): (i) declare the
Total Loan Commitments terminated, whereupon the Commitment of each Bank shall
forthwith terminate immediately and any accrued and unpaid Commitment
Commission shall forthwith become due and payable without any other notice of
<PAGE> 53
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any kind; (ii) declare the principal of and accrued interest in respect of all
Loans and all Obligations owing hereunder and thereunder to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by ATel;
and/or (iii) enforce, as Collateral Agent (or direct the Collateral Agent to
enforce), any or all of the remedies created pursuant to the Security
Documents. If an Event of Default is cured or waived in accordance with the
terms of this Agreement, it ceases (and, if waived, pursuant to the terms, and
to the extent, of such waiver).
SECTION 8. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Additional Collateral" has the meaning provided in Section
5.15.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and executive officers of such Person), controlled by, or under
direct or indirect common control with such Person; provided that neither
Indosuez nor any Affiliate of Indosuez shall be deemed to be an Affiliate of
ATel. A Person shall be deemed to control a corporation for the purposes of
this definition if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" means Indosuez, or any successor thereto appointed in
accordance herewith, in its capacity as agent and collateral agent for the
Banks.
"Agent's Office" means the office of the Agent located at 1211
Avenue of the Americas, New York, New York 10036, or such other office in New
York as the Agent may hereafter designate in writing as such to the other
parties hereto.
"Asset Sale" means the sale, transfer or other disposition, to
the extent consummated after the Effective Date, by ATel or any Subsidiary of
ATel to any Person other than ATel or
<PAGE> 54
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any Wholly-Owned Subsidiary of ATel of any asset of ATel or such Subsidiary
(other than sales, transfers or other business dispositions of Inventory in the
ordinary course of business and/or of excess, obsolete or worn-out property
disposed of in the ordinary course of business and/or sales, transfers or
dispositions in compliance with Section 6.10(iii)(z)).
"ATel" means American Telecasting, Inc., a Delaware
corporation.
"Authorized Officer" means any senior officer of ATel,
designated as such in writing to the Agent by ATel, to the extent acceptable to
the Agent.
"Bank" has the meaning provided in the first paragraph of this
Agreement in Section 10.04 and any other party that becomes a Bank pursuant to
Section 5.18.
"Bankruptcy Code" has the meaning provided in Section 7.05.
"Board of Directors" of any Person means the board of
directors or similar entity of such Person.
"Bond Appreciation Rights" means the Bond Appreciation Rights
Certificate relating to the Senior Discount Notes 2004 dated the date hereof
and executed by ATel.
"Borrower" means ATel.
"Borrowing" means the incurrence pursuant to a Notice of
Borrowing and to the Loan Facility of a Loan by ATel from all of the Banks on a
pro rata basis on a given date.
"BTA" means "basic trading area," as defined by the FCC.
"BTA Licenses" means BTA licenses issued by the FCC for
wireless cable channel authorizations in BTAs.
"Business Day" means any day excluding Saturday, Sunday and
any day which shall be in the City of New York a legal holiday or a day on
which banking institutions are authorized by law or other governmental actions
to close.
"Capital Lease" of any Person means any Lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is, or is required to
<PAGE> 55
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be, accounted for as a capital lease on the balance sheet of that Person,
together with any renewals of such leases (or entry into new leases) on
substantially similar terms.
"Capitalized Lease Obligations" of any Person means all
obligations under Capital Leases of such Person or any of its Subsidiaries in
each case taken at the amount thereof accounted for as liabilities in
accordance with GAAP.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than three years from the date of acquisition, (ii) marketable direct
obligations issued by any State of the United States of America or any local
government or other political subdivision thereof rated (at the time of
acquisition of such security) at least AA by Standard & Poor's Corporation
("S&P") or the equivalent thereof by Moody's Investors Service, Inc.
("Moody's") having maturities of not more than one year from the date of
acquisition, (iii) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (x) any Bank, (y) any domestic commercial
bank of recognized standing having capital and surplus in excess of
$500,000,000 or (z) any bank whose short-term commercial paper rating (at the
time of acquisition of such security) by S&P is at least A-1 or the equivalent
thereof or by Moody's is at least P-1 or the equivalent thereof (any such bank,
an "Approved Bank"), in each case with maturities of not more than six months
from the date of acquisition, (iv) commercial paper and variable or fixed rate
notes issued by any Bank or Approved Bank or by the parent company of any Bank
or Approved Bank and commercial paper and variable rate notes issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating (at the time of acquisition of such security) of at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long-term unsecured
debt rating (at the time of acquisition of such security) of at least AA or the
equivalent thereof by S&P or the equivalent thereof by Moody's and in each case
maturing within one year after the date of acquisition and (v) repurchase
agreements with any Bank or any primary dealer maturing within one year from
the date of acquisition that are fully collateralized by investment instruments
that would oth-
<PAGE> 56
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erwise be Cash Equivalents; provided that the terms of such repurchase
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy -- Repurchase Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"Change of Control" has the meaning assigned to that term in
Section 7.10.
"Channel Lessor Consent" means a Channel Lessor Consent
substantially in the form of Exhibit J hereto.
"Closing Date" means the date of initial funding of the Loans.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means all of the Pledged Collateral and Pledged
Securities.
"Collateral Agent" means Indosuez in its capacity as
collateral agent for the Banks.
"Commitment" means, with respect to each Bank, such Bank's
Loan Commitment.
"Common Stock" means the common stock, $.01 par value, of
ATel.
"Compliance Certificate" means a certificate issued pursuant
to Section 5.01(f) signed by a chief financial officer, controller, chief
accounting officer or other Authorized Officer of ATel.
"Confidential Information" means information delivered to a
Bank by or on behalf of ATel in connection with the transactions contemplated
by or otherwise pursuant to this Agreement that is proprietary in nature and
that was clearly marked or labeled when received by such Bank as being
confidential information, provided that such term does not include information
(i) that was publicly known or otherwise known to the Bank prior to the time of
such disclosure, (ii) that subsequently becomes publicly known through no act
or omission by the Bank or any Person acting on the Bank's behalf, (iii) that
otherwise becomes known to the Bank other than through disclo-
<PAGE> 57
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sure by ATel, or (iv) that constitutes financial statements delivered to the
Bank that are otherwise publicly available.
"Contingent Obligations" means, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation
of such Person, whether or not contingent, (a) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the maximum amount that
such Person may be obligated to expend pursuant to the terms of such Contingent
Obligation or, if such Contingent Obligation is not so limited, the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Agreement" means this Credit Agreement, as the same
may after its execution be amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.
"Credit Documents" means (i) this Credit Agreement, (ii) each
Note, (iii) the Security Documents, (iv) the Escrow Agreement, (v) the
Management Subordination Agreement and (vi) the Guarantees.
"Credit Party" means at all times ATel and each Subsidiary
thereof that pledges any stock, grants any Lien or issues any guarantee
pursuant to any Credit Document.
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"Currency Protection Agreement" shall mean any foreign
exchange contract, currency swap agreement, or other financial agreements or
arrangements designed to protect ATel against fluctuations in currency values.
"Debt Warrants" means the aggregate of 141,667 Debt Warrants
to purchase $6.00 Principal amount of Loan dated the date hereof and executed
by ATel.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Dividends" has the meaning provided in Section 6.07.
"Dollars" means United States Dollars.
"Effective Date" has the meaning provided in Section 10.10.
"Environmental Laws" means the common law and all federal,
state and local laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder, now or
hereafter in effect, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
constituent substances or wastes, including, without limitation, petroleum,
including crude oil or any fraction thereof, any petroleum product or any other
Hazardous Materials, into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
(ii) the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of Hazardous Materials, (iii)
underground storage tanks, and related piping, and emissions, discharges,
releases or threatened releases therefrom, and (iv) human exposure to radio
frequency (RF) radiation.
"Equity Warrants" means the aggregate of 141,667 Warrants to
purchase shares of Class A Common Stock dated the date hereof and executed by
ATel.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to ERISA,
as in effect at the date of this Agreement and any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any entity, whether or not
incorporated, which is under common control or would be considered a single
employer with ATel within the meaning of Section 414(b), (c) or (m) of the Code
and regulations promulgated under those sections or within the meaning of
section 4001(b) of ERISA and regulations promulgated under that section.
"Escrow Agent" means Banque Indosuez, New York Branch.
"Escrow Agreement" means the Escrow Agreement dated as of the
Closing Date between ATel and the Escrow Agent, substantially in the form of
Exhibit G hereto, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Event of Default" has the meaning provided in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" has the meaning set forth in Section
3.01(k).
"FCC" means the Federal Communications Commission or any
Governmental Authority which succeeds to the duties and functions presently
performed by such Commission.
"Federal Funds Rate" means on any one day the weighted average
of the rate on overnight Federal funds transactions with members of the Federal
Reserve System only arranged by Federal funds brokers as published as of such
day by the Federal Reserve Bank of New York, or if not so published, the rate
then used by first class banks in extending overnight loans to other first
class banks.
"Final Maturity Date" means the one year anniversary of the
Closing Date.
"Financing Proceeds" means the Cash (other than Net Cash
Proceeds) received by ATel, directly or indirectly, from
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any financing transaction of whatever kind or nature, including without
limitation from any incurrence of Indebtedness, any mortgage or pledge of an
asset or interest therein (including a transaction which is the substantial
equivalent of a mortgage or pledge), from the sale of tax benefits, from a
lease to a third party and a pledge of the lease payments due thereunder to
secure Indebtedness, from the formation of a joint venture arrangement, from an
exchange of assets and a sale of the assets received in such exchange, or any
other similar arrangement or technique whereby ATel obtains Cash in respect of
an asset, net of direct costs associated therewith.
"Fresno Note" means the note issued by Fresno MMDS Associates
in the principal amount of $8,500,000 in connection with the Amended and
Restated Revolving Credit Agreement between Fresno MMDS Associates and First
Union National Bank of North Carolina dated as of September 30, 1994.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect on the Effective Date, it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 6, including defined terms as used therein, are subject (to the
extent provided therein) to Section 10.07(a).
"General Security Agreements" means and includes the General
Security Agreements executed and delivered by ATel and the Guarantors
substantially in the form of Exhibit C-1 hereto and any other general security
agreements delivered pursuant to Section 5.11 or 5.14.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" means the guarantee by the Guarantors of all of
the Obligations of the Borrower hereunder, substantially in the form of Exhibit
H hereto.
"Guarantor" means each of the Subsidiaries of ATel other than
Superchannels of Las Vegas, Inc., Fresno MMDJ Associates, FMA License
Subsidiary, Inc., and American Telecasting of Seattle, Inc.
"Governmental Licenses" shall have the meaning set forth in
the General Security Agreements.
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"Hazardous Materials" has the meaning provided in Section
4.20.
"Indebtedness" of any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of
all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such Indebtedness has been assumed by such first Person, (v) all
Capitalized Lease Obligations of such Person, (vi) all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all
obligations of such Person under Currency Protection Agreements and Interest
Rate Agreements and (viii) all Contingent Obligations of such Person; provided
that Indebtedness shall not include trade payables, accrued expenses, accrued
dividends and accrued income taxes, in each case arising in the ordinary course
of business.
"Indosuez" means Banque Indosuez, New York Branch.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement,
interest rate futures contract, interest rate option contract or other similar
agreement or arrangement to which ATel is a party, designed to protect ATel or
any of its Subsidiaries against fluctuations in interest rates.
"Inventory" means all of the inventory of ATel including
without limitation: (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in ATel's business; (ii)
all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(iii) all goods returned or repossessed by ATel.
"ITFS" means Instructional Television Fixed Service, a class
of television service licensed by the FCC for the primary transmission of
instructional and cultural material to receiving stations and which may also
be leased for wireless cable operations.
"Lease" means any lease, sublease, franchise agreement,
license, occupancy or concession agreement.
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"License Agreements" means, collectively, the instruments and
agreements pursuant to which the Credit Parties have been granted the rights
and privileges (excluding FCC licenses but including any other Governmental
Licenses) to construct and operate the System indicated on Annex 4.21(a).
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, claim, hypothecation, assignment for security or charge of
any kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement or any lease in the nature thereof).
"Loan Commitment" means, with respect to each Bank, the amount
set forth below such Bank's name on the signature pages hereto directly below
the column entitled " Loan Commitment," as the same may be reduced from time to
time pursuant to Sections 2.02 and/or 7, and as the same may be increased in
accordance with the terms of the Debt Warrant and Section 5.18 hereof.
"Loan Commitment Termination Date" means the Business Day
immediately preceding the Final Maturity Date.
"Loan Facility" means the credit facility evidenced by the
Total Loan Commitment.
"Loans" has the meaning provided in Section 1.01.
"Management Subordination Agreement" means a Management
Subordination Agreement substantially in the form of Exhibit I hereto.
"Materially Adverse Effect" means, (i) with respect to ATel,
any materially adverse effect with respect to the operations, business,
properties, assets, nature of assets, liabilities (contingent or otherwise),
financial condition or prospects of ATel, taken as a whole, or (ii) any fact or
circumstance (whether or not the result thereof would be covered by insurance)
as to which singly or in the aggregate there is a reasonable likelihood of (y)
a materially adverse change described in clause (i) with respect to ATel, or
(z) the inability of ATel to perform in any material respect its obligations
hereunder or under any of the other Credit Documents or the inability of the
Banks to enforce in any material respect their rights purported to be granted
hereunder or under any of the other Credit Documents or the Obligations
(including realizing on the Collateral).
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"MDS" means Multipoint Distribution Service, an
omnidirectional, one way domestic transmission service licensed by the FCC,
rendered on microwave frequencies from a single fixed transmitter location
simultaneously to multiple receiving facilities used primarily for the
distribution of television entertainment programming.
"MMDS" means Multichannel Multipoint Distribution Service, an
omnidirectional, one way domestic transmission service licensed by the FCC
rendered on microwave frequencies from a single fixed transmitter location
simultaneously to multiple receiving facilities used primarily for the
distribution of television entertainment programming.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA with respect to which either ATel or its
respective ERISA Affiliates is or has been required to contribute.
"Net Cash Proceeds" means with respect to any Asset Sale in
excess of $50,000, the aggregate cash payments received by ATel from such Asset
Sale, net of direct expenses of sale; provided that, with respect to taxes,
expenses shall only include taxes to the extent that taxes are payable in cash
in the current year or in the next succeeding year with respect to the current
year as a result of such Asset Sale; provided that Net Cash Proceeds shall not
include any amounts or items included in the definition of Financing Proceeds
or Net Financing Proceeds.
"Net Financing Proceeds" means Financing Proceeds, net of
direct expenses of the transaction and net of taxes (including income taxes)
currently paid or payable in cash as a result thereof in the current year or in
the next succeeding year with respect to the current year as a result of the
transaction generating Net Financing Proceeds.
"Notes" has the meaning provided in Section 1.05.
"Notice of Borrowing" has the meaning provided in Section
1.03.
"Obligations" means all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document or secured by any Security Document.
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"Officers' Certificate" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its Chairman of the
Board (if an officer) or its President or one of its Vice Presidents and by its
Chief Financial Officer or its Treasurer or any Assistant Treasurer; provided
that every Officers' Certificate with respect to compliance with a condition
precedent to the making of any Loan hereunder shall include (i) a statement
that the officers making or giving such Officers' Certificate have read such
condition and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signers, they
have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been complied with, and (iii) a statement as to whether, in
the opinion of the signers, such condition has been complied with.
"Officers' Solvency Certificate" means the Officers' Solvency
Certificate in the form set forth as Exhibit F hereto.
"Option Agreement" means the Option Agreements dated as of the
date hereof and executed by ATel.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" means any pension plan as defined in Section
3(2) of ERISA (other than a Multiemployer Plan) which is or has been maintained
by or to which contributions are or have been made by ATel or any of its ERISA
Affiliates.
"Permitted Encumbrances" has the meaning provided in Section
6.03.
"Person" means any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Pledge Agreements" means and includes the Securities Pledge
Agreements substantially in the form of Exhibit C-2 hereto executed by ATel and
the appropriate Subsidiaries of ATel, and any other securities pledge
agreements delivered pursuant to Section 5.11 or 5.14.
"Pledged Collateral" means all the Pledged Collateral as
defined in each of the General Security Agreements.
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"Pledged Securities" means all the Pledged Collateral as
defined in each of the Pledge Agreements.
"Prior Liens" means Liens which pursuant to the terms of any
Security Document are permitted to be prior to the Lien of such Security
Document.
"Projected Financial Statements" has the meaning provided in
Section 4.10(c).
"Real Property" means all right, title and interest of ATel or
any of its Subsidiaries (including, without limitation, any leasehold estate)
in and to a parcel of real property owned or operated by ATel or any of its
Subsidiaries together with, in each case, all improvements and appurtenant
fixtures, equipment, personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof and executed by ATel and the holders
thereof.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
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"Required Banks" means at any time Banks holding at least 51%
of the Total Loan Commitments held by Banks; provided that for the purposes of
Section 3, the requirement that any document, agreement, certificate or other
writing is to be satisfactory to the Required Banks shall be satisfied if (x)
such document, agreement, certificate or other writing was delivered in its
final form to the Banks prior to the Effective Date (or if amended or modified
thereafter, the Agent has reasonably determined such amendment or modification
not to be material), (y) such document, agreement, certificate or other writing
is satisfactory to the Agent and (z) Banks holding more than 33-1/3% of the
Total Loan Commitments held by Banks have not objected in writing to such
document, agreement, certificate or other writing to the Agent prior to the
Effective Date.
"SEC" means the Securities and Exchange Commission or any
successor thereto.
"SEC Regulation D" means Regulation D as promulgated under the
Securities Act, as the same may be in effect from time to time.
"Secured Parties" has the meaning specified in the Security
Documents.
"Securities" means any stock, shares, voting trust
certificates, bonds, debentures, options, warrants, notes, or other evidences
of indebtedness, secured or unsecured, convertible, subordinated or otherwise,
or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Security Documents" means each of the Pledge Agreements, the
General Security Agreements and any other documents utilized to pledge as
Collateral for the Obligations or any property or assets of ATel of whatever
kind or nature.
"State and Local Real Property Disclosure Requirements" means
any state or local laws requiring notification of the buyer of real property,
or notification, registration, or filing to or with any state or local agency,
prior to the sale of any Real Property or transfer of control of an entity, of
the actual or threatened presence or release into the environment, or the use,
disposal, or handling of Hazardous Materials on, at, under, or near the real
property to be sold or the entity for which control is to be transferred.
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"Subsidiary" of any Person means and includes (i) any
corporation 50% or more of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has a 50% or more equity interest at the time.
"System" means, collectively, the MMDS, MDS, ITFS and other
similar television distribution and reception systems (including any non-video
service provided over such facilities) constructed and operated, or to be
constructed and operated, by the Credit Parties to provide a wireless cable
service pursuant to the System Agreements and all rights incident or
appurtenant to such System Agreements.
"System Agreements" means, collectively, all material
instruments, leases, licenses, permits and agreements of the Credit Parties,
now existing or hereafter acquired or obtained, relative to the construction
and operation of the System.
"Taxes" has the meaning provided in Section 2.04.
"Termination Event" means (i) a "reportable event" described
in Section 4043 of ERISA or in the regulations thereunder (excluding events for
which the requirement for notice of such reportable event has been waived by
the PBGC) with respect to a Title IV Plan, or (ii) the withdrawal of ATel or
any of its ERISA Affiliates from a Title IV Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the filing of a notice of intent to terminate a Title IV Plan or the
treatment of a Title IV Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings by the PBGC to terminate a Title
IV Plan or to appoint a trustee to administer a Title IV Plan, or (v) any other
event or condition which might constitute reasonable grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any Title IV Plan, or (vi) the complete or partial withdrawal (within the
meaning of Sections 4203 and 4205, respectively, of ERISA) of ATel or any of
its ERISA Affiliates from a Multiemployer Plan, or (vii) the insolvency or
reorganization (within the meaning of Sections 4245 and 4241, respectively, of
ERISA) or termination of any Multiemployer Plan, or
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(viii) the failure to make any payment or contribution to any Pension Plan or
Multiemployer Plan or the making of any amendment to any Pension Plan which
could result in the imposition of a lien or the posting of a bond or other
security.
"Title Company" means such title insurance company or abstract
company as shall be designated by the Agent.
"Title IV Plan" means any plan (other than a Multiemployer
Plan) described in Section 4021(a) of ERISA, and not excluded under Section
4021(b) of ERISA, which is or has been maintained by, or to which contributions
are or have been made by, ATel or any of its ERISA Affiliates.
"Total Loan Commitments" means the sum of the Loan Commitments
of each of the Banks, which shall not exceed $17,000,000, unless permitted by
ATel's then outstanding contractual obligations.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Unutilized Commitment" for any Bank at any time means the
unutilized Loan Commitment of such Bank.
"Voting Stock" means, with respect to any Person, capital
stock entitled to vote in the election of directors or equivalent persons of
such Person.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' or nominees' qualifying
shares, is owned directly or indirectly by such Person.
"Written" or "in writing" means any form of written
communication or a communication by means of telex, telecopier device,
telegraph or cable.
SECTION 9. The Agent.
9.01. Appointment. Each Bank hereby irrevocably designates
and appoints Indosuez as Agent (such term to include the Agent acting as
Collateral Agent or in any other representative capacity under any other Credit
Document) of such Bank to act as specified herein and in the other Credit
Documents and each such Bank hereby irrevocably authorizes the Agent to take
such action on its behalf under the provisions of this
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Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
this Credit Agreement and the other Credit Documents, together with such other
powers as are reasonably incidental thereto. The Agent agrees to act as such
upon the express conditions contained in this Section 9. Notwithstanding any
provision to the contrary elsewhere in this Credit Agreement, the Agent shall
not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Credit Agreement or
otherwise exist against the Agent. The provisions of this Section 9 are solely
for the benefit of the Agent and the Banks, and ATel shall not have any rights
as a third party beneficiary of any of the provisions hereof. In performing
its functions and duties under this Credit Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to
have assumed any obligation or relationship of agency or trust with or for
ATel.
9.02. Delegation of Duties. The Agent may execute any of its
duties under this Credit Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care except to the extent otherwise required by
Section 9.03.
9.03. Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Credit Agreement (except for
its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties by ATel, any Subsidiary of ATel or any of their
respective officers contained in this Credit Agreement, any other Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Credit
Agreement or any other Document or for any failure of ATel or any Subsidiary of
ATel or any of their respective officers to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions
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of, this Credit Agreement, or to inspect the properties, books or records of
ATel or any Subsidiary of ATel. The Agent shall not be responsible to any Bank
for the effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Credit Agreement or any Credit Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection
herewith or therewith furnished or made by the Agent to the Banks or by or on
behalf of ATel to the Agent or any Bank or be required to ascertain or inquire
as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the
use of the proceeds of the Loans or of the existence or possible existence of
any Default or Event of Default.
9.04. Reliance by the Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to ATel), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Credit Agreement
or any other Credit Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Credit Agreement and the other Credit
Documents in accordance with a request of the Required Banks (or to the extent
specifically provided in Section 10.12, all the Banks), and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Banks.
9.05. Notice of Default. The Agent shall not be deemed to
have knowledge of the occurrence of any Default or Event of Default, other than
a default in the payment of principal or interest on the Loans hereunder unless
it has received notice from a Bank or ATel referring to this Credit Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the
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Agent receives such a notice, the Agent shall give prompt notice thereof to the
Banks. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Banks; provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
9.06. Non-Reliance on Agent and Other Banks. Each Bank
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of ATel or any Subsidiary of ATel,
shall be deemed to constitute any representation or warranty by the Agent to
any Bank. Each Bank represents to the Agent that it has, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of ATel and its Subsidiaries
and made its own decision to make its Loans hereunder and enter into this
Credit Agreement and the other agreements contemplated hereby. Each Bank also
represents that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Credit Agreement, and
to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of ATel and its Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of ATel or any of its Subsidiaries
which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
9.07. Indemnification. The Banks agree to indemnify the
Agent in its capacity as such or in any other representative capacity under any
other Credit Document ratably according to their aggregate Commitments, from
and against any and all
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liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, reasonable expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of this
Credit Agreement or any other Credit Document, or any documents contemplated by
or referred to herein or the transactions contemplated hereby or any action
taken or omitted to be taken by the Agent under or in connection with any of
the foregoing, but only to the extent that any of the foregoing is not paid by
ATel or any of its Subsidiaries; provided that no Bank shall be liable to the
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. If
any indemnity furnished to the Agent for any purpose shall, in the opinion of
the Agent, be insufficient or become impaired, the Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreements in this
Section 9.07 shall survive the payment of all Obligations.
9.08. The Agent in Its Individual Capacity. The Agent and
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with ATel, its Subsidiaries and other Affiliates of ATel
as though the Agent were not the Agent hereunder. With respect to the Loans
made by it and all Obligations owing to it, the Agent shall have the same
rights and powers under this Credit Agreement as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.09. Successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, the term "Agent" shall
include such successor agent effective upon its appointment, and the resigning
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Credit Agreement. After the retiring Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Credit Agreement.
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9.10. Resignation by Agent. (A) The Agent may resign from
the performance of all its functions and duties hereunder at any time by giving
15 Business Days' prior written notice to ATel and the Banks. Such resignation
shall take effect upon the acceptance by a successor Agent of appointment
pursuant to subsections B and C below or as otherwise provided below.
(B) Upon any such notice of resignation of the Agent, the
Required Banks shall appoint a successor Agent acceptable to ATel and which
shall be an incorporated bank or trust company or other qualified financial
institution with operations in the United States and total assets of at least
$1 billion.
(C) If a successor Agent shall not have been so appointed
within said 15 Business Day period, the resigning Agent with the consent of
ATel shall then appoint a successor Agent (which shall be an incorporated bank
or trust company or other qualified financial institution with operations in
the United States and total assets of at least $1 billion) who shall serve as
Agent until such time, if any, as the Required Banks appoint a successor Agent
as provided above.
(D) If no successor Agent has been appointed pursuant to
subsection B or C by the 20th Business Day after the date such notice of
resignation was given by the resigning Agent, such Agent's resignation shall
become effective and the Required Banks shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Required Banks
appoint a successor Agent as provided above.
SECTION 10. Miscellaneous.
10.01. Payment of Expenses, etc. ATel agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
out-of-pocket costs and expenses of the Agent (including, without limitation,
the reasonable fees and disbursements of Cahill Gordon & Reindel and
communications legal counsel) in connection with the negotiation, preparation,
execution and delivery of the Credit Documents and the documents and
instruments referred to therein and any amendment, waiver or consent relating
thereto and of the Agent, and, following the occurrence of a Default, each of
the Banks in connection with any amendment, waiver or consent relating to the
Credit Documents and with the enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and dis-
<PAGE> 74
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bursements of counsel for the Agent, and, following the occurrence of a
Default, each of the Banks) with prior notice to ATel of the engagement of any
counsel and the fees and expenses of any appraisers or any consultants or other
advisors engaged with prior notice to ATel of any such engagement with respect
to environmental or other matters; (ii) pay and hold each of the Banks harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Banks harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission (other than to the extent attributable to such Bank) to pay such
taxes; and (iii) indemnify each Bank, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses (including, without
limitation, any and all losses, liabilities, claims, damages or expenses
arising under Environmental Laws) incurred by any of them as a result of, or
arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Bank is a party thereto)
related to the entering into and/or performance of any Document or the use of
the proceeds of any Loans hereunder or the consummation of any other
transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
10.02. Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of an Event of Default, each Bank is hereby authorized at any time or from time
to time, without presentment, demand, protest or other notice of any kind to
ATel or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) to
or for the credit or the account of ATel against and on account of the
Obligations and liabilities of ATel to such Bank under this Credit Agreement or
under any of the other Credit Documents, including, without limitation, all
interests in Obligations of ATel purchased by such Bank pursuant to Section
10.06(b), and all other claims of any nature or description arising out of or
connected with this Credit Agree-
<PAGE> 75
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ment or any other Credit Document, irrespective of whether or not such Bank
shall have made any demand hereunder and although said Obligations, liabilities
or claims, or any of them, shall be contingent or unmatured.
10.03. Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered, if to ATel, to
American Telecasting, Inc., 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919, Attention: President, with a copy to: Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022,
Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street,
N.W., Suite 450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.;
if to any Bank, at its address specified for such Bank on Annex II hereto; or,
at such other address as shall be designated by any party in a written notice
to the other parties hereto. All such notices and communications shall, when
mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective two days after being deposited in the mails, when
delivered to the telegraph company, cable company or overnight courier, as the
case may be, or when sent by telex or telecopier, except that notices and
communications to the Agent shall not be effective until received by the Agent.
10.04. Benefit of Credit Agreement. (a) This Credit
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto, all future holders of the Notes, and their respective
successors and assigns; provided (A) that ATel may not assign or transfer any
of its interests hereunder without the prior written consent of the Banks; and
(B) that the rights of each Bank to transfer, assign or grant participations
in its rights and/or obligations hereunder shall be limited as set forth below
in this Section 10.04; provided that nothing in this Section 10.04 shall
prevent or prohibit any Bank from (i) pledging its Loans hereunder to a Federal
Reserve Bank in support of borrowings made by such Bank from such Federal
Reserve Bank and (ii) granting participations in or assignments of such Bank's
Loans, Notes and/or Commitments hereunder to (x) its parent company and/or (y)
any Affiliate of such Bank that is at least 50% owned by such Bank or its
parent company and/or (z) an entity managed by one of the persons specified in
clauses (x) or (y) above.
(b) Each Bank shall have the right to transfer, assign or
grant participations in all or any part of its remain-
<PAGE> 76
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ing Loans, Notes and/or Commitments hereunder on the basis set forth below in
this clause (b). Each Bank may furnish any information concerning ATel in the
possession of such Bank from time to time to assignees and participants
(including prospective assignees and participants).
(A) Assignments. Each Bank, with the written consent of the
Agent, which shall not be unreasonably withheld, which shall be
evidenced on the notice in the form of Exhibit D-1 hereto, may assign
pursuant to an Assignment Agreement substantially in the form of
Exhibit D-2 hereto all or a portion of its Loans, Notes and/or
Commitments hereunder pursuant to this clause (b)(A) to (x) one or
more Banks or (y) one or more accredited investors (as defined in SEC
Regulation D). Any assignment pursuant to this clause (b)(A) will
become effective five Business Days after the Agent's receipt of (i) a
written notice in the form of Exhibit D- 1 hereto from the assigning
Bank and the assignee Bank and (ii) a processing and recordation fee
of $2,000 from the assigning Bank in connection with the Agent's
recording of such sale, assignment, transfer or negotiation; provided
that such fee shall only be payable if the assignment is between a
Bank and a party that is not a Bank prior to the assignment. ATel
shall issue new Notes to the assignee in conformity with Section 1.05
and the assignor shall return the old Notes to ATel. Upon the
effectiveness of any assignment in accordance with this clause (b)(A),
the assignee will become a "Bank" for all purposes of this Credit
Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Bank shall be relieved of its obligations
hereunder with respect to the Commitments being assigned. The Agent
shall maintain at its address specified in Annex II hereto a copy of
each Assignment Agreement delivered to and accepted by it and a
register in which it shall record the names and addresses of the Banks
and the Commitment of, and principal amount of the Loans owing to,
each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
demonstrable error, and ATel, the Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for
all purposes of this Credit Agreement. The Register shall be
available for inspection by ATel, the Agent or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(B) Participations. Each Bank may transfer, grant or assign
participations in all or any part of such Bank's
<PAGE> 77
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Loans, Notes and/or Commitments hereunder pursuant to this clause
(b)(B) to any Person; provided that (i) such Bank shall remain a
"Bank" for all purposes of this Credit Agreement and the transferee of
such participation shall not constitute a Bank hereunder and (ii) no
participant under any such participation shall have rights to approve
any amendment to or waiver of this Credit Agreement or any other
Credit Document except to the extent such amendment or waiver would
(x) change the scheduled final maturity date of any of the Loans,
Notes or Commitments in which such participant is participating or (y)
reduce the principal amount, interest rate or fees applicable to any
of the Loans, Notes or Commitments in which such participant is
participating or postpone the payment of any interest or fees or (z)
release all or substantially all of the Collateral. In the case of
any such participation, the participant shall not have any rights
under this Credit Agreement or any of the other Credit Documents (the
participant's rights against the granting Bank in respect of such
participation to be those set forth in the agreement with such Bank
creating such participation) and all amounts payable by ATel hereunder
shall be determined as if such Bank had not sold such participation;
provided that such participant shall be considered to be a "Bank" for
purposes of Sections 10.02 and 10.06(b).
10.05. No Waiver; Remedies Cumulative. No failure or delay
on the part of the Agent or any Bank in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between ATel and the Agent or any Bank shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on ATel in any case shall
entitle ATel to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Banks to
any other or further action in any circumstances without notice or demand.
10.06. Payments Pro Rata. (a) The Agent agrees that
promptly after its receipt of each payment from or on behalf of ATel in respect
of any Obligations of ATel, it shall distribute such payment to the Banks pro
rata based upon their
<PAGE> 78
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respective shares, if any, of the Obligations with respect to which such
payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, of a sum which with respect to the related sum or sums received
by other Banks is in a greater proportion than the total of such Obligations
then owed and due to such Bank bears to the total of such Obligations then owed
and due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of ATel to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
10.07. Calculations; Computations. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in
writing by ATel to the Banks); provided that, except as otherwise specifically
provided herein, all computations determining compliance with Section 7 and all
definitions used herein for any purpose), shall utilize accounting principles
and policies in effect at the time of the preparation of, and in conformity
with those used to prepare, the historical financial statements delivered to
the Banks pursuant to Section 3.01(I).
(b) All computations of interest and fees hereunder shall be
made on the actual number of days elapsed over a year of 365 days.
10.08. Governing Law; Submission to Jurisdiction; Venue. (a)
This Credit Agreement and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with and be governed by the laws
of the State of New York applicable to contracts made and to be performed
wholly therein. Any legal action or proceeding with respect to this Credit
Agreement or any other Credit Document may be brought in the courts of the
State of New York or of the United
<PAGE> 79
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States for the Southern District of New York, and, by execution and delivery of
this Credit Agreement, ATel hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts. ATel further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to CT Corporation System at its address at 1633 Broadway, New
York, New York 10019, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Agent or any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against ATel in any other jurisdiction.
(b) ATel hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Credit Agreement or any
other Credit Document brought in the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
10.09. Counterparts. This Credit Agreement may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with ATel and the Agent.
10.10. Effectiveness. This Credit Agreement shall become
effective on the date (the "Effective Date") on which ATel and each of the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Agent at the Agent's Office or, in the
case of the Banks, shall have given to the Agent telephonic (confirmed in
writing), written, telex or telecopy notice (actually received) at such office
that the same has been signed and mailed to it. The Agent will give ATel and
each Bank prompt written notice of the occurrence of the Effective Date.
10.11. Headings Descriptive. The headings of the several
sections and subsections of this Credit Agreement are inserted for convenience
only and shall not in any way affect
<PAGE> 80
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the meaning or construction of any provision of this Credit Agreement.
10.12. Amendment or Waiver. Neither this Credit Agreement
nor any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Required Banks; provided that no such
change, waiver, discharge or termination shall, without the consent of each
affected Bank and the Agent, (i) extend the scheduled final maturity date of
any Loan, or any portion thereof, or reduce the rate or extend the time of
payment of interest thereon or fees or reduce the principal amount thereof, or
increase the Commitments of any Bank over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Loan Commitment shall not constitute a change in the
terms of any Commitment of any Bank), (ii) release all or substantially all of
the Collateral (except as expressly permitted by the Credit Documents), (iii)
amend, modify or waive any provision of this Section, or Sections 1.08, 2.04,
7, 9.07, 10.01, 10.02, 10.04, 10.06 or 10.07(b), (iv) reduce any percentage
specified in, or otherwise modify, the definition of Required Banks or (v)
consent to the assignment or transfer by ATel of any of its rights and
obligations under this Credit Agreement. No provision of Section 9 may be
amended without the consent of the Agent.
10.13. Survival. All indemnities set forth herein including,
without limitation, in Section 1.08, 2.04, 9.07 or 10.01 shall survive the
execution and delivery of this Credit Agreement and the making of the Loans,
the repayment of the Obligations and the termination of the Loan Commitments.
10.14. Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Bank.
10.15. Waiver of Jury Trial. Each of the parties to this
agreement hereby irrevocably waives all right to a trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Credit Agreement,
the Credit Documents or the transactions contemplated hereby or thereby.
10.16. Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or be otherwise within the limitation of, another covenant
<PAGE> 81
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shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
10.17. Confidentiality. Except as may be required to enforce
the rights and duties established hereunder, the parties hereto shall preserve
in a confidential manner all Confidential Information received from the other
pursuant to this Credit Agreement, the Credit Documents and the transactions
contemplated hereunder and thereunder, and shall not disclose such Confidential
Information except to those person with which a confidential relationship is
maintained (including regulators, legal counsel, accountants, or designated
agents), to participants or assignees or prospective participants or assignees
who agree to be bound by the terms of this provision, or where required by law,
requested by any governmental authority or pursuant to legal process.
<PAGE> 82
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IN WITNESS WHEREOF, the parties hereto have caused this
indenture to be duly executed, all as of the date first written above.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
<PAGE> 83
Credit Agreement among
American Telecasting, Inc.,
Banque Indosuez and the Banks listed herein
BANQUE INDOSUEZ, NEW YORK BRANCH
as Agent and Collateral Agent
By: /s/ BANQUE INDOSUEZ
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Loan Commitment: $17,000,000
<PAGE> 84
ANNEX I
List of Banks
Banque Indosuez, New York Branch
<PAGE> 85
ANNEX II
Bank Addresses
Banque Indosuez, New York Branch
1211 Avenue of the Americas
New York, New York 10036
<PAGE> 86
___________________________________________
Exhibit A to the
Credit Agreement
FORM OF NOTE
AMERICAN TELECASTING, INC.
New York, New York
U.S. $17,000,000 February 26, 1997
FOR VALUE RECEIVED, AMERICAN TELECASTING, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of BANQUE INDOSUEZ, NEW
YORK BRANCH (the "Bank"), in lawful money of the United States of America in
immediately available funds, at the office of Banque Indosuez, New York Branch,
located at 1211 Avenue of the Americas, Seventh Floor, New York, New York
10036-8701 or as otherwise designated pursuant to the Credit Agreement (as
defined) on the Final Maturity Date, the principal sum of SEVENTEEN MILLION
U.S. DOLLARS ($17,000,000) or, if less, the unpaid principal amount of the
Loans made by the Bank to the Borrower pursuant to the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of February 26, 1997, among the Borrower, the Bank, the other lending
institutions party thereto, and Banque Indosuez, New York Branch, as Agent (as
amended or modified in accordance with its terms, the "Credit Agreement") and
is entitled to the benefits thereof and shall be subject to the provisions
thereof. This Note is also entitled to the benefits of the Guarantees (as
defined in the Credit Agreement) and the Security Documents (as defined in the
Credit Agreement). As provided in the Credit Agreement, this Note is subject
to mandatory and voluntary prepayment, in whole or in part.
___________________________________________
Footnote continued from previous page.
<PAGE> 87
___________________________________________
In case an Event of Default (as defined in the Credit Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Credit Agreement.
The Borrower and the Guarantors hereby waive presentment, demand,
protest, notice of dishonor, and any and all other notices or demands of any
kind in connection with the delivery, performance, default or enforcement of
this Note.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on the schedule attached hereto and made
a part hereof, or on a continuation thereof which shall be attached hereto and
made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such
a notation or any error in such a notation shall not affect the obligations of
the Borrower under this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF
LAW.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
----------------------------------
Name:
Title:
___________________________________________
Footnote continued from previous page.
<PAGE> 88
___________________________________________
TRANSACTIONS
ON
NOTE
___________________________________________
Footnote continued from previous page.
<PAGE> 89
___________________________________________
<TABLE>
<CAPTION>
Amount of Outstanding
Amount of Principal or Principal
Loan Made Interest Paid Balance Notation
Borrower Date This Date This Date This Date Made By
- -------- ---- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
___________________________________________
Footnote continued from previous page.
<PAGE> 90
-1-
EXHIBIT H TO THE
CREDIT AGREEMENT
FORM OF SUBSIDIARY GUARANTEE
This GUARANTEE (the "Guarantee"), dated as of February 26, 1997 by the
signatories hereto, (each a "Guarantor" and collectively, the "Guarantors"), in
favor and for the benefit of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office
at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, in its
capacity as agent (in such capacities and together with any successors in such
capacity, the "Agent") for the ratable benefit of the lending institutions (the
"Banks") from time to time party to the Credit Agreement (as hereinafter
defined).
R E C I T A L S:
A. Pursuant to a certain credit agreement dated as of the date hereof
(as amended, amended and restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof in effect, the "Credit Agreement";
capitalized terms not defined herein have the meanings ascribed to them in the
Credit Agreement) by and among American Telecasting, Inc. (the "Borrower"), the
lending institutions identified therein (collectively, the "Banks") and Banque
Indosuez, New York branch, as Agent, the Banks have agreed to make certain
Loans to the Borrower.
B. It is a condition precedent to the Banks' obligations to make the
Loans under the Credit Agreement that the Guarantors shall have executed and
delivered this Guarantee and that this Guarantee shall be in full force and
effect.
C. This Guarantee is given by the Guarantors in favor of the Banks to
guarantee, on a joint and several basis, all of the Obligations of the Borrower
in accordance with the terms of the Credit Agreement.
______________________________________
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<PAGE> 91
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D. All of the Guarantors' obligations hereunder shall be secured
pursuant to the Security Documents to which the Guarantors are a party.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Guarantors hereby agree as follows:
Guarantee. (a) To induce the Banks to execute and deliver the Credit
Agreement and to make the Loans upon the terms and conditions set forth in the
Credit Agreement, and in consideration thereof, each of the Guarantors, jointly
and severally, hereby unconditionally and irrevocably (i) guarantees to the
Banks and their respective successors, endorsees, transferees and assigns, the
prompt and complete payment and performance when due (whether at the Final
Maturity Date, by acceleration or otherwise) and at all times thereafter of the
Obligations of the Borrower (including amounts which would become due but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, or similar provisions under the bankruptcy laws of foreign jurisdictions)
and (ii) agrees to pay any and all reasonable expenses (including reasonable
attorneys' fees and disbursements) which may be paid or incurred by the Banks,
the Agent or the Collateral Agent in enforcing any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, the Guarantors under this Guarantee
(collectively, the "Guaranteed Obligations").
(b) Each of the Guarantors agrees that this Guarantee constitutes a
guarantee of payment when due and not of collection and waives any right to
require that any resort be had by the Collateral Agent, the Agent or any Bank
to any of the security held for payment of any of the Guaranteed Obligations or
to any balance of any deposit account or credit on the books of the Agent, the
Collateral Agent or any Bank in favor of the Borrower or any other Person.
(c) No payment or payments made by the Guarantors or any other Person
or received or collected by the Banks (or the
______________________________________
Footnote continued from previous page.
<PAGE> 92
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Collateral Agent or Agent on behalf of the Banks) from the Guarantors or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time in reduction of or in payment of the
Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability or obligations of the Guarantors hereunder which shall,
notwithstanding any such payment or payments other than payments made to the
Banks (or the Collateral Agent or Agent on behalf of the Banks) by the
Guarantors or payments received or collected by the Banks (or the Collateral
Agent or Agent on behalf of the Banks) from the Guarantors, remain liable for
the Guaranteed Obligations until the Guaranteed Obligations are indefeasibly
paid in full in cash or cash equivalents, subject to the provisions of Section
1(d) hereof.
(d) Notwithstanding any other provisions of this Guarantee, the
maximum aggregate amount of Guaranteed Obligations which each of the Guarantors
agrees to guarantee pursuant to this Guarantee shall equal the lesser of (i)
the excess of the fair saleable value of the property of such Guarantor over
the total liabilities of such Guarantor (including the maximum amount
reasonably expected to become due in respect of contingent liabilities, other
than any such contingent liabilities under the Credit Agreement and the other
Credit Documents), such excess to be determined on the date of this Guarantee
or the date on which, from time to time, such enforcement or realization is
effected, whichever is higher and, (ii) the maximum aggregate amount of
Guaranteed Obligations which does not render this Guarantee, as it relates to
such Guarantor, void or voidable under applicable laws relating to fraudulent
conveyance or fraudulent transfer. Subject to the preceding sentence, each of
the Guarantors understands, agrees and confirms that this is a guarantee of
payment when due and not of collection and that each Bank may, from time to
time, enforce this Guarantee up to the full amount of the Guaranteed
Obligations owed to such Bank without proceeding against the Borrower, against
any security for the Guaranteed Obligations, against any other guarantor or
under any other guarantee covering the Guaranteed Obligations.
Waiver by Guarantors. Each of the Guarantors hereby waives absolutely
and irrevocably any claim which it may have against the Borrower or any of
their respective Affiliates by
______________________________________
Footnote continued from previous page.
<PAGE> 93
-4-
reason of any payment to the Agent, Collateral Agent or any Bank, or to any
other Person pursuant to or in respect of this Guarantee, including any claims
by way of subrogation, contribution, reimbursement, indemnity or otherwise
until such time as the Obligations hereunder have been paid in full.
Consent by Guarantors. Each of the Guarantors hereby consents and
agrees that, without the necessity of any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Guaranteed Obligations made by the Agent, the
Collateral Agent or any Bank may be rescinded by the Banks (or the Agent or
Collateral Agent on behalf of the Banks) and any of the Guaranteed Obligations
continued, and the Guaranteed Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Banks (or the Agent or the Collateral
Agent on behalf of the Banks); and the Credit Agreement or any other Credit
Document, or other guarantee or documents in connection therewith, or any of
them, may be amended, modified, supplemented or terminated, in whole or in
part, as the Banks (or the Agent or Collateral Agent on behalf of the Banks)
may deem advisable from time to time; and any Guarantee or right of offset or
any Collateral may be sold, exchanged, waived, surrendered or released, all
without the necessity of any reservation of rights against any Guarantor and
without notice to or further assent by any Guarantor, which will remain bound
hereunder, notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, termination, sale, exchange,
waiver, surrender or release. Neither the Banks nor the Agent or the
Collateral Agent shall have any obligation to protect, secure, perfect or
insure any Collateral or property at any time held as security for the
Guaranteed Obligations or this Guarantee. When making any demand hereunder
against any Guarantor, the Agent, the Collateral Agent or the Banks may, but
shall be under no obligation to, make a similar demand on any other Borrower or
any such other guarantor, and any failure by the Agent, the Collateral Agent or
the Banks to make any such demand or to collect any payments from such other
Borrower or any such other guarantor or any release of such other Borrower or
any such other guarantor or any of the Guarantors' obligations or
______________________________________
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<PAGE> 94
-5-
liabilities hereunder shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Banks against any of the
Guarantors hereunder. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
Waivers; Successors and Assigns. The Guarantors waive any and all
notice of the creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance by the Banks upon this Guarantee
or acceptance of this Guarantee, and the Guaranteed Obligations shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Guarantee, and all dealings between any of the Guarantors and any
other guarantor or any of the Borrower, on the one hand, and the Banks, on the
other hand, shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. Each of the Guarantors waives
diligence, presentment, protest, demand for payment and notice of default or
non-payment to or upon any guarantor, any of the Borrower or the Guarantors
with respect to the Guaranteed Obligations. This Guarantee shall be construed
as a continuing, absolute and unconditional Guarantee of payment without regard
to the validity, regularity or enforceability of the Credit Agreement, the
other Credit Documents, any of the Guaranteed Obligations or any guarantee
therefor or right of offset with respect thereto at any time or from time to
time held by the Banks and without regard to any defense (other than the
defense of payment), set off or counterclaim which may at any time be available
to or be asserted by any guarantor, or any of the Borrower against the Banks,
or by any other circumstance whatsoever (with or without notice to or knowledge
of the Guarantors) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Guaranteed Obligations, or any of the
Guarantors under this Guarantee, in bankruptcy or in any other instance, and
the obligations and liabilities of any of the Guarantors hereunder shall not be
conditioned or contingent upon the pursuit by the Banks or any other Person at
any time of any right or remedy against any guarantor, any of the Borrower or
against any other Person which may be or become liable or obligated in respect
of all or any part of the Guaranteed Obligations or against any collateral
security or guarantee therefor or right of offset with respect thereto. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon
______________________________________
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<PAGE> 95
-6-
each of the Guarantors and the successors and assigns thereof, and shall inure
to the benefit of the Banks, and their respective successors, endorsees,
transferees and assigns (including each holder from time to time of Guaranteed
Obligations) until all of the Guaranteed Obligations and the obligations of the
Guarantors under this Guarantee shall have been satisfied by indefeasible
payment in full in cash or cash equivalents, notwithstanding that from time to
time during the term of the Credit Agreement any guarantor or any of the
Borrower may be released from all of its Guaranteed Obligations thereunder.
Guarantee Secured. Payment under this Guarantee is secured by
pledges, encumbrances and mortgages of Collateral pursuant to applicable
Security Documents in accordance with the Credit Agreement. Reference is
hereby made to the Credit Agreement and the applicable Security Documents for a
description of the Collateral pledged and the right of the respective parties
to such property, to secure all the obligations of the Guarantors hereunder.
Rights of Set-Off. The Banks, and the Agent and Collateral Agent on
behalf of the Banks, are each hereby irrevocably authorized upon the occurrence
and during the continuance of an Event of Default without notice to any of the
Guarantors (any such notice being expressly waived by any of the Guarantors to
the extent permitted by applicable law) to set-off and appropriate and apply
any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect or contingent or matured or
unmatured, at any time held or owing by the Banks to or for the credit or the
account of any of the Guarantors, or any part thereof, in such amounts as the
Banks, or the Agent or Collateral Agent on behalf of the Banks, may elect,
against and on account of the obligations and liabilities of any of the
Guarantors to the Banks, in any currency, whether arising hereunder or
otherwise, as the Banks, or the Agent or Collateral Agent on behalf of the
Banks, may elect, whether or not the Banks, or the Agent or Collateral Agent on
behalf of the Banks, have made any demand for payment but only to the extent
that such obligations, liabilities and claims shall have become due and payable
(whether as stated, by acceleration or otherwise). The Banks, or the Agent or
Collateral Agent on
______________________________________
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<PAGE> 96
-7-
behalf of the Banks, agree to notify the Guarantors promptly of any such
set-off and the application made by the Banks, or the Agent on behalf of the
Banks; provided, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Banks, or the
Agent or Collateral Agent on behalf of the Banks, under this Section 6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Banks, or the Agent or Collateral Agent on behalf
of the Banks, may otherwise have.
Effectiveness; Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any guarantor or the Borrower, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, any guarantor, the Borrower, or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
Payments of Guaranteed Obligations. Each of the Guarantors hereby
guarantees that the Guaranteed Obligations will be paid for the ratable benefit
of the Banks without set-off or counterclaim in lawful currency of the United
States of America at the office of the Collateral Agent located at 1211_Avenue
of the Americas, 7th Floor, New York, New York 10036-8701. Each of the
Guarantors shall make any payments required hereunder upon receipt of written
notice thereof from the Agent or Collateral Agent or any Bank; provided,
however, that the failure of the Agent or Collateral Agent or any Bank to give
such notice shall not affect Guarantors' obligations hereunder.
Default. If (x) the Borrower has failed to pay or perform when due
its Guaranteed Obligations or (y) there is an event with respect to the
Guarantors that would require or permit the acceleration pursuant to Section
7.04 of the Credit Agreement of any outstanding Loan, or (z) the Guarantors
obligations, if any, under the Credit Agreement are accelerated, then in the
case of clause (x) all of the
______________________________________
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<PAGE> 97
-8-
Guaranteed Obligations with respect to the Borrower and in the case of clause
(y) or clause (z) all of the Guaranteed Obligations shall be immediately due
and payable by the Guarantors, regardless of whether in the case of clause (x)
the payment of the Guaranteed Obligations has been accelerated or in the case
of clause (y) or clause (z) the Borrower is in default with respect to the
Guaranteed Obligations.
Representations and Warranties. To induce the Banks to enter into the
Credit Agreement and to make Loans thereunder, the Guarantors represent and
warrant to each Bank that the following statements are true, correct and
complete on and as of the Closing Date:
Organization and Powers. Each of the Guarantors has been duly
incorporated and is an existing corporation in good standing under the laws of
its jurisdiction of incorporation and has the power and authority to own its
property and assets and to transact the business in which it is engaged and
proposes to engage. Each of the Guarantors has duly qualified and is qualified
to do business and is in good standing in all jurisdictions in which the
conduct of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Materially Adverse Effect. Each of the Guarantors has all requisite power and
authority and all requisite governmental licenses, authorizations, consents and
approvals to own and carry on its business as now conducted and as contemplated
to be conducted by the Documents, other than such licenses, authorizations,
consents and approvals the failure to obtain which has not had and will not
have a Materially Adverse Effect. Each of the Guarantors has all authority to
enter into each of the Security Documents to which it is or is to be a party
and to carry out the transactions contemplated thereby and to execute and
deliver this Guarantee.
No Violations. Neither the execution, delivery or performance by any
of the Guarantors of any of the Credit Documents to which it is, or is to be, a
party, nor compliance with any of the terms and provisions thereof, nor the
consummation of any of the transactions contemplated therein, nor the grant and
perfection of the security interests pursuant to the Security Documents (a)
will contravene any provision of
______________________________________
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<PAGE> 98
-9-
any law, statute, rule, regulation, order, writ, injunction or decree of any
Governmental Authority, (b) will conflict or be inconsistent with or result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute (with notice or lapse of time or both) a default under any material
contractual obligation of any of the Guarantors, or (other than as contemplated
by the Security Documents) result in the creation or imposition of (or the
obligation to create or impose), any Lien upon any of the property or assets of
the Guarantors pursuant to any material contractual obligation or (c) will
violate any provision of the organizational documents of the Guarantors.
Approvals. The execution, delivery and performance by any of the
Guarantors of the Credit Documents to which it is, or is to be, a party do not
and will not require any registration with, consent or waiver or approval of,
or notice to, or other action to, with or by, any Governmental Authority or
other Person except filings required for the perfection of security interests
granted pursuant to the Security Documents. All consents and approvals from or
notices to or filings with any Governmental Authority or other Person required
to be obtained by any Guarantor have been obtained and are in full force and
effect except where failure to obtain such consents, approvals, notices, etc.
would not have a Material Adverse Effect.
Binding Obligation. This Guarantee constitutes the legal, valid and
binding obligation of each of the Guarantors, enforceable, jointly and
severally, against each of the Guarantors in accordance with its terms except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
Investment Company. Each of the Guarantors is not an "investment
company" or a company "controlled" by an "investment company" (as each of such
quoted terms is defined or used in the Investment Company Act of 1940, as
amended) or subject to any foreign, federal or local statute or regulation
limiting its ability to incur indebtedness for money borrowed
______________________________________
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<PAGE> 99
-10-
or guarantee such indebtedness as contemplated hereby or by any other Credit
Document.
Ratable Sharing. The Banks by acceptance of this Guarantee agree
among themselves that with respect to all amounts received by them which are
applicable to the payment of obligations of each of the Guarantors under this
Guarantee, if the Banks, or the Agent or Collateral Agent on behalf of the
Banks, exercise their rights hereunder, including, without limitation,
acceleration of the obligations of each of the Guarantors hereunder, equitable
adjustment will be made so that, in effect, all such amounts will be shared
among the banks pro rata based on the relative outstanding Guaranteed
Obligations.
Merger. If any of the Guarantors shall merge into or consolidate with
another entity, or liquidate, wind up or dissolve itself in a transaction not
prohibited by the Credit Agreement, or if all of the stock of any of the
Guarantors shall be sold or otherwise disposed of in a manner not prohibited by
the Credit Agreement, such Guarantor hereby covenants and agrees, that upon any
such merger, consolidation, liquidation, or dissolution, the guarantee given in
this Guarantee and the due and punctual performance and observance of all of
the covenants and conditions of the Credit Agreement to be performed by such
Guarantor, shall be expressly assumed (in the event that any of such Guarantor
is not the surviving entity in the merger) by supplemental agreements
satisfactory in form to the Banks, or the Agent or Collateral Agent on behalf
of the Banks, by the entity or entities formed by such consolidation, or into
which such Guarantor shall have been merged, or by the entity or entities which
shall have acquired such property. In addition, such Guarantor shall deliver
to the Banks, or the Agent or Collateral Agent on behalf of the Banks, an
Officers' Certificate and an opinion of counsel, each stating that such merger,
consolidation or transfer and such supplemental agreements comply with this
Guarantee and that all conditions precedent herein provided relating to such
transaction have been complied with. In case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor entity or
entities, by supplemental agreements executed and delivered to the Banks or
the Agent or Collateral Agent on behalf
______________________________________
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<PAGE> 100
-11-
of the Banks, and satisfactory in form to the Banks, or the Agent or Collateral
Agent on behalf of the Banks, of the guarantee given in this Guarantee and the
due and punctual performance of all of the covenants and conditions of the
Credit Agreement to be performed by such Guarantor, such successor entity or
entities shall succeed to and be substituted for such Guarantor, with the same
effect as if it or they had been named herein as a Guarantor.
No Waiver. No failure to exercise and no delay in exercising, on the
part of the Banks, or the Agent or Collateral Agent on behalf of the Banks, any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof, or the exercise of any other power or
right. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law. In the event the Banks,
the Agent or the Collateral Agent on behalf of the Banks, shall have instituted
any proceeding to enforce any right, power or remedy under this Guarantee by
sale or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Banks,
the Agent or the Collateral Agent on behalf of the Banks, then and in every
such case, the Guarantors, the Banks, the Agent or the Collateral Agent on
behalf of the Banks, and each Bank shall be restored to its respective former
position and rights hereunder, and all rights, remedies and powers of the
Banks, the Agent or the Collateral Agent on behalf of the Banks, shall continue
as if no such proceeding had been instituted.
Termination. This Guarantee shall terminate and be of no further
force and effect, upon the payment and satisfaction of the Guaranteed
Obligations.
Notices. All notices, demands, instructions or other communications
required or permitted to be given to or made upon any party hereto shall be
given in accordance with the provisions of the Credit Agreement and at the
address either set forth therein or as provided on the signature page hereof.
Amendments, Waivers, etc. No provision of this Guarantee shall be
waived, amended, terminated or supplemented
______________________________________
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<PAGE> 101
-12-
except by a written instrument executed by such Guarantors and the Agent or
Collateral Agent, on behalf of the Banks.
Notice of Exercise. Upon exercise of its rights hereunder, the Banks,
or the Agent or Collateral Agent on behalf of the Banks, as the case may be,
shall provide written notice on the date of such exercise to the Banks, or the
Collateral Agent on behalf of the Banks, as the case may be, of such exercise.
GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
CONSENT TO JURISDICTION AND SERVICE PROCESS. ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK
AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE EACH OF THE GUARANTORS ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS GUARANTEE. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY
JURY, AND EACH OF THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
THE GUARANTORS DESIGNATE AND APPOINT AMERICAN TELECASTING INC., WITH AN ADDRESS
AT 5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS, COLORADO 80919, AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE GUARANTORS IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY THE GUARANTORS TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE GUARANTORS AS PROVIDED IN SECTION 14 HEREOF. IF ANY AGENT
APPOINTED BY THE GUARANTORS REFUSES TO ACCEPT SERVICE, THE GUARANTORS HEREBY
AGREE THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS
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<PAGE> 102
-13-
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY BANK TO
BRING PROCEEDINGS AGAINST ANY OF THE GUARANTORS IN THE COURTS OF ANY OTHER
JURISDICTION.
Severability of Provisions. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Headings. The Section headings used in this Guarantee are for
convenience of reference only and shall not affect the construction of this
Agreement.
Future Advances. This Guarantee shall guarantee the payment of any
amounts advanced from time to time pursuant to the Credit Agreement.
Counterparts. This Guarantee and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
______________________________________
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<PAGE> 103
-14-
IN WITNESS WHEREOF, the undersigned have caused this Guarantee to be
duly executed and delivered by its duly authorized officer on the day and year
first above written.
AMERICAN TELECASTING DEVELOPMENT INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF ANCHORAGE, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BEND, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BILLINGS, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 104
-15-
AMERICAN TELECASTING OF BISMARK, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CENTRAL
FLORIDA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CINCINNATI, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF COLORADO
SPRINGS, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF COLUMBUS, INC.
By:
-----------------------------------
______________________________________
Footnote continued from previous page.
<PAGE> 105
-16-
Name:
Title:
AMERICAN TELECASTING OF DENVER, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF FORT COLLINS,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF FORT MYERS, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF GREEN BAY, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF HAWAII, INC.
______________________________________
Footnote continued from previous page.
<PAGE> 106
-17-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSON, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSONVILLE,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LANSING, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LINCOLN, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 107
-18-
AMERICAN TELECASTING OF LITTLE ROCK,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LOUISVILLE, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MEDFORD, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MICHIANA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MINNESOTA, INC.
______________________________________
Footnote continued from previous page.
<PAGE> 108
-19-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MONTEREY, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF NEBRASKA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF NORTH DAKOTA,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF OKLAHOMA, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 109
-20-
AMERICAN TELECASTING OF PORTLAND, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF RAPID CITY INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF REDDING, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF ROCKFORD, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SALEM/EUGENE,
INC.
By:
-----------------------------------
______________________________________
Footnote continued from previous page.
<PAGE> 110
-21-
Name:
Title:
AMERICAN TELECASTING OF SANTA BARBARA,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SANTA ROSA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SARASOTA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SHERIDAN, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SIOUX VALLEY,
INC.
______________________________________
Footnote continued from previous page.
<PAGE> 111
-22-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SOUTH DAKOTA,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF TOLEDO, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YOUNGSTOWN, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YUBA CITY, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 112
-23-
FRESNO WIRELESS CABLE TELEVISION, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 113
______________________________________
EXHIBIT I______________
TO THE CREDIT AGREEMENT
MANAGEMENT SUBORDINATION AGREEMENT
THIS MANAGEMENT SUBORDINATION AGREEMENT, dated as of February 26,
1997, is by and between American Telecasting, Inc., (the "Subordinated
Creditor"), and BANQUE INDOSUEZ, NEW YORK BRANCH, as Agent ("Banque").
WHEREAS, the Subordinated Creditor, Banque, and the banks listed on
Annex I thereto (the "Banks") have entered into a Credit Agreement dated as of
even date herewith (such Credit Agreement, together with any supplements,
restatements, modifications and amendments, is hereinafter referred to as the
"Credit Agreement") pursuant to which the Subordinated Creditor has incurred
certain monetary obligations to the Banks (the "Senior Debt");
WHEREAS, the Subordinated Creditor has entered into management
agreements with each of its Subsidiaries (each such management agreement, an
"Operating Agreement" and collectively, the "Operating Agreements") pursuant to
which, among other things, the Subordinated Creditor will provide management
services to such Subsidiaries in return for management fees and reimbursement
for costs and expenses as required by each of their respective Operating
Agreements; and
WHEREAS, it is a condition under the terms of the Credit Agreement
that all payments pursuant to each Operating Agreement be subordinated to the
Senior Debt (such payments are hereinafter referred to as the "Subordinated
Payments").
NOW, THEREFORE, in consideration of the foregoing and of the premises
herein contained, the parties agree as follows:
Any capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement.
______________________________________
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<PAGE> 114
______________________________________
The Subordinated Creditor agrees to subordinate and does hereby
subordinate, all payments by each of its Subsidiaries of the Subordinated
Payments to any payments to the Banks with respect to the Senior Debt and
further agrees as follows:
except as provided in paragraph 3 hereof, not to accept payment
which may be due with respect to, and not to demand, sue for, take or receive
all or any part of the Subordinated Payments or any interest thereon, unless
and until any and all of the Senior Debt shall have been fully paid and
discharged;
not to modify, amend or waive any of the terms or conditions of
any agreement relating to the Subordinated Payments (including without
limitation each of the Operating Agreements) without the prior written consent
of Banque;
that, except as provided in paragraph 3 hereof, if any payments
are made on account of the Subordinated Payments, each and every amount so paid
will be forthwith paid to Banque to be credited and applied by Banque as Agent
upon the Senior Debt as provided in the Credit Agreement whether matured or
unmatured at such time, and until so paid shall hold such payments in
segregated amounts and in trust for the benefit of the Banks.
that, in the event of any insolvency or bankruptcy proceedings, or
any receivership, liquidation, or reorganization or other similar proceedings
in connection therewith, relating to any Subsidiary of the Subordinated
Creditor, or to any of such Subsidiary's respective properties, or in the event
of any proceedings for voluntary liquidation, dissolution or other winding up
of any such Subsidiary, whether or not involving insolvency or bankruptcy, the
Banks shall be entitled to receive payment in full of the Senior Debt before
the Subordinated Creditor is entitled to receive any payment on account of the
Subordinated Payments, and to enable the Banks to assert and enforce their
rights hereunder in any such action or proceedings, or upon the happening of
any such event, Banque is irrevocably authorized and empowered, in its
discretion, as the Subordinated Creditor's attorneys-in-fact or otherwise, to
______________________________________
Footnote continued from previous page.
<PAGE> 115
______________________________________
make and present, for and on behalf of the Subordinated Creditor, such proofs
of claim against any such Subsidiary on account of any or all of the
Subordinated Payments as it may in good faith deem advisable, and to receive
and collect any and all interest or other payments or disbursements made
thereon, and to apply the same in its discretion upon the Senior Debt for the
benefit of the Banks;
that in the event the Subordinated Payments are, or any part
thereof is, declared due and payable before maturity because of the existence
of default (under circumstances where the provisions of the foregoing clause
(d) are not applicable) ("Acceleration") then the Banks shall be entitled to
receive payment in full of the Senior Debt before the Subordinated Creditor
shall be entitled to receive any payment on account of the Subordinated
Payments;
not to commence any action or proceeding against any of its
Subsidiaries or any of its Subsidiaries' assets to recover all or any part of
the Subordinated Payments or exercise any right it may have as a secured party
of any of its Subsidiaries with respect to any of its assets or bring or join
with any creditor, unless Banque shall also join, on behalf of the Banks, in
bringing any proceedings against any such Subsidiary under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the federal or any state
government;
not to transfer, assign, encumber or subordinate at any time while
this Agreement remains in effect, any right, claim or interest of any kind in
or to any of the Subordinated Payments and/or any interest thereon, unless the
same is done expressly subject to the terms or provisions of this Agreement;
that Banque, on behalf of the Banks, may at any time in its
discretion renew or extend the time of payment of all or any exiting or future
indebtedness or obligations of any Subsidiary of the Subordinated Creditor to
the Banks or waive any rights or release any collateral relative thereto at any
time or times, and, with reference thereto, make and enter into such agreements
as it may deem proper or desirable without
______________________________________
Footnote continued from previous page.
<PAGE> 116
______________________________________
notice to or further assent of the Subordinated Creditor and all without in any
manner impairing or affecting this Agreement or any of the Banks' rights
hereunder, and
that any collateral security securing such Subordinated Payments
shall be expressly made subordinate and junior to any lien in the same
collateral securing Senior Debt, and the Subordinated Creditor will promptly
file notices or instruments in all appropriate public offices to give public
notice of this subordination.
Notwithstanding paragraph 2 hereof, each Subsidiary of the
Subordinated Creditor may pay to the Subordinated Creditor, and the
Subordinated Creditor may retain for itself, current and earned payments (which
payments otherwise would constitute Subordinated Payments hereunder) pursuant
to the Operating Agreements so long as no Event of Default (or event which with
notice or a lapse of time would become an Event of Default) has occurred and
is continuing under the Credit Agreement at the time of such payment, or would
occur immediately after giving effect to such payment.
The Subordinated Creditor hereby represents and warrants to Banque as
follows:
The Subordinated Creditors (i) is a corporation duly formed,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation; (ii) has the power and authority to own its assets and to
transact the business in which it is now or in which it proposes to be engaged;
(iii) and is duly qualified as a foreign entity to do business and is in good
standing in all jurisdictions in which any of its activities or the ownership
of its properties makes such qualification necessary, except where the failure
to so qualify would not have a material adverse effect on the business or
properties of the Subordinated Creditor.
The execution, delivery and performance by the Subordinated
Creditor of this Agreement has been duly authorized by all necessary corporate
actions and does not and will not: (i) require any consent or approval of each
of the
______________________________________
Footnote continued from previous page.
<PAGE> 117
______________________________________
Subordinated Creditor's board of directors or shareholders or any other person
that has not been obtained; (ii) conflict with, or result in the breach of, or
constitute a default under, any of the terms, conditions or provisions of (A)
the Subordinated Creditor's certificate of incorporation or by-laws, (B) any
law or any regulation applicable to the Subordinated Creditor, (C) any order,
writ, injunction or decree of any court or governmental instrumentality
applicable to the Subordinated Creditor, (D) any agreement or instrument to
which the Subordinated Creditors is subject, which conflict, breach or default
would have a material adverse effect on the business or properties of the
Subordinated Creditor or the ability of the Subordinated Creditor to execute,
deliver or perform this Agreement, or (iii) result in the creation or
imposition of any Lien (other than in favor of the Banks) upon the Subordinated
Creditor's properties or assets pursuant to the terms of any such agreement or
instrument or otherwise.
No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory body is required
for the due execution, delivery and performance by the Subordinated Creditor of
this Agreement.
This Agreement is a legal, valid and binding obligation of the
Subordinated Creditor, enforceable against the Subordinated Creditor in
accordance with its terms except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
There is no action, suit or proceeding pending or, to the
knowledge of the Subordinated Creditor, threatened against or otherwise
affecting the Subordinated Creditor before any court or other governmental
instrumentality or any arbitrator which would, in any one case or in the
aggregate, materially adversely affect the ability of the Subordinated Creditor
to perform its obligations under this Agreement.
All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing or by telecopier (fax) and,
unless otherwise expressly provided
______________________________________
Footnote continued from previous page.
<PAGE> 118
______________________________________
herein, shall be deemed to have been duly given or made when delivered by hand,
or five (5) days after deposited in the mail, air postage prepaid, or in the
case of notice by telecopier (fax) when confirmed, addressed as follows or to
such other address as may be hereafter notified by the respective parties to
this Agreement:
If to the Subordinated
Creditor: American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80914
Attention: President
With a copy to: McDermott, Will & Emery
1850 K Street, N.W., Suite 450
Washington, D.C. 20006
Attention: Robert Jensen, Esq
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue, 35th Floor
New York, NY 10022
Attention: Randall Doud, Esq.
If to the Banks: Banque Indosuez, New York Branch
1211 Avenue of the Americas
New York, New York 10036
______________________________________
Footnote continued from previous page.
<PAGE> 119
______________________________________
Attention: Michael Arougheti
Telecopier
(fax) no.: (212) 278-2203
(212) 278-2000
With a copy to: William B. Gannett, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopier
(fax) no.: (212) 269-5420
(212) 701-3000
THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT SITTING IN
NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, AND OF THE SUBORDINATED CREDITOR HERBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR FEDERAL COURT. THE SUBORDINATED CREDITOR WAIVES
ANY OBJECTION TO ANY ACTION OR PROCEEDING IN ANY STATE OR FEDERAL COURT SITTING
IN NEW YORK COUNTY ON THE BASIS OF FORUM NON CONVENIENS. THE SUBORDINATED
CREDITOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY. THE SUBORDINATED CREDITOR
HEREBY WAIVES PERSONAL SERVICE OF ANY PROCESS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL DIRECTED TO THE SUBORDINATED CREDITOR AT THE
ADDRESS SET FORTH IN SECTION 5. THE SUBORDINATED CREDITOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE FOR PURPOSES OF
ENFORCEMENT IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH OF THE SUBORDINATED CREDITORS FURTHER AGREES THAT
ANY ACTION OR PROCEEDING BROUGHT AGAINST BANQUE OR THE BANKS SHALL BE BROUGHT
ONLY IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY. NOTHING IN THIS
PARAGRAPH 6 SHALL AFFECT THE RIGHT OF THE BANKS TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANKS TO BRING ANY
ACTION OR PROCEEDING AGAINST ANY SUBORDINATED CREDITOR OR THE PROPERTY OF THE
SUBORDINATED CREDITOR IN THE COURTS OF ANY OTHER JURISDICTION.
______________________________________
Footnote continued from previous page.
<PAGE> 120
______________________________________
This is a continuing agreement and shall remain in full force and
effect and be binding upon parties hereto and their successors and assigns
until the Senior Debt has been satisfied.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF
CONFLICT OF LAWS.
No modification or waiver of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the parties
agreeing to such waiver or modification. Any such waiver shall be effective
only in the specific instance and for the purpose for which given.
Provisions of this Agreement are solely for the purpose of defining
the relative rights of Banque, the Banks and the Subordinated Creditors and
nothing herein shall impair any obligations of any Subsidiary of the
Subordinated Creditor to the parties hereto nor affect or impair the rights of
any party relative to those of other creditors of any Subsidiary of the
Subordinated Creditor, nor shall anything herein prevent either party from
exercising all remedies otherwise permitted by law or hereunder, subject to the
relative rights of the parties expressed herein.
This Agreement may be executed in any number of counterparts, each of
which, when executed, shall be deemed to be an original and all of which, when
taken together, shall constitute one and the same Agreement.
______________________________________
Footnote continued from previous page.
<PAGE> 121
______________________________________
IN WITNESS WHEREOF, each party, by its proper officer duly authorized,
has executed this Agreement as of the date and year first above written.
AMERICAN TELECASTING DEVELOPMENT INC.
By:
-----------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 122
-10-
The undersigned, on behalf of each of Subsidiary of the Subordinated
Creditor, hereby accept the terms hereof and agree to take any action requested
by the parties hereto in accordance with or in furtherance of the terms hereof.
AMERICAN TELECASTING DEVELOPMENT INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF ANCHORAGE, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BEND, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BILLINGS, INC.
By:
-----------------------------------
Name:
______________________________________
Footnote continued from previous page.
<PAGE> 123
-11-
Title:
AMERICAN TELECASTING OF BISMARK, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CENTRAL
FLORIDA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CINCINNATI, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF COLORADO
SPRINGS, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 124
-12-
AMERICAN TELECASTING OF COLUMBUS, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF DENVER, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF FORT COLLINS,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF FORT MYERS, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF GREEN BAY, INC.
______________________________________
Footnote continued from previous page.
<PAGE> 125
-13-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF HAWAII, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSON, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSONVILLE,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LANSING, INC.
By:
-----------------------------------
Name:
______________________________________
Footnote continued from previous page.
<PAGE> 126
-14-
Title:
AMERICAN TELECASTING OF LINCOLN, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LITTLE ROCK,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF LOUISVILLE, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MEDFORD, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 127
-15-
AMERICAN TELECASTING OF MICHIANA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MINNESOTA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF MONTEREY, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF NEBRASKA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF NORTH DAKOTA,
INC.
______________________________________
Footnote continued from previous page.
<PAGE> 128
-16-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF OKLAHOMA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF PORTLAND, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF RAPID CITY INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF REDDING, INC.
By:
-----------------------------------
Name:
______________________________________
Footnote continued from previous page.
<PAGE> 129
-17-
Title:
AMERICAN TELECASTING OF ROCKFORD, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SALEM/EUGENE,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SANTA BARBARA,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SANTA ROSA, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 130
-18-
AMERICAN TELECASTING OF SARASOTA, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SHERIDAN, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SIOUX VALLEY,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SOUTH DAKOTA,
INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF TOLEDO, INC.
______________________________________
Footnote continued from previous page.
<PAGE> 131
-19-
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YOUNGSTOWN, INC.
By:
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YUBA CITY, INC.
By:
-----------------------------------
Name:
Title:
FRESNO WIRELESS CABLE TELEVISION, INC.
By:
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 132
______________________________________
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND
MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER)
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR
OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES
ADMINISTRATOR.
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement"), dated as of February
26, 1997, is made and entered into by and among AMERICAN TELECASTING, INC., a
Delaware corporation (the "Company"), and the holder listed on the signature
page hereto (collectively, together with its assigns, the "Holder").
WHEREAS, as partial consideration for the commitment of Banque
Indosuez (the "Bank") to make a loan to the Company pursuant to the Credit
Agreement dated as of February 25, 1997 by and among the Company, Banque
Indosuez, New York Branch, as Agent and Collateral Agent, and the lending
institutions named therein (the "Credit Agreement"), the Company has agreed to
issue to the Bank and its affiliates, 141,667 Warrants to Purchase $6.00
principal amount of Loan ("Debt Warrants") and 141,667 Warrants to Purchase
shares of Class A Common Stock of the Company ("Equity Warrants") on the date
hereof; and
WHEREAS, the parties hereto agree that no more than an aggregate of
141,667 Debt Warrants and Equity Warrants shall ever become exercisable;
NOW, THEREFORE, in consideration of the mutual premises, agreements
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE
______________________________________
Footnote continued from previous page.
<PAGE> 133
______________________________________
Option
Upon the earlier to occur of (i) the Holder receiving the notice
referred to in Article II hereof and (ii) one year from the date hereof, the
Holder shall have the right, for a 5-day period, to exercise or put to the
Company the Debt Warrants attached hereto as Exhibit A. If the Holder elects
not to exercise or put the Debt Warrants during such period, or elects to
exercise or put such Warrants only in part, or, in the event the Holder elects
to put the Debt Warrants and the Company fails to make payment therefor within
the time specified for such payment in the Debt Warrant, the Equity Warrant
attached hereto as Exhibit B shall become fully exercisable; provided if the
Debt Warrants are exercised in part, the number of Equity Warrants shall be
reduced by the number of Debt Warrants so exercised or put to the Company and
which the Company has satisfied in accordance with its terms. The Holder shall
surrender the portion of the Equity Warrant reduced by the proviso in the
preceding sentence after the applicable portion of the Debt Warrant is
exercised or after the Debt Warrant is put to the Company and the Holder
receives the applicable amount in cash.
ARTICLE
Covenants
The Company agrees to give the Holder at least one Business Day's
notice of any prepayment in full of, and termination of the Credit Agreement.
ARTICLE
______________________________________
Footnote continued from previous page.
<PAGE> 134
______________________________________
Representations and Warranties of the Company
The Company represents and warrants to the Holders as of the date of
this Agreement as follows:
() Due Authorization. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all requisite
action.
() Binding Obligation. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
() No Violation. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated herein, by
the Company does not violate any provision of law, any order of any court
or other agency of government, any organizational document of the Company
or any provision of any material indenture, agreement or other instrument
to which the Company or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company which violation, conflict, breach or default or
lien, charge, restriction or encumbrance would have a material adverse
effect on the business, condition (financial or otherwise) of the Company
taken as a whole.
() Government Action. No action has been taken and no statute, rule
or regulation or order has been enacted, no injunction, restraining order
or order of any nature has been issued by a federal or state court of
competent jurisdiction and no action, suit or proceeding is pending against
or affecting or threatened against, the Company before any court or
arbitrator or any governmental body,
______________________________________
Footnote continued from previous page.
<PAGE> 135
______________________________________
agency or official which, if adversely determined, would in any manner draw
into question the validity of this Agreement. Other than filings required
with the Commission and under state securities laws, no action or approval
by, or filing or registration with, any court or governmental agency or
body is required for the consummation of the transactions contemplated by
this Agreement by the Company.
ARTICLE
Investment Representation
The Holder represents that it is purchasing this Option, the Debt
Warrants and the Equity Warrants for its own account, for investment, and does
not have a view to, or the purpose of, transferring, reselling, or otherwise
disposing of this Option, the Debt Warrants or the Equity Warrants.
ARTICLE
Miscellaneous
SECTION . Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be effective
upon delivery in person, faxed or telecopied, addressed as follows:
() if to the Company, 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919, Attention: President; with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention:
Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street,
______________________________________
Footnote continued from previous page.
<PAGE> 136
______________________________________
N.W., Suite 450, Washington, D.C. 20006-2296, Washington, DC 20006-2296,
Attention: Robert Jensen, Esq.;
() if to the Holder, at such address as may have been furnished to
the Company in writing by the Holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a Holder) or to the Holder
(in the case of the Company) in accordance with the provisions of this
paragraph.
SECTION . Waivers; Amendments. No failure or delay of the Holder or
the Company in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Holder and the Company
are cumulative and not exclusive of any rights or remedies which it would
otherwise have. The provisions of this Agreement may be amended, modified or
waived with (and only with) the written consent of the Company and the Holder.
No notice or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
SECTION . Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York without
regard to principles of conflicts of law.
SECTION . Survival of Agreements; Representations and Warranties,
etc. All warranties, representations and covenants made by the Company herein
or in any certificate or other instrument delivered by it or on its behalf in
connection with this Agreement shall be considered to have been relied upon by
the Holder and shall continue in full force and effect so long as this
Agreement is in effect regardless of any investigation made by the Holder. All
statements in any such certificate or other instrument shall constitute
representations and warranties hereunder.
______________________________________
Footnote continued from previous page.
<PAGE> 137
______________________________________
SECTION . Covenants to Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Agreement contained by
or on behalf of the parties hereto shall bind their successors and assigns,
whether so expressed or not. The Company shall not be required to register any
transfers if the Holder fails to furnish to the Company, after a request
therefor, an opinion of counsel reasonably satisfactory to the Company that
such transfer is exempt from the registration requirements of the Securities
Act; provided that the Company agrees not to request an opinion of counsel with
respect to transfers by an affiliate of Banque Indosuez to its employees so
long as such persons furnish documentation regarding the evidence of such
exemption reasonably satisfactory to the Company.
SECTION . Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION . Section Headings. The section headings used herein are
for convenience of reference only, are not part of this Agreement and are not
to affect the construction of or be taken into consideration in interpreting
this Agreement.
SECTION . Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION . Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way, and any other agreements or understandings among the parties
hereto are hereby terminated.
______________________________________
Footnote continued from previous page.
<PAGE> 138
______________________________________
SECTION . Submission to Jurisdiction; Venue. () Any legal action
or proceeding with respect to this Agreement may be brought in the courts of
the State of New York or of the United States for the Southern District of New
York, and, by execution and delivery of this Agreement, the Company hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The
Company further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to CT
Corporation Systems at its address at 1633 Broadway, New York, New York 10019,
such service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Holder to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
() The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
______________________________________
Footnote continued from previous page.
<PAGE> 139
______________________________________
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first set forth above.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
HOLDER:
INDOSUEZ CM II, INC.
By: /s/ INDOSUEZ CM II, INC.
-------------------------
By:
-------------------------
______________________________________
Footnote continued from previous page.
<PAGE> 140
______________________________________
Exhibit A to
Option Agreement
THIS DEBT WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND
MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER)
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR
OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES
ADMINISTRATOR. THIS DEBT WARRANT IS SUBJECT TO AN OPTION AGREEMENT, DATED AS
OF FEBRUARY 26, 1997, BY AND AMONG THE COMPANY AND THE HOLDER THEREOF.
Dated: February 26, 1997
141,667 DEBT WARRANTS
Each Debt Debt Warrant to Purchase
$6.00 Principal Amount of Loan
AMERICAN TELECASTING, INC.
EXPIRING March 2, 1998.
THIS IS TO CERTIFY THAT, for value received, INDOSUEZ CM II, INC., or
registered assigns (the "Holder") is entitled to purchase from AMERICAN
TELECASTING, INC., a Delaware corporation (the "Company"), at any time from
time to time during the Exercise Period at the Exercise Price (as hereinafter
defined) $6.00 principal amount of Loans (as
______________________________________
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<PAGE> 141
______________________________________
defined in the Credit Agreement ("Credit Agreement") dated as of February 25,
1997 by and among Banque Indosuez, New York Branch, as Agent and Collateral
Agent, the lending institutions a party thereto, and the Company) per Debt Debt
Warrant, and is entitled also to exercise the other appurtenant rights, powers
and privileges hereinafter described, subject to the terms of the Option
Agreement. This Debt Debt Warrant is exercisable or puttable during a 5-day
period (the "Exercise Period") commencing on the earlier of (i) the Holder
having received notice that payment in full of all amounts outstanding under,
and the termination of, the Credit Agreement had occurred or that the Company
has irrevocably committed to cause such event to occur within 5 Business Days,
and (ii) one year from the date of issuance of this Debt Debt Warrant. This
Debt Debt Warrant is one of one or more warrants (the "Debt Debt Warrants") of
the same form and having the same terms as this Debt Debt Warrant.
Certain terms used in this Debt Debt Warrant are defined in Article
IV.
ARTICLE
EXERCISE OF DEBT WARRANTS
.. Method of Exercise. To exercise this Debt Debt Warrant in whole
or in part, the Holder shall deliver to the Company (a) this Debt Debt Warrant
and (b) a written notice, in substantially the form of the Subscription Notice
attached hereto, of such Holder's election to exercise this Debt Debt Warrant,
which notice shall specify the number of Debt Debt Warrants to be exercised.
The Company shall, as promptly as practicable and in any event within
one Business Day thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a Note (as defined in the Credit
Agreement) in the principal amount equal to the amount specified in said
______________________________________
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<PAGE> 142
______________________________________
notice. The Note so delivered shall be specified in such notice in the
principal amount equal to the amount, and shall be issued in the name of the
Holder or such other name or names as shall be designated in such notice. In
no event shall the Company be required to deliver a Note representing the Loan
if at the time of such exercise the issuance of such Note or Loan is prohibited
by any agreement to which the Company is a party and, in such event, the put
feature in Section 3.1 shall be deemed automatically exercised by the Holder.
ARTICLE
EXCHANGE AND REPLACEMENT
OF DEBT WARRANTS
.. Ownership of Debt Debt Warrant. The Company may deem and treat
the Person in whose name this Debt Debt Warrant is registered as the holder and
owner hereof (notwithstanding any notations of ownership or writing hereon made
by any Person) for all purposes and shall not be affected by any notice to the
contrary, until presentation of this Debt Debt Warrant for registration of
transfer as provided in this Article II.
.. Division or Combination of Debt Debt Warrants. This Debt Debt
Warrant may be divided or combined with other Debt Debt Warrants upon surrender
hereof and of any Debt Debt Warrant or Debt Debt Warrants with which this Debt
Debt Warrant is to be combined at the agency selected by the Company for such
purpose (which may be its corporate headquarters), together with a written
notice specifying the names and denominations in which the new Debt Debt
Warrant or Debt Debt Warrants are to be issued, signed by the holders hereof
and thereof or their respective duly authorized agents or attorneys. Subject
to compliance with the provisions of the Option Agreement dated as of the date
of initial issuance
______________________________________
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<PAGE> 143
______________________________________
of this Debt Debt Warrant, the Company shall execute and deliver a new Debt
Debt Warrant or Debt Debt Warrants in exchange for the Debt Debt Warrant or
Debt Debt Warrants to be divided or combined in accordance with such notice.
.. Loss, Theft, Destruction or Mutilation of Debt Debt Warrants.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Debt Debt Warrant and, in the case of any such
loss, theft or destruction, upon receipt of indemnity or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of such Debt Debt Warrant, the Company will make and
deliver, in lieu of such lost, stolen, destroyed or mutilated Debt Debt
Warrant, a new Debt Debt Warrant of like tenor and representing the right to
purchase the same aggregate principal amount of Loan as provided for in such
lost, stolen, destroyed or mutilated Debt Debt Warrant.
.. Expenses of Delivery of Debt Debt Warrants. The Company shall pay
all expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Debt Debt Warrants and the Loan issuable upon exercise of the Debt Debt
Warrants hereunder.
ARTICLE
CERTAIN RIGHTS
.. Put Right. At any time during the Exchange Period, in lieu of
exercising this Debt Debt Warrant the Holder of this Debt Debt Warrant may put
(a "Put") this Debt Debt Warrant to the Company, in whole or in part, for a net
put price (the "Put Amount") of $6.00 per Debt Debt Warrant, in cash, by
delivering to the Company, at its corporate headquarters, this Debt Debt
Warrant and a written notice, substantially in the form of the Put Notice
attached hereto,
______________________________________
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<PAGE> 144
______________________________________
which notice shall specify the number of Debt Debt Warrants to be put and the
wire transfer instructions as to which account the Company shall wire the
aggregate Put Amount in same day funds. The Company shall make such transfer
within five Business Day of receipt of such Put Notice.
.. Certain Representations and Covenants. Information. () The
Company covenants and agrees that, until exercise or termination of this Debt
Debt Warrant, the Company will deliver to each Holder:
() As soon as available but not later than ninety (90) days after the
close of the fiscal year of the Company, a consolidated balance sheet of the
Company as at the end of such year and the related consolidated and
consolidating statements of income, of stockholders' equity and of cash flows
for such year, such consolidated statements to be audited by Arthur Andersen
LLP or other "Big Six" accounting firm;
() As soon as available but not later than forty-five (45) days after
the end of each quarter, a consolidated balance sheet of the Company as at the
end of, and the related consolidated statements of income, of stockholders'
equity and of cash flows for the portion of the Company's fiscal year then
elapsed, all prepared in accordance with generally accepted accounting
principles;
() As soon as available, any and all management letters provided to
the Company's board of directors or audit committee by the Company's auditors;
() As soon as available, any and all reports filed by the Company
under the Securities Act and the Exchange Act; and
() As soon as available, any and all press releases of the Company.
() Prohibition on Payment. The Company is not a party to any
agreement which would restrict the Company's
______________________________________
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<PAGE> 145
______________________________________
ability to pay the aggregate maximum Put Amount in cash. The Company agrees
that it will not, without the consent of the Holders of a majority of the Debt
Debt Warrants at the time then outstanding, enter into any agreement or amend
any existing agreement which would prohibit or otherwise limit the Company's
ability to make cash payments upon exercise of any Put or restrict the Holder's
ability to exercise this Debt Debt Warrant.
ARTICLE
DEFINITIONS
The following terms, as used in this Debt Debt Warrant, have the
following respective meanings:
"Business Day" shall mean (a) if any class of Common Stock is listed
or admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Company" shall have the meaning set forth in the first paragraph of
this Debt Debt Warrant.
"Debt Debt Warrants" shall have the meaning set forth in the first
paragraph of this Debt Debt Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
______________________________________
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<PAGE> 146
______________________________________
"Exercise Price" shall mean $.01 per $1,000 principal amount of Loan.
"Holder" shall have the meaning set forth in the first paragraph of
this Debt Debt Warrant.
"Debt Warrantholder" means a holder of a Debt Warrant.
ARTICLE
MISCELLANEOUS
.. Notices. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be effective upon delivery in
person, faxed, or mailed by certified or registered mail, return receipt
requested, postage pre-paid, addressed as follows:
() if to the Company, to 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919, Attention: President; with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention:
Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, N.W., Suite
450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.;
() if to an initial Holder of Debt Debt Warrants, to such Holder
c/o Banque Indosuez, New York Branch, at 1211 Avenue of the Americas,
7th Floor, New York, New York 10036, with a copy to Cahill Gordon &
Reindel, 80 Pine Street, New York, New York 10005, Attention: William B.
Gannett, Esq., and if to any subsequent Holder of Debt Debt Warrants, to it
at such address as may have been furnished to the Company in writing by
such Holder;
______________________________________
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<PAGE> 147
______________________________________
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Debt Debt
Warrants) or to the Holders of Debt Debt Warrants (in the case of the Company)
in accordance with the provisions of this paragraph.
.. Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Debt Debt Warrant may be amended, modified or waived with
(and only with) the written consent of the Company and the Holders of a
majority of the Debt Warrants; provided, however, that no such amendment,
modification or waiver shall, without the written consent of each Debt
Warrantholder whose interest might be adversely affected by such amendment,
modification or waiver, (a) change the principal amount of Loan subject to
issuance upon exercise of this Debt Debt Warrant, the Put Amount or provisions
for payment thereof or (b) amend, modify or waive the provisions of this
Section or Article III.
Any such amendment, modification or waiver effected pursuant to this
Section shall be binding upon the holders of all Debt Debt Warrants, upon each
future holder thereof and upon the Company. In the event of any such
amendment, modification or waiver the Company shall give prompt notice thereof
to all Debt Warrantholders and, if appropriate, notation thereof shall be made
on all Debt Debt Warrants thereafter surrendered for registration of transfer
or exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
.. Governing Law. This Debt Debt Warrant shall be construed in
accordance with and governed by the laws of the
______________________________________
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<PAGE> 148
______________________________________
State of New York without regard to principles of conflicts of law.
.. Survival of Agreements; Representations and Debt Debt Warranties
etc. All representations, warranties and covenants made by the Company herein
or in any certificate or other instrument delivered by or on behalf of it in
connection with the Debt Debt Warrants shall be considered to have been relied
upon by the Holder and shall survive the issuance and delivery of the Debt Debt
Warrants, regardless of any investigation made by the Holder, and shall
continue in full force and effect so long as any Debt Debt Warrant is
outstanding. All statements in any such certificate or other instrument shall
constitute representations and warranties hereunder.
.. Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Debt Debt Warrant contained by or
on behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
.. Severability. In case any one or more of the provisions contained
in this Debt Debt Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
.. Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Debt Debt Warrant and are
not to affect the construction of or be taken into consideration in
interpreting this Debt Debt Warrant.
.. No Rights as Stockholder. This Debt Debt Warrant shall not
entitle the Holder to any rights as a stockholder of the Company.
______________________________________
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<PAGE> 149
______________________________________
.. No Impairment. The Company shall not by any action including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Debt Debt Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company will use its commercially reasonable
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Debt Debt Warrant.
.. Submission to Jurisdiction; Venue. () Any legal action or
proceeding with respect to this Debt Debt Warrant may be brought in the courts
of the State of New York or of the United States for the Southern District of
New York, and, by execution and delivery of this Debt Debt Warrant, the Company
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The
Company further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to CT
Corporation Systems at its address at 1633 Broadway, New York, New York 10019,
such service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Holder to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
() The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Debt Debt Warrant brought
in the courts referred to in clause (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum.
______________________________________
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<PAGE> 150
-12-
IN WITNESS WHEREOF, AMERICAN TELECASTING, INC. has caused this Debt
Debt Warrant to be executed in its corporate name by one of its officers
thereunto duly authorized, and attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
______________________________________
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<PAGE> 151
-13-
SUBSCRIPTION NOTICE
(To be executed upon exercise of Debt Debt Warrant)
TO AMERICAN TELECASTING, INC.:
The undersigned hereby irrevocably elects to exercise _______________
of the Debt Debt Warrants for, and to acquire thereunder, _________________
principal amount of Loan.
Please issue the Note evidencing such Loan in the following name or
names and denominations:
Dated: _____________, 19__ _______________________________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Debt Debt Warrant or with the
name of the assignee appearing in the
attached assignment form.
______________________________________
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<PAGE> 152
-14-
PUT NOTICE
(To be executed upon put of Debt Debt Warrant)
TO AMERICAN TELECASTING, INC.:
The undersigned hereby irrevocably elects to put __________ of the
Debt Debt Warrants represented by the attached Debt Debt Warrant for payment of
an aggregate Put Amount of $________, as provided in the attached Debt Debt
Warrant.
Payment of the aggregate Put Amount should be made in same-day funds
to the following account:
Dated: _____________, 19__ _______________________________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Debt Debt Warrant or with the
name of the assignee appearing in the
attached assignment form.
______________________________________
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<PAGE> 153
-15-
ASSIGNMENT
(To be executed upon assignment of Debt Debt Warrant)
For value received, ______________________________ hereby sells,
assigns and transfers unto __________________ the attached Debt Debt Warrant,
together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint _________________ attorney to transfer said
Debt Debt Warrant on the books of American Telecasting, Inc., with full power
of substitution in the premises.
_______________________________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Debt Debt Warrant.
______________________________________
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<PAGE> 154
______________________________________
Exhibit B to
Option Agreement
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED
FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT
REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED
OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND THE
SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE BENEFITED BY AND SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF FEBRUARY 26, 1997, BY AND AMONG THE
COMPANY AND THE OTHER PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE WITH
THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THIS WARRANT IS ALSO SUBJECT TO AN OPTION AGREEMENT, DATED AS OF FEBRUARY 26,
1997, BY AND AMONG THE COMPANY AND THE HOLDER THEREOF.
Dated: February 26, 1997
141,667 WARRANTS
To Purchase One Share of Class A Common Stock
AMERICAN TELECASTING, INC.
EXPIRING FEBRUARY 26, 2007.
THIS IS TO CERTIFY THAT, for value received, INDOSUEZ CM_II, INC. or
registered assigns (the "Holder") is entitled to purchase from AMERICAN
TELECASTING, INC., a Delaware corporation (the "Company"), at any time or from
time to time
______________________________________
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<PAGE> 155
______________________________________
after the Exercise Period (as hereinafter defined) has expired and prior to
5:00 p.m., New York City time, on February 25, 2007 at the place where a
Warrant Agency (as hereinafter defined) is located, at the Exercise Price (as
hereinafter defined), the number of shares of Class A Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company shown above, all subject
to adjustment and upon the terms and conditions as hereinafter provided, and is
entitled also to exercise the other appurtenant rights, powers and privileges
hereinafter described. This Warrant is also subject to adjustment pursuant to
the Option Agreement (as hereinafter defined). This Warrant is one of one or
more warrants (the "Warrants") of the same form and having the same terms as
this Warrant.
Certain terms used in this Warrant are defined in Article V.
ARTICLE
EXERCISE OF WARRANTS
.. Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be
purchased, the denominations of the share certificate or certificates desired
and the name or names in which such certificates are to be registered, and (c)
payment of the Exercise Price with respect to such shares. Notwithstanding the
foregoing, this Warrant shall be exercisable only, to the extent and at the
time or times, that the Holder could legally take possession and title of such
shares. Payment made pursuant to clause (c) above may be made, at the option
of the Holder: (x) by cash, money order, certified or bank cashier's check or
wire transfer or (y) the delivery of a notice to the Company that the Holder is
exercising this Warrant by
______________________________________
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<PAGE> 156
______________________________________
authorizing the Company to reduce the number of shares of Common Stock subject
to this Warrant by the number of shares having an aggregate value equal to the
aggregate Exercise Price.
The Company shall, as promptly as practicable and in any event within
three Business Days thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number and type of shares of Common Stock specified
in said notice. The share certificate or certificates so delivered shall be in
such denominations as may be specified in such notice or, if such notice shall
not specify denominations, shall be in the amount of the number of shares of
Common Stock for which the Warrant is being exercised, and shall be issued in
the name of the Holder or such other name or names as shall be designated in
such notice. Such certificate or certificates shall be deemed to have been
issued, and such Holder or any other Person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares, as of the date the aforementioned notice is received by the Company.
If this Warrant shall have been exercised only in part, the Company shall, at
the time of delivery of the certificate or certificates, deliver to the Holder
a new Warrant evidencing the rights to purchase the remaining shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the
Holder. The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, issuance and delivery of share certificates
and new Warrants, except that, if share certificates or new Warrants shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all transfer taxes payable as a result of such transfer shall
be paid by the Holder at the time of delivering the aforementioned notice of
exercise or promptly upon receipt of a written request of the Company for
payment.
.. Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder,
and from all taxes, liens and charges with respect to the issue
______________________________________
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thereof (other than transfer taxes) and, if the Common Stock is then listed on
any national securities exchanges (as defined in the Exchange Act) or quoted on
NASDAQ, be duly listed or quoted thereon, as the case may be.
.. No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, and if the Company shall have elected not to
issue such fraction of a share, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such fraction of the Fair
Market Value per share of outstanding Common Stock of the Company on the
Business Day immediately prior to the date of such exercise.
.. Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION
AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS
OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS
NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR. THIS
SECURITY IS BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF FEBRUARY 25, 1997, BY AND AMONG THE COMPANY AND THE OTHER
PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution
______________________________________
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<PAGE> 158
______________________________________
pursuant to a registration statement under the Securities Act) shall also bear
such legend unless, in the opinion of counsel selected by the holder of such
certificate (who may be an employee of such holder) reasonably satisfactory to
the Company, the securities represented thereby are no longer subject to
restrictions on resale under the Securities Act.
.. Reservation; Authorization. The Company has reserved and will
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such shares has been duly and validly
authorized and, when issued and sold in accordance with the Warrants, such
shares will be duly and validly issued, fully paid and nonassessable.
ARTICLE
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
.. Warrant Agency. If the Requisite Holders shall request
appointment of an independent warrant agency with respect to the Warrants, the
Company shall promptly appoint and thereafter maintain, at its own expense, an
agency, which agency may be the Company's then existing transfer agent (the
"Warrant Agency"), for certain purposes specified herein, and shall give prompt
notice of such appointment (and appointment of any successor Warrant Agency) to
all holders of Warrants. Until an independent Warrant Agency is so appointed,
the Company shall perform the obligations of the Warrant Agency provided
herein at its address at _______________________________ or such other address
as the Company shall specify by notice to all Warrantholders.
______________________________________
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<PAGE> 159
______________________________________
.. Ownership of Warrant. The Company may deem and treat the Person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person other than the Warrant Agency) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
.. Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant
Agency, together with a written assignment of this Warrant duly executed by the
Holder or his duly authorized agent or attorney, with (unless the Holder is the
original Warrantholder) signatures guaranteed by a bank or trust company or a
broker or dealer registered with the NASD, and funds sufficient to pay any
transfer taxes payable upon such transfer. Upon surrender the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be cancelled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder in accordance with the procedures set
forth herein without having a new Warrant issued. The Warrant Agency shall not
be required to register any transfers if the Holder fails to furnish to the
Company, after a request therefor, an opinion of counsel reasonably
satisfactory to the Company that such transfer is exempt from the registration
requirements of the Securities Act; provided that the Company agrees not to
request an opinion of counsel with respect to transfers by an affiliate of
Banque Indosuez to its employees so long as such persons furnish documentation
reasonably satisfactory to the Company.
.. Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
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division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
.. Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company (the original Warrantholder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of any Warrant owned by
such holder), or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of shares of
Common Stock as provided for in such lost, stolen, destroyed or mutilated
Warrant.
.. Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and shares issuable upon exercise of the Warrants hereunder.
ARTICLE
CERTAIN RIGHTS
.. Registration Rights. The Common Stock issuable upon exercise of
this Warrant is entitled to the benefits of the Registration Rights Agreement
dated as of February 25, 1997, by and among the Company and the other parties
listed therein (the "Registration Rights Agreement"). The Company shall keep a
copy of the Registration Rights
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Agreement, and any amendments thereto, at the Warrant Agency and shall furnish
copies thereof to the Holder upon request.
.. Contest and Appraisal Rights. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to all Warrantholders, setting forth in reasonable detail the calculation of
such Fair Market Value and the method and basis of determination thereof, as
the case may be. If the Requisite Holders shall disagree with such
determination and shall, by notice to the Company given within 30 days after
the Company's notice of such determination, elect to dispute such
determination, such dispute shall be resolved in accordance with this Section
3.2. In the event that a determination of Market Price, or a determination of
Fair Market Value solely involving Market Price, is disputed, such dispute
shall be submitted, at the Company's expense, to a New York Stock Exchange
member firm selected by the Company and acceptable to the Warrantholders, whose
determination of Fair Market Value and/or Market Price, as the case may be,
shall be binding on the Company and the Warrantholders. In the event that a
determination of Fair Market Value, other than a determination solely involving
Market Price, is disputed, such dispute shall be resolved through the Appraisal
Procedure.
.. Certain Covenants. The Company covenants and agrees that, until
exercise or cancellation of this Warrant, the Company will deliver to each
Holder:
() As soon as available but not later than ninety (90) days after
the close of the fiscal year of the Company, a consolidated balance sheet of
the Company as at the end of such year and the related consolidated and
consolidating statements of income, of stockholders' equity and of cash flows
for such year, such consolidated statements to be audited by Arthur Andersen
LLP or other "Big Six" accounting firm;
() As soon as available but not later than forty-five (45) days
after the end of each quarter, a consolidated balance sheet of the Company as
at the end of, and the related consolidated statements of income, of
stockholders' equity and of cash flows for the portion of the Company's fiscal
year then
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elapsed, all prepared in accordance with generally accepted accounting
principles;
() As soon as available, any and all management letters provided to
the Company's board of directors or audit committee by the Company's auditors;
() As soon as available, any and all reports filed by the Company
under the Securities Act and the Exchange Act; and
() As soon as available, any and all press releases of the Company.
ARTICLE
ANTIDILUTION PROVISIONS
.. Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
.. Common Stock Reorganization. If the Company shall after the date
of issuance of this Warrant subdivide its outstanding shares of Common Stock
into a greater number of shares or consolidate its outstanding shares of Common
Stock into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Common Stock Reorganization,
to a price determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common
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Stock outstanding on such record date before giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be adjusted, effective at such
time, to a number determined by multiplying the number of shares of Common
Stock subject to purchase immediately before such Common Stock Reorganization
by a fraction, the numerator of which shall be the number of shares outstanding
after giving effect to such Common Stock Reorganization and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
before such Common Stock Reorganization.
.. Common Stock Distribution. () If the Company shall after the
date of issuance of this Warrant issue or otherwise sell or distribute any
shares of Common Stock, otherwise than pursuant to a Common Stock
Reorganization (any such event, including any event described in paragraphs (b)
and (c) below, being herein called a "Common Stock Distribution"), if such
Common Stock Distribution shall be for a consideration per share less than the
Fair Market Value per share of outstanding Common Stock of the Company on the
date of such Common Stock Distribution, or on the first date of the
announcement of such Common Stock Distribution (whichever is less), then,
effective upon such Common Stock Distribution, the number of shares of Common
Stock purchasable upon exercise of this Warrant shall be adjusted by
multiplying the number of shares of Common Stock subject to purchase upon
exercise of this Warrant by a fraction, the numerator of which shall be the
total number of shares of Common Stock outstanding (and issuable upon exercise
or conversion of outstanding options, warrants and convertible securities)
immediately prior to such Common Stock Distribution plus the number of shares
of Common Stock issued (or deemed to be issued pursuant to paragraphs (b) and
(c) below) in such Common Stock Distribution and the denominator of which shall
be an amount equal to the sum of (A) the number of shares of Common Stock
outstanding (and issuable upon exercise or conversion of outstanding options,
warrants and convertible securities) immediately prior to such Common Stock
Distribution, plus (B) the number of shares of Common Stock which the aggregate
consideration, if any, received by the Company (determined as provided below)
for such Common Stock
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Distribution would buy at the Fair Market Value thereof, as of the date
immediately prior to such Common Stock Distribution or as of the date
immediately prior to the date of announcement of such Common Stock Distribution
(whichever is less). In the event of any such adjustment, the Exercise Price
for each Warrant shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such Common Stock Distribution by the
fraction used for purposes of the aforementioned adjustment.
The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price or
to reduce the number of shares of Common Stock subject to purchase upon
exercise of this Warrant.
() If the Company shall after the date of issuance of this Warrant
issue, sell, distribute or otherwise grant in any manner (whether directly or
by assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock including
the Company's Class B Common Stock (such rights, warrants or options being
herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether or not such
Options or the rights to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the aggregate amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus, in the case
of Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Fair Market Value per share of outstanding Common Stock of the Company on the
date of granting such Options or on the date of announcement thereof (whichever
is less), then for purposes of paragraph (a) above, the total maximum number of
shares of Common Stock issuable upon the
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exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued as of the date of granting of such
Options and thereafter shall be deemed to be outstanding and the Company shall
be deemed to have received as consideration such price per share, determined as
provided above, therefor. Except as otherwise provided in paragraph (d) below,
no additional adjustment of the number of shares of Common Stock purchasable
upon the exercise of this Warrant or of the Exercise Price shall be made upon
the actual exercise of such Options or upon conversion or exchange of such
Convertible Securities.
() If the Company shall after the date of issuance of this Warrant
issue, sell or otherwise distribute or grant (whether directly or by assumption
in a merger or otherwise) any Convertible Securities, whether or not the rights
to exchange or convert thereunder are immediately exercisable, and the price
per share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the aggregate amount received or receivable by the
Company as consideration for the issue, sale or distribution of such
Convertible Securities, plus, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Fair Market Value per share of outstanding Common Stock of the
Company on the date of such issue, sale or distribution or on the date of
announcement thereof (whichever is less), then, for purposes of paragraph (a)
above, the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued as of the date of the issue, sale or distribution of such
Convertible Securities and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration such price per share,
determined as provided above, therefor. Except as otherwise provided in
paragraph (d) below, no additional adjustment of the number of shares of Common
Stock purchasable upon exercise of this Warrant or of the Exercise Price shall
be made upon the actual conversion or exchange of such Convertible Securities.
() If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional
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consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (b) or (c) above, or the rate
at which any Convertible Securities referred to in paragraph (b) or (c) above
are convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against, and
having the effect of protecting against, dilution upon an event which results
in a related adjustment pursuant to this Article IV), the number of shares of
Common Stock purchasable upon exercise of this Warrant and the Exercise Price
then in effect shall forthwith be readjusted (effective only with respect to
any exercise of this Warrant after such readjustment) to the number of shares
of Common Stock purchasable upon exercise of this Warrant and the Exercise
Price which would then be in effect had the adjustment made upon the issue,
sale, distribution or grant of such Options or Convertible Securities been made
based upon such changed purchase price, additional consideration or conversion
rate, as the case may be; provided, however, that such readjustment shall give
effect to such change only with respect to such Options and Convertible
Securities as then remain outstanding. If, at any time after any adjustment of
the number of shares of Common Stock purchasable upon exercise of each Warrant
or the Exercise Price shall have been made pursuant to this Article IV on the
basis of the issuance of any Option or Convertible Securities or after any new
adjustments of the number of shares of Common Stock purchasable upon exercise
of each Warrant or the Exercise Price shall have been made pursuant to this
paragraph, the right of conversion, exercise or exchange in such Option or
Convertible Securities shall expire or terminate, and the right of conversion,
exercise or exchange in respect of a portion of such Option or Convertible
Securities shall not have been exercised, such previous adjustment shall be
rescinded and annulled. Thereupon, a recomputation shall be made of the effect
of such Option or Convertible Securities on the basis of treating the number of
shares of Common Stock, if any, theretofore actually issued or issuable
pursuant to the previous exercise of such right of conversion, exercise or
exchange as having been issued on the date or dates of such conversion,
exercise or exchange and for the consideration actually received and receivable
therefor, and treating any such Option or Convertible Securities which then
remain outstanding as having been granted or issued immediately after the time
of any such issuance for the consideration per share for which shares of Common
Stock are issuable under such Option or Convertible Securities; and, if and to
the extent called for by the foregoing provisions of
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this Section on the basis aforesaid, a new adjustment of the number of shares
of Common Stock purchasable upon exercise of each Warrant and the Exercise
Price shall be made, which new adjustment shall supersede (effective only with
respect to any exercise of this Warrant after such readjustment) the previous
adjustment so rescinded and annulled.
() If the Company shall after the date of issuance of this Warrant
pay a dividend or make any other distribution upon any capital stock of the
Company payable in Common Stock, Options or Convertible Securities, then, for
purposes of paragraph (a) above, such Common Stock, Options or Convertible
Securities, as the case may be, shall be deemed to have been issued or sold
without consideration.
() If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor net
of any underwriting commissions or concessions paid or allowed by the Company
in connection therewith. If any shares of Common Stock, Options or Convertible
Securities shall be issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the Fair Market Value of such consideration, after
deduction of any expenses incurred and any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market
Value of such portion of the assets and business of the nonsurviving
corporation as shall be attributable to such Common Stock, Options or
Convertible Securities, as the case may be. If any Options shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued for consideration to be determined pursuant to the
Appraisal Procedure.
() If the Company shall take a record of the holders of the Common
Stock for the purpose of entitling them to
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receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue, sale, distribution or grant of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
() For purposes of determining whether any adjustment is required
pursuant to this Article IV, any security of the Company having rights
substantially equivalent to the Common Stock as to dividends or upon
liquidation, dissolution or winding up of the Company shall be treated as if
such security were Common Stock.
.. Dividends. If the Company shall after the date of issuance of
this Warrant issue or distribute to all or substantially all holders of shares
of Common Stock evidences of indebtedness, any other securities of the Company
or any property, assets or cash, and if such issuance or distribution does not
constitute a Common Stock Reorganization or a Common Stock Distribution (any
such nonexcluded event being herein called a "Dividend"), (i) the number of
shares of Common Stock subject to purchase upon exercise of this Warrant shall
be increased (but not decreased), effective immediately after the record date
at which the holders of shares of Common Stock are determined for purposes of
such Dividend, to a number determined by multiplying the number of shares of
Common Stock subject to purchase immediately before such Dividend by a
fraction, the numerator of which shall be the Fair Market Value per share of
outstanding Common Stock on such record date and the denominator of which shall
be the Fair Market Value per share of outstanding Common Stock of the Company
on such record date less the then Fair Market Value of the evidences of
indebtedness, securities, cash, or property or other assets issued or
distributed in such Dividend with respect to one share of Common Stock, and
(ii) the Exercise Price shall be decreased (but not increased) to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the number of shares of Common Stock subject to
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purchase upon exercise of this Warrant immediately before such Dividend and the
denominator of which shall be the number of shares of Common Stock subject to
purchase upon exercise of this Warrant immediately after such Dividend. If
after the date of issuance of this Warrant the Company repurchases shares of
Common Stock for a per share consideration which exceeds the Fair Market Value
(as calculated immediately prior to such repurchase), then the number of shares
of Common Stock purchasable upon exercise of this Warrant and the Exercise
Price shall be adjusted in accordance with the foregoing provisions, as if, in
lieu of such repurchases, the Company had (I) distributed a Dividend having a
Fair Market Value equal to the Fair Market Value of all property and cash
expended in the repurchases, and (II) effected a reverse split of the Common
Stock in the proportion required to reduce the number of shares of Common Stock
outstanding from (A) the number of such shares outstanding immediately before
such first repurchase to (B) the number of such shares outstanding immediately
following all the repurchases.
.. Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value) in,
outstanding shares of Common Stock, or any sale or conveyance of the property
of the Company as an entirety or substantially as an entirety (any such event
being called a "Capital Reorganization"), then, effective upon the effective
date of such Capital Reorganization, the Holder shall have the right to
purchase, upon exercise of this Warrant, the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised immediately prior to such Capital
Reorganization, assuming such holder (i) is not a person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or conveyance was made, as the case may be ("constituent
person"), or an Affiliate of a constituent person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash
or other property receivable upon such Capital Reorganization (provided that if
the kind or amount of securities, cash or other property receivable upon such
Capital Reorganization is not the same for each share of Common Stock held
immediately prior to such consolidation, merger, sale or conveyance by other
than a
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constituent person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purposes of this Section the kind and amount of shares of stock and other
securities or other property (including cash) receivable upon such Capital
Reorganization shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). As a condition to effecting
any Capital Reorganization, the Company or the successor or surviving
corporation, as the case may be, shall execute and deliver to each
Warrantholder and to the Warrant Agency an agreement as to the Warrantholder's
rights in accordance with this Section 4.5, providing for subsequent
adjustments as nearly equivalent as may be practicable to the adjustments
provided for in this Article IV. The provisions of this Section 4.5 shall
similarly apply to successive Capital Reorganizations.
.. Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article
IV are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company, fairly protect
the purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then such Board shall make such adjustments in
the application of such provisions, in accordance with such essential intent
and principles, as shall be reasonably necessary, in the good faith opinion of
such Board, to protect such purchase rights as aforesaid, but in no event shall
any such adjustment have the effect of increasing the Exercise Price or
decreasing the number of shares of Common Stock subject to purchase upon
exercise of this Warrant, or otherwise adversely affect the Warrantholders.
.. Adjustment Rules. () Any adjustments pursuant to this
Article IV shall be made successively whenever an event referred to herein
shall occur.
() If the Company shall set a record date to determine the holders
of shares of Common Stock for purposes of a Common Stock Reorganization, Common
Stock Distribution, Dividend or Capital Reorganization, and shall legally
abandon such action prior to effecting such Action, then no adjustment
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shall be made pursuant to this Article IV in respect of such action.
() No adjustment in the amount of shares purchasable upon exercise
of this Warrant or in the Exercise Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall serve to adjust such amount or price
by one percent or more.
() No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which par value shall initially be $0.01 per share of Common
Stock.
() No adjustment shall be made pursuant to this Article IV in
respect of (i) the issuance (or deemed issuance) or repurchase of shares of
Common Stock in connection with the exercise of the Warrants or (ii) the
issuance of shares of Common Stock in an underwritten public offering managed
by a nationally recognized investment banking firm.
.. Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof.
.. Notice of Adjustment. Not less than 30 nor more than 40 days
prior to the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Article IV, the Company shall give notice to each Warrantholder of such event,
describing such event in reasonable detail and specifying the record date or
effective date, as the case may be, and, if determinable, the required
adjustment and the
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computation thereof. If the required adjustment is not determinable at the
time of such notice, the Company shall give notice to each Warrantholder of
such adjustment and computation promptly after such adjustment becomes
determinable. If no Holder objects to any such notice within 30 days of
receipt of the Company's notice, the adjustment will be deemed accepted by the
Holders.
ARTICLE
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Appraisal Procedure" means a procedure whereby two independent
appraisers, one chosen by the Company and one by the Requisite Holders, shall
mutually agree upon the determinations then the subject of appraisal. Each
party shall deliver a notice to the other appointing its appraiser within 15
days after the Appraisal Procedure is invoked. If within 30 days after
appointment of the two appraisers they are unable to agree upon the amount in
question, a third independent appraiser shall be chosen within 10 days
thereafter by the mutual consent of such first two appraisers or, if such first
two appraisers fail to agree upon the appointment of a third appraiser, such
appointment shall be made by the American Arbitration Association, or any
organization successor thereto, from a panel of arbitrators having experience
in the appraisal of the subject matter to be appraised. The decision of the
third appraiser so appointed and chosen shall be given within 30 days after the
selection of such third appraiser. If three appraisers shall be appointed and
the determination of one appraiser is disparate from the middle determination
by more than twice the amount by which the other determination is disparate
from the middle determination, then the determination of such appraiser shall
be excluded, the remaining two determinations shall be averaged and such
average shall be binding and conclusive on the Company and the Warrantholders;
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otherwise the average of all three determinations shall be binding and
conclusive on the Company and the Warrantholders. The costs of conducting any
Appraisal Procedure shall be borne by the Warrantholders requesting such
Appraisal Procedure, except (a) the fees and expenses of the appraiser
appointed by the Company and any costs incurred by the Company shall be borne
by the Company, (b) the fees and expenses of the appraiser appointed by the
Requisite Holders shall be borne by the Requisite Holders, and (c) the fees and
expenses of any third appraiser shall be shared equally by the Company and such
Requisite Holders; provided if such Appraisal Procedure shall result in a
determination that is disparate by 5% or more to the benefit of the holder from
the Company's initial determination, all costs of conducting such Appraisal
Procedure shall be borne by the Company.
"Business Day" shall mean (a) if any class of Common Stock is listed
or admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.5.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported
sale occurs on such day, the closing bid price regular way on such day, in each
case as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which such class of security is listed or admitted to trading, or (b) if
such security is not listed or admitted to trading on any national securities
exchange, the last quoted sales price, or, if not so quoted, the closing bid
price in the over-the-counter market on such day as reported by NASDAQ or any
comparable system then in use or, if not so reported, as reported by any New
York Stock Exchange member firm reasonably selected by the Company for such
purpose.
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"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant subject to adjustment pursuant to Article IV.
"Common Stock Distribution" shall have the meaning set forth in
Section 4.3(a).
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Convertible Securities" shall have the meaning set forth in Section
4.3(b).
"Dividend" shall have the meaning set forth in Section 4.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Exercise Period" means the Exercise Period as defined in the Option
Agreement.
"Exercise Price" shall mean $3.281.
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board of Directors of
the Company, provided, however, that the Fair Market Value of any security for
which a Closing Price is available shall be the Market Price of such security.
The Fair Market Value of the Company shall be the Fair Market Value of the
Company and its subsidiaries as a going concern. Notwithstanding the
foregoing, if, at any date
______________________________________
Footnote continued from previous page.
<PAGE> 175
______________________________________
of determination of the Fair Market Value of the Company, the Common Stock of
any class shall then be publicly traded, the Fair Market Value of the Company
on such date shall be the Market Price on such date multiplied by the number of
shares of Common Stock on a fully diluted basis, giving effect to any
consideration to be paid to the Company in connection with the exercise or
conversion of any security. Notwithstanding the foregoing, the Fair Market
Value of shares of Common Stock to be issued in connection with the grant of
employee stock options will be deemed to be, if lower, the Closing Price on the
date of such sale or grant.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant.
"Market Price" with respect to any security on any day means the
average of the daily Closing Prices of a share or unit of such security for the
10 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of (A) a dividend or distribution of Common
Stock, or (B) any subdivision, combination or reclassification of Common Stock
and prior to the expiration of 20 Business Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Option Agreement" means the Option Agreement between the Company and
each of the initial Warrantholders dated the date of original issuance of this
Warrant.
______________________________________
Footnote continued from previous page.
<PAGE> 176
______________________________________
"Options" shall have the meaning set forth in Section 4.3(b).
"Registrable Security" shall have the meaning set forth in the
Registration Rights Agreement dated as of February 26, 1997 among the Company
and the Holders of the Warrants.
"Registration Rights Agreement" shall have the meaning set forth in
Section 3.1.
"Requisite Holders" means the Holders of Warrants to purchase a
majority of the shares of Common Stock issuable upon exercise of the Warrants
(excluding Warrants held by the Company or any of its subsidiaries) at the time
outstanding.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
"Warrantholder" means a holder of a Warrant.
"Warrants" shall have the meaning set forth in the first paragraph of
this Warrant.
ARTICLE
MISCELLANEOUS
______________________________________
Footnote continued from previous page.
<PAGE> 177
______________________________________
.. Notices. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be effective upon delivery in
person, faxed, or mailed by certified or registered mail, return receipt
requested, postage pre-paid, addressed as follows:
() if to the Company, to 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919, Attention: President; with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention:
Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street N.W., Suite
450, Washington, DC 20006-2296, Attention: Robert Jensen, Esq.;
() if to an initial Holder of Warrants, to such Holder c/o Banque
Indosuez, New York Branch, at 1211 Avenue of the Americas, 7th Floor, New
York, New York 10036, with a copy to Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, Attention: William B. Gannett, Esq., and
if to any subsequent Holder of Warrants, to it at such address as may have
been furnished to the Company in writing by such Holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Warrants) or to
the Holders of Warrants (in the case of the Company) in accordance with the
provisions of this paragraph.
.. Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Requisite Holders; provided,
however, that no such amendment, modification or waiver shall, without the
written consent of each Warrantholder whose interest might be adversely
affected by
______________________________________
Footnote continued from previous page.
<PAGE> 178
______________________________________
such amendment, modification or waiver, (a) change the number of shares of
Common Stock subject to purchase upon exercise of this Warrant, the Exercise
Price or provisions for payment thereof or (b) amend, modify or waive the
provisions of this Section or Articles III or IV. The provisions of the
Registration Rights Agreement may be amended, modified or waived only in
accordance with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Registration Rights Agreement shall
be binding upon the holders of all Warrants and Warrant Shares, upon each
future holder thereof and upon the Company. In the event of any such
amendment, modification or waiver the Company shall give prompt notice thereof
to all Warrantholders and, if appropriate, notation thereof shall be made on
all Warrants thereafter surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
.. Governing Law. This Warrant shall be construed in accordance with
and governed by the laws of the State of New York without regard to principles
of conflicts of law.
.. Survival of Agreements; Representations and Warranties etc. All
representations, warranties and covenants made by the Company herein or in any
certificate or other instrument delivered by or on behalf of it in connection
with the Warrants shall be considered to have been relied upon by the Holder
and shall survive the issuance and delivery of the Warrants, regardless of any
investigation made by the Holder, and shall continue in full force and effect
so long as any Warrant is outstanding. All statements in any such certificate
or other instrument shall constitute representations and warranties hereunder.
.. Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this
______________________________________
Footnote continued from previous page.
<PAGE> 179
______________________________________
Warrant contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
.. Severability. In case any one or more of the provisions contained
in the Registration Rights Agreement or this Warrant shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of
the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
.. Section Headings. The sections headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
.. No Rights as Stockholder. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
.. No Impairment. The Company shall not by any action including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not, directly or indirectly, increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its commercially reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public
______________________________________
Footnote continued from previous page.
<PAGE> 180
______________________________________
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
.. Submission to Jurisdiction; Venue. () Any legal action or
proceeding with respect to this Warrant may be brought in the courts of the
State of New York or of the United States for the Southern District of New
York, and, by execution and delivery of this Warrant, the Company irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The
Company further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to CT
Corporation Systems at its address at 1633 Broadway, New York, New York 10019,
such service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Holder to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
() The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or or in connection with this Warrant brought in the
courts referred to in clause (a) above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
______________________________________
Footnote continued from previous page.
<PAGE> 181
-28-
IN WITNESS WHEREOF, AMERICAN TELECASTING, INC. has caused this Warrant
to be executed in its corporate name by one of its officers thereunto duly
authorized, and attested by its Secretary or an Assistant Secretary, all as of
the day and year first above written.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
Attest:
- -------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 182
-29-
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO AMERICAN TELECASTING, INC.:
The undersigned hereby irrevocably elects to exercise the right to
purchase represented by the attached Warrant for, and to purchase thereunder,
_________________ shares of voting Class A Common Stock, as provided for
therein, and tenders herewith payment of the Exercise Price in full in
accordance with the terms of the attached Warrant.
Please issue a certificate or certificates for such shares of Class A
Common Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: _____________, 19__ _______________________________________________
Note: The above signature should correspond
exactly with the name on the face of the
attached Debt Debt Warrant or with the
name of the assignee appearing in the
assignment form.
______________________________________
Footnote continued from previous page.
<PAGE> 183
-30-
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________ hereby sells,
assigns and transfers unto __________________ the attached Warrant, together
with all rights, title and interest therein, and does hereby irrevocably
constitute and appoint _________________ attorney to transfer said Warrant on
the books of American Telecasting, Inc., with full power of substitution in the
premises.
__________________________________________
Note: The above signature should correspond
exactly with the name on the face of
the attached Warrant.
______________________________________
Footnote continued from previous page.
<PAGE> 184
______________________________________
THIS BOND APPRECIATION RIGHTS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY
BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID
ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY
STATE'S SECURITIES ADMINISTRATOR.
BOND APPRECIATION RIGHTS CERTIFICATE
RELATING TO THE
SENIOR DISCOUNT NOTES DUE 2004
OF
AMERICAN TELECASTING, INC.
______________________________________
Footnote continued from previous page.
<PAGE> 185
-2-
No. 1 4,500 Bond Appreciation Rights
This certifies that FOR VALUE RECEIVED INDOSUEZ CM II, INC. or,
subject to the terms hereof, permitted transferees (the "Registered Holder"),
is the registered owner of the number of Bond Appreciation Rights ("BARs")
specified above. Each BAR represents the equivalent of $1,000 face amount (the
"Equivalent Amount") of Senior Discount Notes due 2004 (the "Notes") of
American Telecasting, Inc., a Delaware corporation (the "Company"), and has an
initial value of $290 (the "BAR Price"). The Equivalent Amount and the BAR
Price are each subject to adjustment as provided in Section 5 hereof. Upon the
presentation and surrender of this BAR Certificate, with the Exercise Form
attached hereto or a comparable form reasonably acceptable to the Company, duly
completed and executed, at the office of the Company during normal business
hours on any business day the Registered Holder shall be entitled to the
receipt of an amount calculated in the manner set forth in Section 2 hereof.
This BARs Certificate shall be governed by and construed in accordance
with the internal laws of the State of New York (other than its rules of
conflicts of laws to the extent the application of the laws of another
jurisdiction would be required thereby).
Procedures for Exercise of BARs.
During the Exercise Period, a Registered Holder may exercise BARs by
surrendering a BARs Certificate or Certificates together with an Exercise Form
in the form attached hereto. A BAR shall be deemed to be exercised at the time
immediately prior to the close of business on the business day (the "Exercise
Date") on which the duly executed and completed Exercise Form is received by
the Company at its office at 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919.
<PAGE> 186
-3-
The term "Exercise Period" shall mean the period beginning at the
earlier of (a) any event of default under the existing terms of the Notes or
(b) 9:00 a.m., New York City time, on June 15, 1999 and ending at 5:00 p.m.,
New York City time, on December 31, 2004.
This BARs Certificate, upon the surrender hereof (in the manner
described above) by the Registered Holder, may be exchanged without charge for
one or more replacement BARs Certificates of like tenor and date entitling the
Registered Holder to the same aggregate number of BARs as is evidenced by this
surrendered BARs Certificate.
The BARs represented hereby shall cease to be exercisable upon the
termination of the Exercise Period or earlier upon proper exercise.
Payment of BAR Value.
As soon as practicable after each exercise of a BAR, the Company will
pay to the Registered Holder in cash an amount (the "BAR Value") equal to the
excess of (A) the then current Market Price (as defined below) of the
Equivalent Amount as to which the BAR has been exercised over (B) the BAR Price
of the Equivalent Amount.
"Market Price" of any security on any day means (i) the average bid
prices of three dealers who make a market in the security, which such dealers
shall be selected by a majority in interest of the Registered Holders, or (ii)
if such quotes are not so available or reported as determined by a majority in
interest of the Registered Holders and noticed to the Company, the fair
saleable value (the "Appraised Value") of such security (determined without
giving effect to any discount for (i) a minority interest or (ii) any lack of
liquidity) on such date, as determined in good faith by the Company's Board of
Directors, or if a majority in interest of the Registered Holders elect to
dispute such Appraised Value, the fair market value as determined in accordance
with the terms of Section 3(b).
Determination and Payment of BAR Value.
<PAGE> 187
-4-
Determination and Payment. Except as set forth in Section 3(b), the
BAR Value with respect to any exercise of BARs hereunder shall be determined
within 5 days of the Exercise Date and, subject to Section 4, shall be payable
in the manner provided below within one business day following the date of such
determination. Payment of the BAR Value shall be made by wire transfer of
immediately available (same day) funds to an account in a bank located in the
United States designated by the Holder for such purpose.
Appraisal. If in determining the BAR Value it is necessary to
determine the Appraised Value of the Notes or other securities and a majority
in interest of the Registered Holders elects to dispute the determination made
by the Company, the Appraised Value shall be determined by two independent
appraisers, one chosen by the Company and one by a majority in interest of the
Registered Holders. If within 20 days after appointment of the two appraisers
they are unable to agree upon the amount in question, a third independent
appraiser shall be chosen within 10 days thereafter by the mutual consent of
such first two appraisers or, if such first two appraisers fail to agree upon
the appointment of a third appraiser, such appointment shall be made by the
American Arbitration Association, or any organization successor thereto, from a
panel of arbitrators having experience in the appraisal of the subject matter
to be appraised. The decision of the third appraiser so appointed and chosen
shall be given within 30 days after the selection of such third appraiser. If
three appraisers shall be appointed and the determination of one appraiser is
disparate from the middle determination by more than twice the amount by which
the other determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive on the Company and the Registered Holders; otherwise the average of
all three determinations shall be binding and conclusive on the Company and the
Registered Holders. The costs of conducting any appraisal shall be borne as
follows: (a) the fees and expenses of the appraiser appointed by the Company
and any costs incurred by the Company shall be borne by the Company, (b) the
fees and expenses of the appraiser appointed by the Registered Holders and any
costs incurred by the Registered Holders shall be borne by the Registered
Holders and (c) the fees and expenses of any third appraiser shall be shared
equally by the Company and the Registered Holders electing such appraisal;
provided if such Appraised Value shall result in a determination that is
disparate by 5% or more from the Company's initial
<PAGE> 188
-5-
determination, all costs of conducting such appraisal procedure shall be borne
by the Company.
Non-Cash Payment Upon Exercise.
Right to Pay in Other Securities. Notwithstanding anything to the
contrary set forth in this Agreement, if on the date of exercise of any of the
BARs hereunder, the Company shall be prohibited from paying cash by the terms
of any loan or other agreement by which it is bound, the Registered Holder may
elect to receive, in lieu of all or a part of the BAR Value otherwise payable
in cash in respect of such exercise, (i) if permitted by the terms of the
Company's then existing agreements, Notes having an aggregate current Market
Value on the Exercise Date with respect to such exercise equal to such BAR
Value or (ii) if permitted by the terms of the Company's then existing
agreements, debt securities substantially similar to the Notes, in a form
mutually acceptable to the Company and the Registered Holder, having an
aggregate current Market Value on the Exercise Date with respect to such
exercise equal to such BAR Value.
Prohibition on Payment. The Company is not a party to any agreement
which would restrict the Company's ability to pay the BAR Value in cash. The
Company agrees that it will not, without the consent of the Registered Holders
of a majority of the BARs at the time then outstanding, enter into any
agreement or amend any existing agreement which would prohibit or otherwise
limit the Company's ability to make cash payments or payments in the form of
Notes or other securities upon exercise of the BARs.
Adjustments.
Adjustment or Substitution of Notes and Price. In the event that the
Notes are changed into or exchanged for a different kind or number of debt
securities, or equity or other securities (including warrants or rights to
acquire stock or securities) or assets (including cash) of the Company or stock
or securities or assets (including cash) of another corporation, then an
appropriate and equitable adjustment shall be made in the number and kind of
securities or other assets the Market Value of which determines the BAR Value
payable in respect of exercises of any BARs hereunder, and/or in the kind of
<PAGE> 189
-6-
securities deliverable under Section 4, so as to prevent the dilution of rights
represented by the BARs granted hereunder. In the event of a transaction
(including a tender or exchange offer) in which the Notes are changed into or
exchanged for shares of stock or securities of another corporation, that other
corporation shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Agreement to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined in good faith by resolution of the Board of Directors of the
Company) in order to provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 5(a).
In the event that the Company shall make any direct or indirect payment or
distribution to more than 50% of the holders of Notes, other than payments of
interest, the BAR Price shall be adjusted downward to reflect fully any such
payment or distribution. The foregoing provisions of this Section 5(a) shall
similarly apply to successive reorganizations, tender offers, exchange offers
and other transactions.
Notice of Adjustments. Whenever an adjustment is made pursuant to
Section 5(a), the Company shall promptly prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated, specifying the number and kind of securities or
other assets the current Market Value of which determines the BAR Value payable
in respect of exercises of BARs hereunder and/or the kind of securities
deliverable under Section 4, as the case may be, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to each Holder. The Company shall keep at its
office copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder.
Notice of Other Corporate Actions. The Company shall promptly give
notice to each Holder of any other corporate action for which notice is given
to holders of Notes of the Company.
Assignability.
<PAGE> 190
-7-
This BARs Certificate shall be transferable, in whole or in part, upon
surrender of this BARs Certificate to the Company, together with a written
assignment of the BARs certificate, on the Form of Assignment attached hereto
or in other form reasonably satisfactory to the Company, duly executed by the
Registered Holder hereof or his duly appointed legal representative. If less
than all of the BARs Certificate is being transferred, a new BARs Certificate
or BARs Certificates shall be issued to the Registered Holder for the portion
of the BARs Certificate not being transferred.
Expenses.
The Company shall promptly reimburse the Registered Holders for all
reasonable fees (including reasonable attorney fees and expenses) incurred by
such Registered Holder in connection with the enforcement of its rights
hereunder.
Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the remaining
provisions hereof. If a court of competent jurisdiction should determine that
a provision hereof would be valid or enforceable if a period of time were
extended or shortened or a particular percentage were increased or decreased,
then such court may make such change as shall be necessary to render the
provision in question effective and valid under applicable law.
Governing Law.
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York without regard to principles of conflicts of
law.
Headings.
<PAGE> 191
-8-
The headings of the paragraphs in this BARs Certificate are for
convenience of reference only and shall not define, limit or affect any of the
provisions hereof.
Replacement of BARs.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any BARs Certificate and
in the case of any such loss, theft or destruction of any BARs
Certificate, upon delivery of indemnity reasonably satisfactory to the
Company, or
in the case of any such mutilation, upon surrender of such BARs
Certificate for cancellation at the principal office of the Company,
the Company at its expense will execute and deliver, in lieu thereof, a new
BARs Certificate of like tenor.
No Rights or Liabilities as Stockholder.
Nothing contained in this BARs Certificate shall be construed as
conferring upon the Registered Holder hereof any rights as a stockholder of the
Company, or as imposing any liabilities on such Holder as a stockholder of the
Company or, to purchase any securities of the Company, whether such liabilities
are asserted by the Company or by creditors or stockholders of the Company or
by any other person.
IN WITNESS WHEREOF, the Company has caused this BARs Certificate to be
duly exercised, manually or in facsimile, by two of its officers thereunto duly
authorized.
Dated: February 26, 1997 AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
<PAGE> 192
-9-
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE> 193
-10-
EXERCISE FORM
To be executed by the Registered Holder
to exercise BARs
The undersigned Registered Holder hereby irrevocably elects to
exercise _____ BARs represented by this BARs Certificate and requests that cash
in an amount equal to the aggregate BAR Value be paid to [payment instructions]
and if such number of BARs shall not equal the number of BARs represented by
this BARs Certificate, irrevocably requests that a new BARs Certificate for the
balance of such BARs be registered in the name of, and delivered to, the
Registered Holder at the address stated below.
Dated: __________, ____
-----------------------------------
-----------------------------------
-----------------------------------
Address
-----------------------------------
Social Security or Other
Identifying Number
-----------------------------------
Signature Guaranteed
<PAGE> 194
-11-
FORM OF ASSIGNMENT
To be executed by the Registered Holder
to transfer BARs
FOR VALUE RECEIVED, ____________________ hereby sells, assigns, and
transfers unto
Name:
------------------------------------------------------
Address:
---------------------------------------------------
Zip Code:
--------------------------------------------------
------------------------------------------------------------
Social Security or Other Identifying Number
[please print or type]
__________ of the BARs represented by this BARs Certificate, and hereby
irrevocably constitutes and appoints ___________
____________________ Attorney to transfer this BARs Certificate on the books of
the Company, with full power of substitution.
Dated: __________, ___
-----------------------------------
Signature Guaranteed
THE SIGNATURE TO THE EXERCISE FORM OR FORM OF ASSIGNMENT MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS BARs
<PAGE> 195
-12-
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE, UNLESS THE REGISTERED HOLDER WOULD ITSELF BE ABLE TO
PROVIDE A SIGNATURE GUARANTEE IN WHICH CASE A SIGNATURE GUARANTEE SHALL NOT BE
NECESSARY.
<PAGE> 196
EXHIBIT C-2 TO THE
CREDIT AGREEMENT
SECURITIES PLEDGE AGREEMENT
This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of
February 26, 1997, made by AMERICAN TELECASTING, INC., a Delaware corporation
having an office at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO
80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an
office at 1211 Avenue of the Americas, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, the "Collateral
Agent") for the lending institutions (the "Banks") under the Credit Agreement
(as hereinafter defined).
R E C I T A L S :
Pursuant to a certain credit agreement, dated as of the date hereof
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"; unless otherwise defined herein, capitalized
terms used herein have the meanings assigned to them in the Credit Agreement),
among the Pledgor, the Banks and Banque Indosuez, New York Branch, as Agent for
the Banks, the Banks have agreed to make to or for the account of the Pledgor
certain Loans up to an aggregate principal amount of $17,000,000.
The Pledgor is the legal and beneficial owner of the Pledged
Collateral (as hereinafter defined) pledged by it.
It is a condition precedent to the obligations of the Banks to make
the Loans under the Credit Agreement that the Pledgor execute and deliver the
applicable Credit Documents, including this Agreement.
This Agreement is given by the Pledgor in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
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A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows:
Pledge. As collateral security for the payment and performance when
due of all the Secured Obligations, the Pledgor hereby pledges, assigns,
transfers and grants to Collateral Agent for the benefit of the Secured
Parties, a continuing first priority security interest in and to all of the
right, title and interest of the Pledgor in and to the following property,
whether now existing or hereafter acquired, (collectively, the "Pledged
Collateral"):
the issued and outstanding shares of capital stock described on
Schedule I hereto ("the Pledged Shares"), including the certificates
representing the Pledged Shares and any interest of the Pledgor in the
entries on the books of any financial intermediary pertaining to the
Pledged Shares;
all additional shares of capital stock of any issuer of the Pledged
Shares from time to time acquired by the Pledgor in any manner (which
securities shall be deemed to be part of the Pledged Shares) and the
certificates representing such additional securities and any interest of
the Pledgor in the entries on the books of any financial intermediary
pertaining to such additional securities;
all intercompany notes described on Schedule II hereto (the
"Intercompany Notes") now owned or held by Pledgor and from time to time
acquired by Pledgor in any way, and all certificates or instruments
evidencing such Intercompany Notes and all proceeds thereof, all accessions
thereto and substitutions therefor;
all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed to the Pledgor in respect of or in exchange for any or all of
the Pledged Shares (collectively, "Distributions"); and
<PAGE> 198
all Proceeds (as defined under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "UCC") or under other relevant
law) of any of the foregoing, and in any event, including, without
limitation, any and all (i) proceeds of any insurance (except payments
made to a Person which is not a party to this Agreement), indemnity,
warranty or guarantee payable to Collateral Agent or to the Pledgor from
time to time with respect to any of its respective Pledged Collateral, (ii)
payments (in any form whatsoever) made or due and payable to the Pledgor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of its respective
Pledged Collateral by any Governmental Authority (or any person acting
under color of a Governmental Authority), (iii) instruments representing
obligations to pay amounts in respect of Pledged Shares, (iv) products of
the Pledged Collateral and (v) other amounts from time to time paid or
payable under or in connection with any of the Pledged Collateral.
Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would
accrue and become due but for the filing of a petition in bankruptcy or the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)) of (i) all Obligations of the Pledgor now existing or
hereafter arising under or in respect of the Credit Agreement (including,
without limitation, the obligations of the Pledgor to pay principal, interest
and all other reasonable charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of the
Obligations contained in the Credit Agreement), and (ii) without duplication of
the amounts described in clause (i), all Obligations of the Pledgor now
existing or hereafter arising under or in respect of this Agreement or any
other Security Document, including, without limitation, with respect to all
reasonable charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the obligations
contained in this Agreement (the obligations described in clauses (i) and (ii),
collectively, the "Secured Obligations").
No Release. Subject to Section 18 of this Agreement, nothing set
forth in this Agreement shall relieve the Pledgor from the performance of any
term, covenant, condition on the Pledgor's part to be performed or observed
<PAGE> 199
under or in respect of any of the Pledged Collateral or from any liability to
the Person under or in respect of any of the Pledged Collateral or shall
impose any obligation on Collateral Agent or any Secured Party to perform or
observe any such term, covenant, condition or agreement on the Pledgor's part
to be so performed or observed or shall impose any liability on Collateral
Agent or any Secured Party for any act or omission on the part of the Pledgor
relating thereto or for any breach of any representation or warranty on the
part of the Pledgor contained in this Agreement, or any other Credit Document
or under or in respect of the Pledged Collateral or made in connection herewith
or therewith. Subject to Section 18 of this Agreement, the obligations of the
Pledgor contained in this Section 3 shall survive the termination of this
Agreement and the discharge of the Pledgors' other obligations under this
Agreement and the other Credit Documents.
Delivery of Pledged Collateral.
All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to
Collateral Agent, shall immediately upon receipt thereof by the Pledgor be
delivered to and held by or on behalf of Collateral Agent pursuant hereto. All
Pledged Collateral shall be in suitable form for transfer by delivery or shall
be accompanied by duly executed instruments of transfer or assignment in blank
(with signatures appropriately guaranteed), all in form and substance
satisfactory to Collateral Agent. Subject to the provisions of Section 29 of
this Agreement, Collateral Agent shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of Collateral Agent
or any of its nominees any or all of the Pledged Collateral. Collateral Agent
shall provide the Pledgor with notice of any endorsement, assignment or other
transfer made pursuant to the preceding sentence. In addition, upon the
occurrence and during the continuance of an Event of Default, Collateral Agent
shall have the right at any time to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or larger
denominations.
If an issuer of Pledged Shares is incorporated in a jurisdiction
which does not permit the use of certificates to evidence equity ownership,
then the Pledgor shall, to the extent permitted by applicable law, record such
pledge on the stock register of such issuer, execute any customary stock pledge
forms or other documents necessary or appropriate to complete the pledge and
give Collateral Agent the right to
<PAGE> 200
transfer the Pledged Shares under the terms hereof and provide to Collateral
Agent an opinion of counsel, in form and substance satisfactory to Collateral
Agent, confirming such pledge.
Notwithstanding any provision of this Section 4 to the contrary, if
the exercise of any rights provided in this Section 4 or Section 10 relates to
the ownership or control of any radio, television or other license, permit,
certificate or approval granted or issued by the FCC or any other Governmental
Authority (including, without limitation, any multichannel or single channel
multipoint distribution service, local multipoint distribution service,
operational- fixed microwave service, cable television relay service station,
business radio, instructional television fixed service, earth station or
experimental licenses or permits issued by the FCC) (each, a "Governmental
License") held by the Pledgor or a subsidiary of the Pledgor and it may be
necessary to obtain the consent or approval of the FCC prior to the exercise of
such rights, the provisions of Section 29 of this Agreement shall apply.
Supplements, Further Assurances.
The Pledgor agrees that at any time and from time to time, at the
sole cost and expense of such Pledgor, the Pledgor shall promptly execute and
deliver all further instruments and documents, including, without limitation,
supplemental or additional UCC-1 financing statements, and take all further
action that may be necessary or that Collateral Agent may reasonably request,
in order to perfect and protect the pledge, security interest and Lien granted
or purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
The Pledgor shall, upon obtaining any Pledged Shares of any Person
promptly (and in any event within three Business Days) deliver to Collateral
Agent a pledge amendment, duly executed by the Pledgor, in substantially the
form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of such
Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Shares
listed on any Pledge Amendment delivered to Collateral Agent shall for all
purposes hereunder be considered Pledged Collateral.
<PAGE> 201
Representations, Warranties and Covenants. The Pledgor represents,
warrants and covenants as follows (as to itself only):
No Liens. The Pledgor is, and at the time of any delivery of any
Pledged Collateral to Collateral Agent pursuant to Section 4 of this
Agreement will be, the sole legal and beneficial owner of the Pledged
Collateral pledged by it pursuant to this Agreement. All Pledged
Collateral is on the date hereof, and will be be, so owned by the Pledgor,
as applicable, free and clear of any Lien except for the Lien created by
this Agreement.
Authorization, Enforceability. The Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all of the Pledged Collateral pledged by it pursuant to this
Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable against the Pledgor in accordance
with its terms.
No Consents, etc. No consent of any party (including, without
limitation, any stockholders or creditors of the Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or other Person is
required either (x) for the pledge by the Pledgor of the Pledged Collateral
pledged by it pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor, or (y) for the exercise by
Collateral Agent of the voting or other rights provided for in this
Agreement, or (z) for the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this Agreement; provided,
however, that under the Communications Act and the rules and regulations of
the FCC, FCC consent may be required prior to the transfer of control or
assignment of any Governmental License issued by the FCC, or the exercise
of any voting rights or management over the Pledgor or an issuer of Pledged
Shares to the extent it holds, owns or controls any Governmental License
issued by the FCC.
Due Authorization and Issuance. All of the Pledged Shares have been,
and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
<PAGE> 202
Chief Executive Office. The Pledgor's chief executive office is
located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado
80919. Pledgor shall not move its chief executive office except to such
new location as Pledgor may establish in accordance with the last sentence
of this Section 6(e). Pledgor shall not establish a new location for its
chief executive office nor shall it change its name until (i) it shall have
given Collateral Agent not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location or name and
providing such other information in connection therewith as Collateral
Agent or any Secured Party may request, and (ii) with respect to such new
location or name, Pledgor shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted
hereby.
Delivery of Pledged Collateral; Filings. The Pledgor has delivered to
Collateral Agent all certificates representing the Pledged Shares and
Intercompany Notes and has caused to be filed with the Secretary of State
of the State of New York, the State of incorporation of the Pledgor and the
State of Colorado, which is the State of the chief executive office of the
Pledgor, UCC-1 financing statements evidencing the Lien created by this
Agreement, and such delivery, filing and pledge of the Pledged Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Collateral securing the payment of the
Secured Obligations pursuant to the UCC, including, without limitation, the
UCC as in effect in the States of New York, the State of incorporation of
the Pledgor and the State of Colorado, which is the State of the chief
executive office of the Pledgor.
Pledged Collateral. All information set forth herein, including the
Schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Secured Party in connection
with this Agreement, in each case, relating to the Pledged Collateral is
accurate and complete in all respects.
No Violations, etc. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board.
<PAGE> 203
Ownership of Pledged Collateral. Except as otherwise permitted by the
Credit Agreement, the Pledgor at all times will be the sole beneficial
owner of the Pledged Collateral pledged by it pursuant to this Agreement.
No Options, Warrants, etc. Except as disclosed in the Credit
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which the Pledgor is a party or by which it
is bound obligating the Pledgor to issue, deliver or sell or cause to be
issued, delivered or sold, additional securities of any issuer of the
Pledged Shares or obligating any issuer of the Pledged Shares to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no voting trusts or other agreements or
understandings to which the Pledgor or any issuer of the Pledged Shares is
a party with respect to the voting of the securities of any issuer of the
Pledged Shares.
Endorsement, Assignment or Pledge of Instruments. None of the Pledged
Collateral is, as of the date of this Agreement, and as to Pledged
Collateral which arises from time to time after such date will be,
evidenced by any instrument, note or chattel paper, except such as have
been or will be endorsed, assigned or pledged and delivered to Collateral
Agent by Pledgors simultaneously with the creation thereof.
Systems. The Pledged Shares include the Pledgor's interest in each
Credit Party operating Systems or holding System Agreements.
Voting Rights; Distributions; etc.
So long as no Event of Default shall have occurred and be continuing:
The Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Shares pledged by it pursuant
to this Agreement or any part thereof for any purpose not inconsistent with
the terms or purpose of this Agreement or any of the other Credit Documents
and each Pledgor shall not in any event exercise such rights in any manner
which may have an adverse effect on the value of
<PAGE> 204
its respective Pledged Collateral or the security intended to be provided by
this Agreement.
Subject to the terms of the Credit Agreement, each Pledgor shall be
entitled to receive and retain, and to utilize free and clear of the Lien
of this Agreement, any and all Distributions, but only if and to the extent
made in accordance with the provisions of the Credit Agreement; provided,
however, that any and all such Distributions consisting of rights or
interests in the form of securities shall be, and shall be forthwith
delivered to Collateral Agent to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of Collateral
Agent, be segregated from the other property or funds of such Pledgor, and
be forthwith delivered to Collateral Agent as Pledged Collateral in the
same form as so received (with any necessary endorsement).
Collateral Agent shall be deemed without further action or formality
to have granted to each Pledgor all necessary consents relating to voting
rights and shall, if necessary, upon written request of the Pledgor and at
such Pledgor's sole cost and expense, from time to time execute and deliver
(or cause to be executed and delivered) to such Pledgor all such
instruments as such Pledgor may reasonably request in order to permit such
Pledgor to exercise the voting and other rights which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and to receive the
Distributions which it is authorized to receive and retain pursuant to
Section 7(a)(ii) hereof.
Upon the occurrence and during the continuance of an Event of Default:
All rights of the Pledgor to exercise the voting and other consensual
rights it would otherwise be entitled to exercise pursuant to Section
7(a)(i) hereof without any action or the giving of any notice shall cease,
and all such rights shall thereupon become vested in Collateral Agent,
which shall thereupon have the sole right to exercise such voting and
other consensual rights; provided, however, to the extent the Pledgor or an
issuer of Pledged Shares hold, own or control any Governmental License
issued by
<PAGE> 205
the FCC, if and to the extent required under the Communications Act or the
FCC's rules, until the FCC has consented to a transfer of control or
assignment of Pledgor, an issuer of Pledged Shares, or such Governmental
License issued by the FCC, Pledgor shall continue to exercise the voting
and other consensual rights.
All rights of the Pledgor to receive Distributions which it would
otherwise be authorized to receive and retain pursuant to Section 7(a)(ii)
hereof shall cease and all such rights shall thereupon become vested in
Collateral Agent, which shall thereupon have the sole right to receive and
hold as Pledged Collateral such Distributions.
Subject to any necessary prior or subsequent FCC approval, Collateral
Agent shall be entitled to the appointment, as a matter of right and
without giving notice to the Pledgor, of a receiver with respect to the
Pledged Collateral, without regard to the adequacy or inadequacy of any
Pledged Collateral for the Secured Obligations or the solvency or
insolvency of any person or entity then legally or equitably liable for the
Secured Obligations or any portion thereof, and each Pledgor does hereby
irrevocably consent to such appointment. Any such receiver shall have all
the usual qualifications, powers and duties of receivers in similar cases,
including the full power to conduct the business of the Pledgors.
The Pledgor shall, at such Pledgor's sole cost and expense, from time
to time execute and deliver to Collateral Agent and any other Person directed
by Collateral Agent, appropriate instruments as Collateral Agent may request in
order to permit Collateral Agent to exercise the voting and other rights which
it may be entitled to exercise pursuant to Section 7(b)(i) hereof and to
receive all Distributions which it may be entitled to receive under Section
7(b)(ii) hereof.
All Distributions which are received by the Pledgor contrary to the
provisions of Section 7(b)(ii) hereof shall be received in trust for the
benefit of Collateral Agent, shall be segregated from other funds of such
Pledgor and shall immediately be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).
Transfers and Other Liens; Additional Shares; Principal Office.
The Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant
<PAGE> 206
with respect to, any of the Pledged Collateral pledged by it pursuant to this
Agreement, (ii) create or permit to exist any Lien upon or with respect to any
Pledged Collateral pledged by it pursuant to this Agreement other than the Lien
granted to Collateral Agent under this Agreement, or (iii) permit any issuer of
the Pledged Shares to merge, consolidate or change its legal form unless a
majority of the outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation, pledged to Collateral Agent
pursuant to a pledge agreement in form and substance, satisfactory to
Collateral Agent, and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation.
The Pledgor shall (i) cause each issuer of the Pledged Shares not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to such Pledgor and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock or other equity securities of
any issuer of the Pledged Shares which are required to be pledged hereunder.
Reasonable Care. Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which Collateral Agent, in its individual capacity, accords
its own property consisting of similar instruments or interests, it being
understood that neither the Collateral Agent nor any of the Secured Parties
shall have responsibility for (i) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating to
any Pledged Collateral, whether or not Collateral Agent or any other Secured
Party has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any Person with respect to any
Pledged Collateral.
Remedies Upon Default; Decisions Relating to Exercise of Remedies.
If any Event of Default shall have occurred and be continuing,
subject to the provisions of Section 29 of this Agreement, Collateral Agent
shall have the right, in addition to other rights and remedies provided for
herein or otherwise available to it to be exercised from time to time, (i) to
retain and apply the Distributions to the Secured Obligations as provided in
Section 11 hereof, and (ii) to exercise all the rights and remedies of a
secured party on default under
<PAGE> 207
the UCC, and Collateral Agent may also in its sole discretion, without notice
except as specified below, sell the Pledged Collateral or any part thereof
(including, without limitation, any partial interest in the Pledged Shares) in
one or more parcels at public or private sale, at any exchange, broker's board
or at any of Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as
Collateral Agent may deem commercially reasonable, irrespective of the impact
of any such sales on the market price of the Pledged Collateral. Collateral
Agent or any other Secured Party or any of their respective Affiliates may be
the purchaser of any or all of the Pledged Collateral at any such sale and
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Pledged Collateral sold at
such sale, to use and apply any of the Secured Obligations owed to such Person
as a credit on account of the purchase price of any Pledged Collateral payable
by such Person at such sale. Each purchaser at any such sale shall acquire the
property sold absolutely free from any claim or right on the part of the
Pledgor, and Pledgor hereby waives (to the fullest extent permitted by law) all
rights of redemption, stay and/or appraisal which it now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted. The Pledgor acknowledges and agrees that, to the extent notice of
sale shall be required by law, five (5) days' notice to such Pledgor of the
time and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. No notification need be
given to the Pledgor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying any right to notification of sale
or other intended disposition. Collateral Agent shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
The Pledgor hereby waives any claims against Collateral Agent arising by reason
of the fact that the price at which any Pledged Collateral may have been sold
at such a private sale was less than the price which might have been obtained
at a public sale, even if Collateral Agent accepts the first offer received and
does not offer such Pledged Collateral to more than one offeree.
Notwithstanding any provision of this subsection 10(a) to the contrary, in the
event of a private or public sale of the Pledged Collateral, prior to the
consummation of the sale, to the extent required under the Communications Act
of 1934, as amended, or any successor statute or law (the "Communications
Act"), the prior consent of the FCC pursuant to the
<PAGE> 208
Communications Act and the rules and regulations of the FCC will be obtained.
The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such restrictions
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that Collateral Agent shall have
no obligation to engage in public sales and no obligation to delay the sale of
any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
Notwithstanding the foregoing and to the extent commercially
reasonable, each Pledgor shall, upon the occurrence and during the continuance
of an Event of Default, at the request of Collateral Agent, for the benefit of
Collateral Agent, cause any registration, qualification under or compliance
with any federal or state securities law or laws to be effected with respect to
all or any part of the Pledged Collateral as soon as practicable and at such
Pledgor's sole cost and expense. The Pledgor will use its best efforts to
cause such registration to be effected (and be kept effective) and will use its
best efforts to cause such qualification and compliance to be effected (and be
kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Collateral, including, without
limitation, registration under the Securities Act (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements. The Pledgor will cause Collateral Agent to be kept advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to Collateral Agent
such number of prospectuses, offering circulars or other documents incident
thereto as Collateral Agent from time to time may request, and will indemnify
and
<PAGE> 209
will cause the issuer of the Pledged Collateral to indemnify Collateral Agent
and all others participating in the distribution of such Pledged Collateral
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein
(or in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading.
If Collateral Agent determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, each Pledgor shall from
time to time furnish to Collateral Agent all such information as Collateral
Agent may request in order to determine the number of securities included in
the Pledged Collateral which may be sold by Collateral Agent as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
The Pledgor recognizes, by reason of certain prohibitions contained
in laws, rules, regulations or orders of any foreign Governmental Authority,
Collateral Agent may be compelled, with respect to any sale of all or any part
of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign Governmental Authority. The Pledgor acknowledges
that any such sales may be at prices and on terms less favorable to Collateral
Agent than those obtainable through a public sale without such restrictions,
and, notwithstanding such circumstances, agrees that any such restricted sale
shall be deemed to have been made in a commercially reasonable manner and that
Collateral Agent shall have no obligation to engage in public sales.
In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking
specific performance in connection with any of the agreements or obligations
hereunder.
Without limiting the generality of the provisions in Section 15
hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full
power of substitution, its true and lawful attorney-in-fact, in its name, place
and stead to take any action upon the occurrence and during the continuance of
an Event of Default required to reflect the foreclosure sale of the Pledged
Collateral or the exercise of any remedy hereunder. The foregoing grant of
authority is a power of attorney coupled with an interest and such
<PAGE> 210
appointment shall be irrevocable for the term of this Agreement.
Application of Proceeds. All Distributions held from time to time by
Collateral Agent and all cash proceeds received by Collateral Agent in respect
of any sale of, collection from, or other realization upon all or any part of
the Pledged Collateral pursuant to the exercise by Collateral Agent of its
remedies as a secured creditor as provided in Section 10 hereof shall be
applied, together with any other sums then held by Collateral Agent pursuant to
this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable compensation to Collateral Agent
and its agents and counsel, and all reasonable expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Second, to the payment of all other reasonable costs and expenses of
such sale, collection or other realization, including, without limitation,
reasonable compensation to the Banks and their agents and counsel and all
reasonable expenses, liabilities and advances made or incurred by the
Banks in connection therewith, together with interest on each such amount
at the highest rate then in effect under the Credit Agreement from and
after the date such amount is due, owing or unpaid until paid in full;
Third, to the indefeasible payment in full in cash of interest and all
amounts other than principal under the Credit Agreement at any time and
from time to time owing by the Pledgor under or in connection with the
Credit Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Fourth, to the indefeasible payment in full in cash of principal at
any time and from time to time owing by
<PAGE> 211
the Pledgor under or in connection with the Credit Agreement, ratably
according to the unpaid amounts thereof, without preference or priority of
any kind, among amounts of principal so due and payable, together with
interest on each such amount at the highest rate then in effect under the
Credit Agreement from and after the date such amount is due, owing or
unpaid until paid in full; and
Fifth, to the applicable Pledgor, or its successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
Expenses. The Pledgor will upon demand pay to Collateral Agent the
amount of any and all expenses, including the reasonable fees and expenses of
its counsel and the fees and expenses of any experts and agents, which
Collateral Agent may incur in connection with (i) the collection of the Secured
Obligations, (ii) the enforcement and administration of this Agreement, (iii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of Collateral Agent or any Secured Party
hereunder or (v) the failure by the Pledgor to perform or observe any of the
provisions hereof. All amounts payable by the Pledgor under this Section 12
shall be due upon demand and shall be part of the Secured Obligations. The
Pledgor's obligations under this Section 12 shall survive the termination of
this Agreement and the discharge of such Pledgor's other obligations hereunder.
No Waiver; Cumulative Remedies.
No failure on the part of Collateral Agent to exercise, no course of
dealing with respect to, and no delay on the part of Collateral Agent in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
In the event Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure, sale,
entry or otherwise, and
<PAGE> 212
such proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to Collateral Agent, then and in every
such case, each Pledgor, Collateral Agent and each holder of any of the Secured
Obligations shall be restored to their respective former positions and rights
hereunder with respect to the Pledged Collateral, and all rights, remedies and
powers of Collateral Agent and the Secured Parties shall continue as if no such
proceeding had been instituted.
Collateral Agent. Collateral Agent has been appointed as collateral
agent pursuant to the Credit Agreement. The actions of Collateral Agent
hereunder are subject to the provisions of the Credit Agreement. Collateral
Agent shall have the right hereunder to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking action (including, without limitation, the release or substitution of
Pledged Collateral), in accordance with this Agreement and the Credit
Agreement. Collateral Agent may resign and a successor Collateral Agent may be
appointed in the manner provided in the Credit Agreement; provided, however,
that at the time of appointment of a successor Collateral Agent, if Collateral
Agent, through its possession, control, or ownership of Pledged Collateral or
otherwise, holds, owns, or controls any Governmental License issued by the FCC
such that the FCC must consent to the appointment of a successor Collateral
Agent, until the FCC has consented to the appointment of a successor Collateral
Agent the Collateral Agent shall retain control over such Pledged Collateral
or Government Licenses. Upon the acceptance of any appointment as Collateral
Agent by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent under this Agreement, and the
retiring Collateral Agent shall thereupon be discharged from its duties and
obligations under this Agreement. After any retiring Collateral Agent's
resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it
was Collateral Agent.
Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of such Pledgor
contained herein shall be breached, Collateral Agent or any Secured Party may
(but shall not be obligated to), subject to the provisions of Section 29 of
this Agreement, do the same or cause it to be done or remedy any such breach,
and may expend funds for such purpose. Any and all amounts so expended by
Collateral Agent
<PAGE> 213
or such Secured Party shall be paid by such Pledgor promptly upon demand
therefor, with interest at the highest rate then in effect under the Credit
Agreement during the period from and including the date on which such funds
were so expended to the date of repayment. The Pledgor's obligations under
this Section 15 shall survive the termination of this Agreement and the
discharge of such Pledgor's other obligations under this Agreement, the Credit
Agreement and any other Credit Document. The Pledgor hereby appoints
Collateral Agent its attorney-in-fact with an interest, with full authority in
the place and stead of such Pledgor and in the name of such Pledgor, or
otherwise, from time to time in Collateral Agent's discretion to take any
action and to execute any instrument consistent with the terms of this
Agreement and the other Credit Documents which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement except that
with respect to any FCC applications or filings or other action subject to FCC
rules, regulations and policies, Collateral Agent shall serve as
attorney-in-fact only to the extent permitted under the Communications Act and
FCC rules, regulations and policies. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. The Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
Indemnity.
Indemnity. The Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and each of the Secured Parties and the officers, directors,
employees, agents and affiliates of Collateral Agent and each of the Secured
Parties (collectively called the "Indemnitees") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs),
expenses or disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or any other Credit Document (including, without limitation, any
misrepresentation by the Pledgor in this Agreement or any other Credit
Document) (the "indemnified liabilities"); provided that the Pledgors shall not
have any obligation to an Indemnitee hereunder with respect to indemnified
liabilities if it has been determined by a final decision (after all appeals
and the expiration of time to appeal) by a
<PAGE> 214
court of competent jurisdiction that such indemnified liability arose from the
gross negligence or willful misconduct of that Indemnitee. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, each Pledgor shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them.
Survival. The obligations of each Pledgor contained in this Section
16 shall survive the termination of this Agreement and the discharge of each
Pledgor's other obligations under this Agreement and under the other Credit
Documents.
Reimbursement. Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Pledged Collateral.
Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by the Pledgor therefrom, shall be effective unless the same
shall be done in accordance with the terms of the Credit Agreement and unless
in writing and signed by Collateral Agent and Pledgor. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement or any
other Credit Document, no notice to or demand on the Pledgor in any case shall
entitle any such Pledgor to any other or further notice or demand in similar or
other circumstances.
Termination; Release. When all the Secured Obligations have been
indefeasibly paid in full and the Commitments of the Banks to make any Loan
under the Credit Agreement shall have expired, this Agreement shall terminate.
Upon termination of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement, Collateral Agent shall,
upon the request and at the sole cost and expense of the applicable Pledgor,
forthwith assign, transfer and deliver to such Pledgor, against receipt and
without recourse to or warranty by
<PAGE> 215
Collateral Agent, such of the Pledged Collateral to be released (in the case of
a release) as may be in the possession of Collateral Agent and as shall not
have been sold or otherwise applied pursuant to the terms hereof, on the order
of and at the sole cost and expense of such Pledgor, and proper instruments
(including UCC termination statements on Form UCC-3) acknowledging the
termination of this Agreement or the release of such Pledged Collateral, as the
case may be.
Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner set forth in the Credit Agreement; provided
that notices to Collateral Agent shall not be effective until received by
Collateral Agent.
Continuing Security Interest; Assignment. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall (i)
be binding upon each Pledgor, its respective successors and assigns, and (ii)
inure, together with the rights and remedies of Collateral Agent hereunder, to
the benefit of Collateral Agent and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of the Pledgor) shall have any interest
herein or any right or benefit with respect hereto. Without that limiting the
generality of the foregoing clause (ii), any Bank may assign or otherwise
transfer any indebtedness held by it secured by this Agreement to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank, herein or otherwise, subject
however, to the provisions of the Credit Agreement.
GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS
<PAGE> 216
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS
CT CORPORATION SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK
10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE PLEDGOR
IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY THE PLEDGOR TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 19 HEREOF
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT
APPOINTED BY THE PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE
PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT
NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Obligations Absolute. All obligations of the Pledgor hereunder shall
absolute and unconditional irrespective of:
<PAGE> 217
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Pledgor or any other Credit
Party;
any lack of validity or enforceability of the Credit Agreement or any
other Credit Document or any other agreement or instrument relating
thereto;
any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, any
other Credit Document or any other agreement or instrument relating
thereto;
any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, or any other
Credit Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 17 hereof; or
any other circumstances which might otherwise constitute a defense
available to, or a discharge of, any other Pledgor.
Collateral Agent's Right to Sever Indebtedness.
The Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of the
Secured Obligations and that the Secured Obligations are also secured by other
types of property of such Pledgor and its Affiliates in other jurisdictions
(all such property, collectively, the "Collateral"), (ii) the number of such
jurisdictions and the nature of the transaction of which this instrument is a
part are such that it would have been impracticable for the parties to allocate
to each item of Collateral a specific loan amount and to execute in respect of
such item a separate credit agreement, and (iii) each Pledgor intends that
Collateral Agent have the same rights with respect to the Pledged Collateral,
in any judicial proceeding relating to the exercise of any right or remedy
hereunder or otherwise,
<PAGE> 218
that Collateral Agent would have had if each item of collateral had been
pledged or encumbered pursuant to a separate credit agreement and security
instrument. In furtherance of such intent, each Pledgor agrees to the greatest
extent permitted by law that Collateral Agent may at any time by notice (an
"Allocation Notice") to the Pledgor allocate a portion of the Secured
Obligations (the "Allocated Indebtedness") to the Pledged Collateral of such
Pledgor and sever from the remaining Secured Obligations the Allocated
Indebtedness. From and after the giving of an Allocation Notice with respect
to the Pledged Collateral, the Secured Obligations hereunder shall be limited
to the extent set forth in the Allocation Notice and (as so limited) shall, for
all purposes, be construed as a separate credit obligation of each Pledgor
unrelated to the other transactions contemplated by the Credit Agreement or any
other Credit Document or any document related to either thereof. To the extent
that the proceeds of any judicial proceeding relating to the exercise of any
right or remedy hereunder of the Pledged Collateral shall exceed the Allocated
Indebtedness, such proceeds shall belong to such Pledgor and shall not be
available hereunder to satisfy any Secured Obligations of such Pledgor other
than the Allocated Indebtedness. In any action or proceeding to exercise any
right or remedy under this Agreement which is commenced after the giving by
Collateral Agent of an Allocation Notice, the Allocation Notice shall be
conclusive proof of the limits of the Secured Obligations hereby secured, and
the Pledgor may introduce, by way of defense or counterclaim, evidence thereof
in any such action or proceeding. Notwithstanding any provision of this
Section 27, the proceeds received by Collateral Agent pursuant to this
Agreement shall be applied by Collateral Agent in accordance with the
provisions of Section 11 hereof.
The Pledgor hereby waives to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial proceedings or
otherwise) constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable any further judgment or any other right
or remedy provided for herein because Collateral Agent elected to proceed with
the exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, no Pledgor shall (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against such
Pledgor of any remedy in the Credit
<PAGE> 219
Agreement or executed in connection with the Credit Agreement or (ii) seek to
have such judgment recognized or entered in any other jurisdiction, and any
such judgment shall in all events be limited in application only to the state
or jurisdiction where rendered and only with respect to the collateral referred
to in such judgment.
In the event any instrument in addition to the Allocation Notice is
necessary to effectuate the provisions of this Section 27, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of the Pledgor.
Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 27 shall be effective only to the maximum extent
permitted by law.
Future Advances. This Agreement shall secure the payment of any
amounts advanced from time to time pursuant to the Credit Agreement.
Facilitating Governmental Approvals; Specific Performance.
In connection with the exercise by Collateral Agent of its rights
under this Agreement relating to the disposition of the Pledged Collateral as
it may affect the control of any Governmental License issued by the FCC or any
other authorizations, agreements, permits, licenses, and franchises of the
Pledgor, it may be necessary to obtain the prior consent or approval of the FCC
or other Governmental Authority to the exercise of Collateral Agent's rights
with respect to the Pledged Collateral. To the extent that any such consent or
approval is required for any action that Collateral Agent may take under this
Agreement with respect to the Pledged Collateral, receipt of such FCC or
Governmental Authority approval shall be a condition precedent to Collateral
Agent's exercise of such rights. In furtherance of the first sentence of this
Section, the Pledgor hereby agrees, at its own cost, to use its best efforts to
take any and all actions which Collateral Agent may request in order to obtain
such consents or approvals or any other governmental authorization as may be
necessary to enable Collateral Agent to exercise and enjoy the full rights and
benefits granted to it under this Agreement, the Credit Agreement, or any other
Credit Document, including, without limitation, the preparation, execution,
delivery or filing on
<PAGE> 220
the Pledgor's behalf and in such Pledgor's name, or in such other name as may
be appropriate or required, or causing to be prepared, executed, delivered or
filed, all applications, certificates, filings, instruments, information,
reports and other documents (including, without limitation, any application for
any assignment or transfer of control or ownership).
The Pledgor hereby acknowledges that a breach of any of its respective
obligations contained in this Agreement will cause irreparable injury to
Collateral Agent, and that such a breach would not be adequately compensable in
damages, and therefore Pledgors agree that their obligations under this
Agreement shall be specifically enforceable.
<PAGE> 221
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
AMERICAN TELECASTING, INC.,
as Pledgor
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By: /s/ BARQUE INDOSUEZ
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Notice Address:
Banque Indosuez, New York Branch
1211 Avenue of the Americas
New York, N.Y. 10036
Attention: Michael Arougheti
<PAGE> 222
SECURITIES PLEDGE AGREEMENT
This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of
February 26, 1997, made by AMERICAN TELECASTING OF GREEN BAY, INC., a Delaware
corporation having an office at 5575 Tech Center Drive, Suite 300, Colorado
Springs, Colorado 80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK
BRANCH, having an office at 1211 Avenue of the Americas, New York, New York
10036, as pledgee, assignee and secured party, in its capacity as collateral
agent (in such capacities and together with any successors in such capacities,
the "Collateral Agent") for the lending institutions (the "Banks") under the
Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; unless otherwise defined herein,
capitalized terms used herein have the meanings assigned to them in the Credit
Agreement), among American Telecasting, Inc. ("ATel"), the Banks and Banque
Indosuez, New York Branch, as Agent for the Banks, the Banks have agreed to
make to or for the account of ATel certain Loans up to an aggregate principal
amount of $17,000,000.
B. The Pledgor is the legal and beneficial owner of the Pledged
Collateral (as hereinafter defined) pledged by it.
C. It is a condition precedent to the obligations of the Banks to
make the Loans under the Credit Agreement that the Pledgor execute and deliver
the applicable Credit Documents, including this Agreement.
D. The Pledgor has executed and delivered to Collateral Agent a
certain guarantee instrument (the "Guarantee") pursuant to which, among other
things, the Pledgor has guaranteed the obligations of ATel under the
<PAGE> 223
Credit Agreement, and the Pledgor desires that its obligations under such
Guarantee be secured hereunder.
E. This Agreement is given by the Pledgor in favor of Collateral
Agent for its benefit and the benefit of the Banks and the Agent (collectively,
the "Secured Parties") to secure the payment and performance of all of the
Secured Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows:
Section 1. Pledge. As collateral security for the payment and
performance when due of all the Secured Obligations, the Pledgor hereby
pledges, assigns, transfers and grants to Collateral Agent for the benefit of
the Secured Parties, a continuing first priority security interest in and to
all of the right, title and interest of the Pledgor in and to the following
property, whether now existing or hereafter acquired, (collectively, the
"Pledged Collateral"):
(a) the issued and outstanding shares of capital stock described on
Schedule I hereto ("the Pledged Shares"), including the certificates
representing the Pledged Shares and any interest of the Pledgor in the
entries on the books of any financial intermediary pertaining to the
Pledged Shares;
(b) all additional shares of capital stock of any issuer of the
Pledged Shares from time to time acquired by the Pledgor in any manner
(which securities shall be deemed to be part of the Pledged Shares) and the
certificates representing such additional securities and any interest of
the Pledgor in the entries on the books of any financial intermediary
pertaining to such additional securities;
<PAGE> 224
(c) all intercompany notes described on Schedule II hereto (the
"Intercompany Notes") now owned or held by Pledgor and from time to time
acquired by Pledgor in any way, and all certificates or instruments
evidencing such Intercompany Notes and all proceeds thereof, all accessions
thereto and substitutions therefor;
(d) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed to the Pledgor in respect of or in exchange for any or all of
the Pledged Shares (collectively, "Distributions"); and
(e) all Proceeds (as defined under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "UCC") or under other relevant
law) of any of the foregoing, and in any event, including, without
limitation, any and all (i) proceeds of any insurance (except payments made
to a Person which is not a party to this Agreement), indemnity, warranty or
guarantee payable to Collateral Agent or to the Pledgor from time to time
with respect to any of its respective Pledged Collateral, (ii) payments (in
any form whatsoever) made or due and payable to the Pledgor from time to
time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture Collateral of all or any part of its respective
Pledged Collateral by any Governmental Authority (or any person acting
under color of a Governmental Authority), (iii) instruments representing
obligations to pay amounts in respect of Pledged Shares, (iv) products of
the Pledged Collateral and (v) other amounts from time to time paid or
payable under or in connection with any of the Pledged Collateral.
Section 2. Secured Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. Section
<PAGE> 225
362(a)) of (i) all Obligations of the Pledgor now existing or hereafter arising
under or in respect of the Guarantee (including, without limitation, the
Pledgor's obligations to pay principal, interest and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other payments
related to or in respect of the obligations contained in the Guarantee), (ii)
all Obligations of the Pledgor now existing or hereafter arising under or in
respect of the Credit Agreement (including, without limitation, the obligations
of the Pledgor to pay principal, interest and all other reasonable charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the Obligations contained in the Credit
Agreement), and (iii) without duplication of the amounts described in clauses
(i) and (ii), all Obligations of the Pledgor now existing or hereafter arising
under or in respect of this Agreement or any other Security Document,
including, without limitation, with respect to all reasonable charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this
Agreement (the obligations described in clauses (i), (ii) and (iii),
collectively, the "Secured Obligations").
Section 3. No Release. Subject to Section 18 of this Agreement,
nothing set forth in this Agreement shall relieve the Pledgor from the
performance of any term, covenant, condition on the Pledgor's part to be
performed or observed under or in respect of any of the Pledged Collateral or
from any liability to the Person under or in respect of any of the Pledged
Collateral or shall impose any obligation on Collateral Agent or any Secured
Party to perform or observe any such term, covenant, condition or agreement on
the Pledgor's part to be so performed or observed or shall impose any liability
on Collateral Agent or any Secured Party for any act or omission on the part of
the Pledgor relating thereto or for any breach of any representation or
warranty on the part of the Pledgor contained in this Agreement, or any other
Credit Document or under or in respect of the Pledged Collateral or made in
connection herewith or therewith. Subject to Section 18 of this Agreement, the
obligations of the Pledgor contained in this Section 3 shall survive the
termination of this Agreement and the discharge of the Pledgors' other
obligations under this Agreement and the other Credit Documents.
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Section 4. Delivery of Pledged Collateral.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered to
Collateral Agent, shall immediately upon receipt thereof by the Pledgor be
delivered to and held by or on behalf of Collateral Agent pursuant hereto. All
Pledged Collateral shall be in suitable form for transfer by delivery or shall
be accompanied by duly executed instruments of transfer or assignment in blank
(with signatures appropriately guaranteed), all in form and substance
satisfactory to Collateral Agent. Subject to the provisions of Section 29 of
this Agreement, Collateral Agent shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of Collateral Agent
or any of its nominees any or all of the Pledged Collateral. Collateral Agent
shall provide the Pledgor with notice of any endorsement, assignment or other
transfer made pursuant to the preceding sentence. In addition, upon the
occurrence and during the continuance of an Event of Default, Collateral Agent
shall have the right at any time to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or larger
denominations.
(b) If an issuer of Pledged Shares is incorporated in a jurisdiction
which does not permit the use of certificates to evidence equity ownership,
then the Pledgor shall, to the extent permitted by applicable law, record such
pledge on the stock register of such issuer, execute any customary stock pledge
forms or other documents necessary or appropriate to complete the pledge and
give Collateral Agent the right to transfer the Pledged Shares under the terms
hereof and provide to Collateral Agent an opinion of counsel, in form and
substance satisfactory to Collateral Agent, confirming such pledge.
(c) Notwithstanding any provision of this Section 4 to the contrary,
if the exercise of any rights provided in this Section 4 or Section 10 relates
to the ownership or control of any radio, television or other license, permit,
certificate or approval granted or issued by the FCC or any other Governmental
Authority (including, without limitation, any multichannel or single channel
multipoint distribution
<PAGE> 227
service, local multipoint distribution service, operational-fixed microwave
service, cable television relay service station, business radio, instructional
television fixed service, earth station or experimental licenses or permits
issued by the FCC) (each, a "Governmental License") held by the Pledgor or a
subsidiary of the Pledgor and it may be necessary to obtain the consent or
approval of the FCC prior to the exercise of such rights, the provisions of
Section 29 of this Agreement shall apply.
Section 5. Supplements, Further Assurances.
(a) The Pledgor agrees that at any time and from time to time, at the
sole cost and expense of such Pledgor, the Pledgor shall promptly execute and
deliver all further instruments and documents, including, without limitation,
supplemental or additional UCC-1 financing statements, and take all further
action that may be necessary or that Collateral Agent may reasonably request,
in order to perfect and protect the pledge, security interest and Lien granted
or purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
(b) The Pledgor shall, upon obtaining any Pledged Shares of any Person
promptly (and in any event within three Business Days) deliver to Collateral
Agent a pledge amendment, duly executed by the Pledgor, in substantially the
form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of such
Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Shares
listed on any Pledge Amendment delivered to Collateral Agent shall for all
purposes hereunder be considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants. The Pledgor
represents, warrants and covenants as follows (as to itself only):
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(a) No Liens. The Pledgor is, and at the time of any delivery of any
Pledged Collateral to Collateral Agent pursuant to Section 4 of this
Agreement will be, the sole legal and beneficial owner of the Pledged
Collateral pledged by it pursuant to this Agreement. All Pledged
Collateral is on the date, and will be, so owned by the Pledgor, as
applicable, free and clear of any Lien except for the Lien created by this
Agreement.
(b) Authorization, Enforceability. The Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all of the Pledged Collateral pledged by it pursuant to this
Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable against the Pledgor in accordance
with its terms.
(c) No Consents, etc. No consent of any party (including, without
limitation, any stockholders or creditors of the Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or other Person is
required either (x) for the pledge by the Pledgor of the Pledged Collateral
pledged by it pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor, or (y) for the exercise by
Collateral Agent of the voting or other rights provided for in this
Agreement, or (z) for the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this Agreement; provided,
however, that under the Communications Act and the rules and regulations of
the FCC, FCC consent may be required prior to the transfer of control or
assignment of any Governmental License issued by the FCC, or the exercise
of any voting rights or management over the Pledgor or an issuer of Pledged
Shares to the extent it holds, owns or controls any Governmental License
issued by the FCC.
(d) Due Authorization and Issuance. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
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(e) Chief Executive Office. The Pledgor's chief executive office is
located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado
80919. Pledgor shall not move its chief executive office except to such
new location as Pledgor may establish in accordance with the last sentence
of this Section 6(e). Pledgor shall not establish a new location for its
chief executive office nor shall it change its name until (i) it shall have
given Collateral Agent not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location or name and
providing such other information in connection therewith as Collateral
Agent or any Secured Party may request, and (ii) with respect to such new
location or name, Pledgor shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted
hereby.
(f) Delivery of Pledged Collateral; Filings. The Pledgor has
delivered to Collateral Agent all certificates representing the Pledged
Shares and Intercompany Notes and has caused to be filed with the Secretary
of State of the State of New York, the State of incorporation of the
Pledgor and the State of Colorado, which is the State of the chief
executive office of the Pledgor, UCC-1 financing statements evidencing the
Lien created by this Agreement, and such delivery, filing and pledge of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority security interest in the Pledged Collateral securing the
payment of the Secured Obligations pursuant to the UCC, including, without
limitation, the UCC as in effect in the States of New York, the State of
incorporation of the Pledgor and the State of Colorado, which is the State
of the chief executive office of the Pledgor.
(g) Pledged Collateral. All information set forth herein, including
the Schedules annexed hereto, and all information contained in any
documents, schedules and lists heretofore delivered to any Secured Party in
connection with this Agreement, in each case, relating to the Pledged
Collateral is accurate and complete in all respects.
<PAGE> 230
(h) No Violations, etc. The pledge of the Pledged Collateral pursuant
to this Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board.
(i) Ownership of Pledged Collateral. Except as otherwise permitted by
the Credit Agreement, the Pledgor at all times will be the sole beneficial
owner of the Pledged Collateral pledged by it pursuant to this Agreement.
(j) No Options, Warrants, etc. Except as disclosed in the Credit
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which the Pledgor is a party or by which it
is bound obligating the Pledgor to issue, deliver or sell or cause to be
issued, delivered or sold, additional securities of any issuer of the
Pledged Shares or obligating any issuer of the Pledged Shares to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no voting trusts or other agreements or
understandings to which the Pledgor or any issuer of the Pledged Shares is
a party with respect to the voting of the securities of any issuer of the
Pledged Shares.
(k) Endorsement, Assignment or Pledge of Instruments. None of the
Pledged Collateral is, as of the date of this Agreement, and as to Pledged
Collateral which arises from time to time after such date will be,
evidenced by any instrument, note or chattel paper, except such as have
been or will be endorsed, assigned or pledged and delivered to Collateral
Agent by Pledgors simultaneously with the creation thereof.
(l) Systems. The Pledged Shares include the Pledgor's interest in
each Credit Party operating Systems or holding System Agreements.
Section 7. Voting Rights; Distributions; etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
<PAGE> 231
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares pledged by it
pursuant to this Agreement or any part thereof for any purpose not
inconsistent with the terms or purpose of this Agreement or any of the
other Credit Documents and each Pledgor shall not in any event exercise
such rights in any manner which may have an adverse effect on the value of
its respective Pledged Collateral or the security intended to be provided
by this Agreement.
(ii) Subject to the terms of the Credit Agreement, each Pledgor
shall be entitled to receive and retain, and to utilize free and clear of
the Lien of this Agreement, any and all Distributions, but only if and to
the extent made in accordance with the provisions of the Credit Agreement;
provided, however, that any and all such Distributions consisting of rights
or interests in the form of securities shall be, and shall be forthwith
delivered to Collateral Agent to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of Collateral
Agent, be segregated from the other property or funds of such Pledgor, and
be forthwith delivered to Collateral Agent as Pledged Collateral in the
same form as so received (with any necessary endorsement).
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to each Pledgor all necessary consents relating
to voting rights and shall, if necessary, upon written request of the
Pledgor and at such Pledgor's sole cost and expense, from time to time
execute and deliver (or cause to be executed and delivered) to such Pledgor
all such instruments as such Pledgor may reasonably request in order to
permit such Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the
Distributions which it is authorized to receive and retain pursuant to
Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default:
<PAGE> 232
(i) All rights of the Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) hereof without any action or the giving of any notice shall
cease, and all such rights shall thereupon become vested in Collateral
Agent, which shall thereupon have the sole right to exercise such voting
and other consensual rights; provided, however, to the extent the Pledgor
or an issuer of Pledged Shares hold, own or control any Governmental
License issued by the FCC, if and to the extent required under the
Communications Act or the FCC's rules, until the FCC has consented to a
transfer of control or assignment of Pledgor, an issuer of Pledged Shares,
or such Governmental License issued by the FCC, Pledgor shall continue to
exercise the voting and other consensual rights.
(ii) All rights of the Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to Section
7(a)(ii) hereof shall cease and all such rights shall thereupon become
vested in Collateral Agent, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such Distributions.
(iii) Subject to any necessary prior or subsequent FCC approval,
Collateral Agent shall be entitled to the appointment, as a matter of right
and without giving notice to the Pledgor, of a receiver with respect to the
Pledged Collateral, without regard to the adequacy or inadequacy of any
Pledged Collateral for the Secured Obligations or the solvency or
insolvency of any person or entity then legally or equitably liable for the
Secured Obligations or any portion thereof, and each Pledgor does hereby
irrevocably consent to such appointment. Any such receiver shall have all
the usual qualifications, powers and duties of receivers in similar cases,
including the full power to conduct the business of the Pledgors.
(c) The Pledgor shall, at such Pledgor's sole cost and expense, from
time to time execute and deliver to Collateral Agent and any other Person
directed by Collateral Agent, appropriate instruments as Collateral Agent may
request in order to permit Collateral Agent to exercise the
<PAGE> 233
voting and other rights which it may be entitled to exercise pursuant to
Section 7(b)(i) hereof and to receive all Distributions which it may be
entitled to receive under Section 7(b)(ii) hereof.
(d) All Distributions which are received by the Pledgor contrary to
the provisions of Section 7(b)(ii) hereof shall be received in trust for the
benefit of Collateral Agent, shall be segregated from other funds of such
Pledgor and shall immediately be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).
Section 8. Transfers and Other Liens; Additional Shares; Principal
Office.
(a) The Pledgor shall not (i) sell, convey, assign or otherwise
dispose of, or grant any option, right or warrant with respect to, any of the
Pledged Collateral pledged by it pursuant to this Agreement, (ii) create or
permit to exist any Lien upon or with respect to any Pledged Collateral pledged
by it pursuant to this Agreement other than the Lien granted to Collateral
Agent under this Agreement, or (iii) permit any issuer of the Pledged Shares to
merge, consolidate or change its legal form unless a majority of the
outstanding capital stock of the surviving or resulting corporation is, upon
such merger or consolidation, pledged to Collateral Agent pursuant to a pledge
agreement in form and substance, satisfactory to Collateral Agent, and no cash,
securities or other property is distributed in respect of the outstanding
shares of any other constituent corporation.
(b) The Pledgor shall (i) cause each issuer of the Pledged Shares not
to issue any stock or other securities in addition to or in substitution for
the Pledged Shares issued by such issuer, except to such Pledgor and (ii)
pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of capital stock or other equity
securities of any issuer of the Pledged Shares which are required to be pledged
hereunder.
<PAGE> 234
Section 9. Reasonable Care. Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which Collateral Agent, in its individual
capacity, accords its own property consisting of similar instruments or
interests, it being understood that neither the Collateral Agent nor any of the
Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Collateral Agent or
any other Secured Party has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions Relating to Exercise of
Remedies.
(a)If any Event of Default shall have occurred and be continuing,
subject to the provisions of Section 29 of this Agreement, Collateral Agent
shall have the right, in addition to other rights and remedies provided for
herein or otherwise available to it to be exercised from time to time, (i) to
retain and apply the Distributions to the Secured Obligations as provided in
Section 11 hereof, and (ii) to exercise all the rights and remedies of a
secured party on default under the UCC, and Collateral Agent may also in its
sole discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof (including, without limitation, any partial
interest in the Pledged Shares) in one or more parcels at public or private
sale, at any exchange, broker's board or at any of Collateral Agent's offices
or elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Collateral Agent or any other Secured Party or any of
their respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion
of the Pledged Collateral sold at such sale, to use and apply any of the
Secured Obligations owed to such Person as a credit on account of the purchase
<PAGE> 235
price of any Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely free from
any claim or right on the part of the Pledgor, and Pledgor hereby waives (to
the fullest extent permitted by law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. The Pledgor acknowledges
and agrees that, to the extent notice of sale shall be required by law, five
(5) days' notice to such Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. No notification need be given to the Pledgor if it has signed,
after the occurrence of an Event of Default, a statement renouncing or
modifying any right to notification of sale or other intended disposition.
Collateral Agent shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. The Pledgor hereby waives any
claims against Collateral Agent arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. Notwithstanding any provision of
this subsection 10(a) to the contrary, in the event of a private or public sale
of the Pledged Collateral, prior to the consummation of the sale, to the extent
required under the Communications Act of 1934, as amended, or any successor
statute or law (the "Communications Act"), the prior consent of the FCC
pursuant to the Communications Act and the rules and regulations of the FCC
will be obtained.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms
<PAGE> 236
less favorable to Collateral Agent than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering
made pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that
Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would agree to do so.
(c) Notwithstanding the foregoing and to the extent commercially
reasonable, each Pledgor shall, upon the occurrence and during the continuance
of an Event of Default, at the request of Collateral Agent, for the benefit of
Collateral Agent, cause any registration, qualification under or compliance
with any federal or state securities law or laws to be effected with respect to
all or any part of the Pledged Collateral as soon as practicable and at such
Pledgor's sole cost and expense. The Pledgor will use its best efforts to
cause such registration to be effected (and be kept effective) and will use its
best efforts to cause such qualification and compliance to be effected (and be
kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Collateral, including, without
limitation, registration under the Securities Act (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements. The Pledgor will cause Collateral Agent to be kept advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to Collateral Agent
such number of prospectuses, offering circulars or other documents incident
thereto as Collateral Agent from time to time may request, and will indemnify
and will cause the issuer of the Pledged Collateral to indemnify Collateral
Agent and all others participating in the distribution of such Pledged
Collateral against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration
<PAGE> 237
statement, notification or the like) or by any omission (or alleged omission)
to state therein (or in any related registration statement, notification or the
like) a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, each Pledgor shall from
time to time furnish to Collateral Agent all such information as Collateral
Agent may request in order to determine the number of securities included in
the Pledged Collateral which may be sold by Collateral Agent as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
(e) The Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign Governmental
Authority, Collateral Agent may be compelled, with respect to any sale of all
or any part of the Pledged Collateral, to limit purchasers to those who meet
the requirements of such foreign Governmental Authority. The Pledgor
acknowledges that any such sales may be at prices and on terms less favorable
to Collateral Agent than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
restricted sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales.
(f) In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking
specific performance in connection with any of the agreements or obligations
hereunder.
(g) Without limiting the generality of the provisions in Section 15
hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full
power of substitution, its true and lawful attorney-in-fact, in its name, place
and stead to take any action upon the occurrence and during the continuance of
an Event of Default required to reflect the foreclosure sale of the Pledged
Collateral or the exercise of any remedy hereunder. The foregoing grant of
authority is a power of attorney coupled with an interest and
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such appointment shall be irrevocable for the term of this Agreement.
Section 11. Application of Proceeds. All Distributions held from time
to time by Collateral Agent and all cash proceeds received by Collateral Agent
in respect of any sale of, collection from, or other realization upon all or
any part of the Pledged Collateral pursuant to the exercise by Collateral Agent
of its remedies as a secured creditor as provided in Section 10 hereof shall be
applied, together with any other sums then held by Collateral Agent pursuant to
this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable compensation to Collateral Agent
and its agents and counsel, and all reasonable expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Second, to the payment of all other reasonable costs and expenses of
such sale, collection or other realization, including, without limitation,
reasonable compensation to the Banks and their agents and counsel and all
reasonable expenses, liabilities and advances made or incurred by the Banks
in connection therewith, together with interest on each such amount at the
highest rate then in effect under the Credit Agreement from and after the
date such amount is due, owing or unpaid until paid in full;
Third, to the indefeasible payment in full in cash of interest and all
amounts other than principal under the Credit Agreement at any time and
from time to time owing by the Pledgor under or in connection with the
Credit Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable,
together with
<PAGE> 239
interest on each such amount at the highest rate then in effect under the
Credit Agreement from and after the date such amount is due, owing or
unpaid until paid in full;
Fourth, to the indefeasible payment in full in cash of principal at
any time and from time to time owing by the Pledgor under or in connection
with the Credit Agreement, ratably according to the unpaid amounts thereof,
without preference or priority of any kind, among amounts of principal so
due and payable, together with interest on each such amount at the highest
rate then in effect under the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full; and
Fifth, to the applicable Pledgor, or its successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
Section 12. Expenses. The Pledgor will upon demand pay to Collateral
Agent the amount of any and all expenses, including the reasonable fees and
expenses of its counsel and the fees and expenses of any experts and agents,
which Collateral Agent may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of Collateral Agent or any Secured Party
hereunder or (v) the failure by the Pledgor to perform or observe any of the
provisions hereof. All amounts payable by the Pledgor under this Section 12
shall be due upon demand and shall be part of the Secured Obligations. The
Pledgor's obligations under this Section 12 shall survive the termination of
this Agreement and the discharge of such Pledgor's other obligations hereunder.
Section 13. No Waiver; Cumulative Remedies.
<PAGE> 240
(a) No failure on the part of Collateral Agent to exercise, no course
of dealing with respect to, and no delay on the part of Collateral Agent in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
(b) In the event Collateral Agent shall have instituted any proceeding
to enforce any right, power or remedy under this instrument by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to Collateral
Agent, then and in every such case, each Pledgor, Collateral Agent and each
holder of any of the Secured Obligations shall be restored to their respective
former positions and rights hereunder with respect to the Pledged Collateral,
and all rights, remedies and powers of Collateral Agent and the Secured Parties
shall continue as if no such proceeding had been instituted.
Section 14. Collateral Agent. Collateral Agent has been appointed as
collateral agent pursuant to the Credit Agreement. The actions of Collateral
Agent hereunder are subject to the provisions of the Credit Agreement.
Collateral Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Pledged Collateral), in accordance with this Agreement and the
Credit Agreement. Collateral Agent may resign and a successor Collateral Agent
may be appointed in the manner provided in the Credit Agreement; provided,
however, that at the time of appointment of a successor Collateral Agent, if
Collateral Agent, through its possession, control, or ownership of Pledged
Collateral or otherwise, holds, owns, or controls any Governmental License
issued by the FCC such that the FCC must consent to the appointment of a
successor Collateral Agent, until the FCC has consented to the appointment of a
successor Collateral Agent the Collateral Agent shall retain control over such
Pledged Collateral or Government Licenses. Upon the acceptance of any
appointment as Collateral Agent by a successor Collateral Agent, that successor
Collateral Agent
<PAGE> 241
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Collateral Agent under this Agreement,
and the retiring Collateral Agent shall thereupon be discharged from its duties
and obligations under this Agreement. After any retiring Collateral Agent's
resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it
was Collateral Agent.
Section 15. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of such Pledgor
contained herein shall be breached, Collateral Agent or any Secured Party may
(but shall not be obligated to), subject to the provisions of Section 29 of
this Agreement, do the same or cause it to be done or remedy any such breach,
and may expend funds for such purpose. Any and all amounts so expended by
Collateral Agent or such Secured Party shall be paid by such Pledgor promptly
upon demand therefor, with interest at the highest rate then in effect under
the Credit Agreement during the period from and including the date on which
such funds were so expended to the date of repayment. The Pledgor's
obligations under this Section 15 shall survive the termination of this
Agreement and the discharge of such Pledgor's other obligations under this
Agreement, the Credit Agreement and any other Credit Document. The Pledgor
hereby appoints Collateral Agent its attorney-in-fact with an interest, with
full authority in the place and stead of such Pledgor and in the name of such
Pledgor, or otherwise, from time to time in Collateral Agent's discretion to
take any action and to execute any instrument consistent with the terms of
this Agreement and the other Credit Documents which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Agreement except
that with respect to any FCC applications or filings or other action subject to
FCC rules, regulations and policies, Collateral Agent shall serve as
attorney-in-fact only to the extent permitted under the Communications Act and
FCC rules, regulations and policies. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. The Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
<PAGE> 242
Section 16. Indemnity.
(a) Indemnity. The Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and each of the Secured Parties and the officers, directors,
employees, agents and affiliates of Collateral Agent and each of the Secured
Parties (collectively called the "Indemnitees") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs),
expenses or disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or any other Credit Document (including, without limitation, any
misrepresentation by the Pledgor in this Agreement or any other Credit
Document) (the "indemnified liabilities"); provided that the Pledgors shall not
have any obligation to an Indemnitee hereunder with respect to indemnified
liabilities if it has been determined by a final decision (after all appeals
and the expiration of time to appeal) by a court of competent jurisdiction that
such indemnified liability arose from the gross negligence or willful
misconduct of that Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each Pledgor
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnitees or any of them.
(b) Survival. The obligations of each Pledgor contained in this
Section 16 shall survive the termination of this Agreement and the discharge of
each Pledgor's other obligations under this Agreement and under the other
Credit Documents.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
such Indemnitee has the right to
<PAGE> 243
reimbursement shall constitute Secured Obligations secured by the Pledged
Collateral.
Section 17. Modification in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by the Pledgor therefrom, shall be effective unless
the same shall be done in accordance with the terms of the Credit Agreement and
unless in writing and signed by Collateral Agent and Pledgor. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement or any
other Credit Document, no notice to or demand on the Pledgor in any case shall
entitle any such Pledgor to any other or further notice or demand in similar or
other circumstances.
Section 18. Termination; Release. When all the Secured Obligations
have been indefeasibly paid in full and the Commitments of the Banks to make
any Loan under the Credit Agreement shall have expired, this Agreement shall
terminate. Upon termination of this Agreement or any release of Pledged
Collateral in accordance with the provisions of the Credit Agreement,
Collateral Agent shall, upon the request and at the sole cost and expense of
the applicable Pledgor, forthwith assign, transfer and deliver to such Pledgor,
against receipt and without recourse to or warranty by Collateral Agent, such
of the Pledged Collateral to be released (in the case of a release) as may be
in the possession of Collateral Agent and as shall not have been sold or
otherwise applied pursuant to the terms hereof, on the order of and at the sole
cost and expense of such Pledgor, and proper instruments (including UCC
termination statements on Form UCC-3) acknowledging the termination of this
Agreement or the release of such Pledged Collateral, as the case may be.
Section 19. Notices. Unless otherwise provided herein or in the
Credit Agreement, any notice or other communication herein required or
permitted to be given shall be given in the manner set forth in the Credit
Agreement;
<PAGE> 244
provided that notices to Collateral Agent shall not be effective until received
by Collateral Agent.
Section 20. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon each Pledgor, its respective successors and assigns, and
(ii) inure, together with the rights and remedies of Collateral Agent
hereunder, to the benefit of Collateral Agent and the other Secured Parties and
each of their respective successors, transferees and assigns; no other Persons
(including, without limitation, any other creditor of the Pledgor) shall have
any interest herein or any right or benefit with respect hereto. Without
limiting the generality of the foregoing clause (ii), any Bank may assign or
otherwise transfer any indebtedness held by it secured by this Agreement to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Bank, herein or otherwise, subject
however, to the provisions of the Credit Agreement.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS AMERICAN TELECASTING,
INC., WITH AN ADDRESS AT 5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS,
COLORADO 80919, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE
PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE
ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY
<PAGE> 245
SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
THE PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF
SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE PLEDGOR AT ITS
ADDRESS PROVIDED FOR IN SECTION 19 HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE PLEDGOR REFUSES TO
RECEIVE AND FORWARD SUCH SERVICE, THE PLEDGOR HEREBY AGREES THAT SERVICE UPON
IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF
ANY OTHER JURISDICTION.
Section 23. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original, but all such counterparts together shall constitute one and the
same agreement.
Section 25. Headings. The Section headings used in this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
Section 26. Obligations Absolute. All obligations of the Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Pledgor or any
other Credit Party;
<PAGE> 246
(ii) any lack of validity or enforceability of the Credit
Agreement, the Guarantee or any other Credit Document or any other
agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Guarantee, any other Credit Document or any other agreement
or instrument relating thereto;
(iv) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, the
Guarantee or any other Credit Document except as specifically set forth in
a waiver granted pursuant to the provisions of Section 17 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any other Pledgor.
Section 27. Collateral Agent's Right to Sever Indebtedness.
(a) The Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of the
Secured Obligations and that the Secured Obligations are also secured by other
types of property of such Pledgor and its Affiliates in other jurisdictions
(all such property, collectively, the " "), (ii) the number of such
jurisdictions and the nature of the transaction of which this instrument is a
part are such that it would have been impracticable for the parties to allocate
to each item of Collateral a specific loan amount and to
<PAGE> 247
execute in respect of such item a separate credit agreement, and (iii) each
Pledgor intends that Collateral Agent have the same rights with respect to the
Pledged Collateral, in any judicial proceeding relating to the exercise of any
right or remedy hereunder or otherwise, that Collateral Agent would have had if
each item of collateral had been pledged or encumbered pursuant to a separate
credit agreement and security instrument. In furtherance of such intent, each
Pledgor agrees to the greatest extent permitted by law that Collateral Agent
may at any time by notice (an "Allocation Notice") to the Pledgor allocate a
portion of the Secured Obligations (the "Allocated Indebtedness") to the
Pledged Collateral of such Pledgor and sever from the remaining Secured
Obligations the Allocated Indebtedness. From and after the giving of an
Allocation Notice with respect to the Pledged Collateral, the Secured
Obligations hereunder shall be limited to the extent set forth in the
Allocation Notice and (as so limited) shall, for all purposes, be construed as
a separate credit obligation of each Pledgor unrelated to the other
transactions contemplated by the Credit Agreement or any other Credit Document
or any document related to either thereof. To the extent that the proceeds of
any judicial proceeding relating to the exercise of any right or remedy
hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness,
such proceeds shall belong to such Pledgor and shall not be available hereunder
to satisfy any Secured Obligations of such Pledgor other than the Allocated
Indebtedness. In any action or proceeding to exercise any right or remedy
under this Agreement which is commenced after the giving by Collateral Agent of
an Allocation Notice, the Allocation Notice shall be conclusive proof of the
limits of the Secured Obligations hereby secured, and the Pledgor may
introduce, by way of defense or counterclaim, evidence thereof in any such
action or proceeding. Notwithstanding any provision of this Section 27, the
proceeds received by Collateral Agent pursuant to this Agreement shall be
applied by Collateral Agent in accordance with the provisions of Section 11
hereof.
(b) The Pledgor hereby waives to the greatest extent permitted under
law the right to a discharge of any of the Secured Obligations under any
statute or rule of law now or hereafter in effect which provides that the
exercise of any particular right or
<PAGE> 248
remedy as provided for herein (by judicial proceedings or otherwise)
constitutes the exclusive means for satisfaction of the Secured Obligations or
which makes unavailable any further judgment or any other right or remedy
provided for herein because Collateral Agent elected to proceed with the
exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, no Pledgor shall (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against such
Pledgor of any remedy in the Credit Agreement, the Guarantee or any other
agreement or instrument executed in connection with the Credit Agreement or
(ii) seek to have such judgment recognized or entered in any other
jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction where rendered and only with
respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 27, including,
without limitation, any amendment to this Agreement, any substitute promissory
note or affidavit or certificate of any kind, Collateral Agent may execute and
deliver such instrument as the attorney-in-fact of the Pledgor.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 27 shall be effective only to the maximum extent
permitted by law.
Section 28. Future Advances. This Agreement shall secure the payment
of any amounts advanced from time to time pursuant to the Credit Agreement.
Section 29. Facilitating Governmental Approvals; Specific Performance.
(a) In connection with the exercise by Collateral Agent of its rights
under this Agreement relating to the disposition of the Pledged Collateral as
it may affect the control of any Governmental License issued by the FCC or any
other authorizations, agreements, permits, licenses, and
<PAGE> 249
franchises of the Pledgor, it may be necessary to obtain the prior consent or
approval of the FCC or other Governmental Authority to the exercise of
Collateral Agent's rights with respect to the Pledged Collateral. To the
extent that any such consent or approval is required for any action that
Collateral Agent may take under this Agreement with respect to the Pledged
Collateral, receipt of such FCC or Governmental Authority approval shall be a
condition precedent to Collateral Agent's exercise of such rights. In
furtherance of the first sentence of this Section, the Pledgor hereby agrees,
at its own cost, to use its best efforts to take any and all actions which
Collateral Agent may request in order to obtain such consents or approvals or
any other governmental authorization as may be necessary to enable Collateral
Agent to exercise and enjoy the full rights and benefits granted to it under
this Agreement, the Credit Agreement, or any other Credit Document, including,
without limitation, the preparation, execution, delivery or filing on the
Pledgor's behalf and in such Pledgor's name, or in such other name as may be
appropriate or required, or causing to be prepared, executed, delivered or
filed, all applications, certificates, filings, instruments, information,
reports and other documents (including, without limitation, any application for
any assignment or transfer of control or ownership).
(b) The Pledgor hereby acknowledges that a breach of any of its
respective obligations contained in this Agreement will cause irreparable
injury to Collateral Agent, and that such a breach would not be adequately
compensable in damages, and therefore Pledgors agree that their obligations
under this Agreement shall be specifically enforceable.
<PAGE> 250
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
AMERICAN TELECASTING OF GREEN BAY, INC.,
as Pledgor
By: /s/ AMERICAN TELECASTING OF GREEN
BAY, INC.
-----------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By: /s/ BANQUE INDOSUEZ
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Notice Address:
Banque Indosuez, New York Branch
1211 Avenue of the Americas
New York, N.Y. 10036
Attention: Michael Arougheti
<PAGE> 251
SCHEDULE I
Pledged Shares
<PAGE> 252
<TABLE>
<CAPTION>
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER SECURITY VALUE NO(S) OF SHARES ISSUER
- ------ -------- ----- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 253
SCHEDULE II
Intercompany Notes
<TABLE>
<CAPTION>
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
- ------ --------- -------- -------- --------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 254
EXHIBIT 1
PLEDGE AMENDMENT
This Pledge Amendment, dated , 199 , is delivered pursuant to
Section 5 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of February 24, 1997, made by the undersigned (as defined in the
Securities Pledge Agreement), in favor of Banque Indosuez, New York Branch, as
Collateral Agent (the "Agreement"; capitalized terms used herein and not
defined have the meanings ascribed to them in the Credit Agreement) and that
the Pledged Shares listed on this Pledge Amendment shall be deemed to be and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
---------------------------------------
By:
-----------------------------------
Title:
<PAGE> 255
SCHEDULE I
Pledged Shares
<TABLE>
<CAPTION>
PERCENTAGE OF
ALL CAPITAL OR
OTHER EQUITY
CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF
ISSUER SECURITY VALUE NO(S) OF SHARES ISSUER
- ------ -------- ----- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 256
SCHEDULE II
Intercompany Notes
<TABLE>
<CAPTION>
PRINCIPAL DATE OF INTEREST MATURITY
ISSUER AMOUNT ISSUANCE RATE DATE
- ------ --------- -------- -------- --------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 257
-1-
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT (the "Agreement"), dated as of February 26,
1997, made by each of the subsidiaries party hereto (collectively, the
"Pledgors"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at
1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacity, "Collateral
Agent") for the lending institutions (the "Banks") from time to time party to
the Credit Agreement (as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used herein and
not defined shall have the meanings assigned to them in the Credit Agreement),
among American Telecasting, Inc. ("ATel"), the Banks and Banque Indosuez, New
York Branch, as Agent for the Banks, the Banks have agreed to make to or for
the account of ATel Loans up to an aggregate principal amount of $17,000,000.
B. Pledgors are the legal and beneficial owners of the Pledged
Collateral (as hereinafter defined).
C. Pledgors have executed and delivered to Collateral Agent a certain
guarantee instrument (the "Guarantee") pursuant to which, among other things,
Pledgors have guaranteed the obligations of ATel under the Credit Agreement,
and Pledgors desire that their obligations under such Guarantee be secured
hereunder.
D. It is a condition to the obligations of the Banks to make the
Loans under the Credit Agreement that Pledgors execute and deliver the
applicable Credit Documents, including this Agreement.
______________________________________
Footnote continued from previous page.
<PAGE> 258
-2-
E. This Agreement is given by Pledgors in favor of Collateral Agent
for its benefit and the benefit of the Banks and the Agent (collectively, the
"Secured Parties") to secure the payment and performance of all of the Secured
Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Pledgors and Collateral Agent hereby agree as follows:
Pledge. As collateral security for the payment and performance when
due of all the Secured Obligations, Pledgors hereby pledge, assign, transfer
and grant to Collateral Agent for its benefit and the benefit of the Secured
Parties, a continuing first priority security interest (except as set forth on
Schedule A hereto) in and to all of the right, title and interest of Pledgors
in, to and under the following property, whether now existing or hereafter
acquired (collectively, the "Pledged Collateral"):
each and every Receivable (as hereinafter defined);
all Inventory (as hereinafter defined);
all books, records, ledgers, print-outs, file materials and other
papers containing information relating to Receivables and any account
debtors in respect thereof, together with all Contracts (as hereinafter
defined);
all Equipment (as hereinafter defined); provided, however, that the
security interest granted hereby in respect of any transmission and
reception equipment utilized to transmit on ITFS frequencies shall be
subject and subordinate to the terms of the System Agreements and the
rights of the licensees of the ITFS frequencies under the System
Agreements;
______________________________________
Footnote continued from previous page.
<PAGE> 259
-3-
all Intangibles (as hereinafter defined);
all Insurance Policies (as hereinafter defined);
all Pension Plan Reversions (as hereinafter defined);
all Governmental Licenses, but only as and to the extent permitted by
applicable law and administrative rules and regulations (including the
rules and regulations promulgated by the FCC);
all System Agreements (other than channel lease agreements), but only
as and to the extent permitted by applicable law and administrative rules
and regulations (including the rules and regulations promulgated by the
FCC);
any and all property of every name and nature which from time to time
after the date hereof, by delivery or by writing of any kind for the
purposes hereof, shall have been conveyed, mortgaged, pledged, assigned or
transferred by Pledgors or by anyone on a Pledgor's behalf or with its
consent to Collateral Agent for the benefit of the Secured Parties, which
is hereby authorized to receive at any and all times any such property, as
and for additional security for the payment of the Secured Obligations and
to hold and apply such property subject to and in accordance with this
Agreement; including, without limitation, all monies due and to become due
to Pledgors in connection with any of the foregoing and all rights,
remedies, powers, privileges and claims of Pledgors under or in connection
therewith;
all Documents (as hereinafter defined);
all Instruments (as hereinafter defined); and
______________________________________
Footnote continued from previous page.
<PAGE> 260
-4-
all Proceeds (as hereinafter defined) of any and all of the foregoing.
Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would
accrue and become due but for the filing of a petition in bankruptcy or the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)), of (i) all Obligations of Pledgors now existing or
hereafter arising under or in respect of the Guarantee (including, without
limitation, Pledgors' obligations to pay principal, interest and all other
charges, fees, expenses, commissions, reimbursements, premiums, indemnities and
other payments related to or in respect of the obligations contained in the
Guarantee), (ii) all Obligations of the Pledgors now existing or hereafter
arising under or in respect of the Credit Agreement (including, without
limitation, the obligations of Pledgors to pay principal, interest and all
other reasonable charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of the
Obligations contained in the Credit Agreement) and (iii) without duplication of
the amounts described in clauses (i) and (ii), all obligations of Pledgors now
existing or hereafter arising under or in respect of this Agreement or any
other Security Document, including, without limitation, all reasonable charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and other
payments related to or in respect of the obligations contained in this
Agreement or in any other Security Document, in each case whether in the
regular course of business or otherwise (the obligations described in clauses
(i), (ii) and (iii), collectively, the "Secured Obligations").
No Release. Nothing set forth in this Agreement shall relieve
Pledgors from the performance of any term, covenant, condition or agreement on
Pledgors' part to be performed or observed under or in respect of any of the
Pledged Collateral or from any liability to any Person under or in respect of
any of the Pledged Collateral or shall impose any obligation on Collateral
Agent or any Secured Party to perform or observe any such term, covenant,
condition or agreement on Pledgors' part to be so performed or observed or
shall impose
______________________________________
Footnote continued from previous page.
<PAGE> 261
-5-
any liability on Collateral Agent or any Secured Party for any act or omission
on the part of Pledgors relating thereto or for any breach of any
representation or warranty on the part of Pledgors contained in this Agreement
or any other Credit Document, or under or in respect of the Pledged Collateral
or made in connection herewith or therewith. The obligations of Pledgors
contained in this Section 3 shall survive the termination of this Agreement and
the discharge of Pledgors' other obligations under this Agreement or the other
Credit Documents.
Supplements by Collateral Agent. Pledgors hereby authorize Collateral
Agent, without relieving Pledgors of any obligations hereunder, to file
financing statements, continuation statements, amendments thereto and other
documents relative to all or any part thereof, without the signature of
Pledgors where permitted by law, and Pledgors agree to do such further acts and
things, and to execute and deliver to Collateral Agent such additional
assignments, agreements, powers and instruments, as Collateral Agent may deem
necessary or appropriate, wherever required or permitted by law in order to
perfect and preserve the rights and interests granted to Collateral Agent
hereunder or to carry into effect the purposes of this Agreement or better to
assure and confirm unto Collateral Agent its respective rights, powers and
remedies hereunder. All of the foregoing shall be at the sole cost and expense
of Pledgors.
Representations, Warranties and Covenants. Pledgors represent,
warrant and covenant as follows:
Necessary Filings. Upon the filing of financing statements and
acceptance thereof in the appropriate offices under the UCC, the security
interest granted to Collateral Agent for the benefit of the Secured Parties
pursuant to this Agreement in and to the Pledged Collateral will constitute
a perfected security interest therein, superior and prior to the rights of
all other Persons therein and subject to no Liens other than the Liens
identified on Schedule A relating to the items of Pledged Collateral
identified on such schedule (collectively, "Prior Liens").
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No Liens. Pledgors are as of the date hereof, and, as to Pledged
Collateral acquired by them from time to time after the date hereof,
Pledgors will be, the owner of all Pledged Collateral free from any Lien or
other right, title or interest of any Person other than (i) Prior Liens,
(ii) the Lien and security interest created by this Agreement, (iii) Liens
of the type described in clauses (a), (b), (c), (d), (i) and (j) of the
definition of Permitted Encumbrances and (iv) Liens for taxes being
contested in accordance with the Credit Agreement, and Pledgors shall
defend the Pledged Collateral against all claims and demands of all Persons
at any time claiming any interest therein adverse to Collateral Agent or
any Secured Party.
Other Financing Statements. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in
the Pledged Collateral other than financing statements relating to (i)
Prior Liens, (ii) this Agreement and (iii) Liens of the type described in
clauses (a), (b), (c), (d), (i) and (j) of the definition of Permitted
Encumbrances and so long as any of the Secured Obligations remain unpaid or
the Commitments of the Banks to make any Loan shall not have expired or
been sooner terminated, Pledgors shall not execute, authorize or permit to
be filed in any public office any financing statement (or similar statement
or instrument of registration under the law of any jurisdiction) or
statements relating to the Pledged Collateral, except, in each case,
financing statements filed or to be filed in respect of and covering the
security interests granted by Pledgors pursuant to this Agreement,
financing statements relating to Prior Liens and financing statements
relating to Liens of the type described in clauses (a), (b), (c), (d) and
(i) of the definition of Permitted Encumbrances.
Chief Executive Office; Records. The chief executive office of each
of Pledgors is located at 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919. Each Pledgor shall not move its chief executive office
except to such new location as it may establish in accordance with the last
sentence of this Section 5(d). All tangible
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evidence of all Receivables, Pension Plan Reversions, Contracts,
Intangibles, Insurance Policies, System Agreements and Governmental
Licenses of each Pledgor and the only original books of account and records
of each Pledgor relating thereto are, and will continue to be, kept at such
chief executive office, or at such new location for such chief executive
office as each Pledgor may establish in accordance with the last sentence
of this Section 5(d). All Receivables, Pension Plan Reversions, Contracts,
Intangibles, Insurance Policies, System Agreements and Governmental
Licenses of each Pledgor are, and will continue to be, controlled and
monitored (including, without limitation, for general accounting purposes)
from such chief executive office location shown above, or such new location
as a Pledgor may establish in accordance with the last sentence of this
Section 5(d). Pledgors shall not establish a new location for their chief
executive office nor change their name until (i) it shall have given
Collateral Agent not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location or name and
providing such other information in connection therewith as Collateral
Agent or any Secured Party may request, and (ii) with respect to such new
location or name, Pledgors shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted
hereby, including, without limitation, obtaining waivers of landlord's or
warehouseman's liens with respect to such new location, if applicable.
Location of Inventory. All Inventory held on the date hereof by each
Pledgor is located at one of the locations shown with respect to each such
Pledgor on Schedule B hereto, except for Inventory in transit in the
ordinary course of business to or from one or more of such locations or
such inventory located at the premises of subscribers in the ordinary
course of business. All Inventory now held or subsequently acquired shall
be kept at one of the locations shown on Schedule B hereto with respect to
each Pledgor, except for Inventory in transit in the ordinary course of
business to or from one or more of such locations or such Inventory located
at the premises of subscribers in the ordinary course of
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business, or at such new location as a Pledgor may establish if (i) such
Pledgor shall have given to Collateral Agent reasonable prior written
notice of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as Collateral
Agent or any Secured Party may request, and (ii) with respect to such new
location, Pledgors shall have taken all action satisfactory to Collateral
Agent and the Secured Parties to maintain the perfection and priority of
the security interest in the Pledged Collateral intended to be granted
hereby, including, without limitation, obtaining waivers of landlord's or
warehouseman's liens with respect to such new location, if applicable.
Location of Equipment. All Equipment held on the date hereof by each
Pledgor is located at one of the locations shown with respect to each such
Pledgor on Schedule C hereto. All Equipment now held or subsequently
acquired by Pledgors shall be kept at one of the locations shown on
Schedule C hereto with respect to each Pledgor except for such Equipment
located at the premises of subscribers in the ordinary course of business,
or such new location as a Pledgor may establish if (i) such Pledgor shall
have given to Collateral Agent reasonable prior written notice of its
intention so to do, clearly describing such new location and providing such
other information in connection therewith as Collateral Agent or any
Secured Party may request, and (ii) with respect to such new location,
Pledgors shall have taken all action satisfactory to Collateral Agent and
the Secured Parties to maintain the perfection and priority of the security
interest of Collateral Agent for the benefit of the Secured Parties in the
Pledged Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location, if applicable.
Authorization, Enforceability. Pledgors have the requisite corporate
power, authority and legal right to pledge and grant a security interest in
all the Pledged Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of Pledgors,
enforceable against Pledgors in accordance with
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its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
No Consents, etc. Except as set forth in Part_B of Schedule D hereto,
no consent of any party (including, without limitation, stockholders or
creditors of Pledgors or any account debtor under a Receivable) and, except
as provided in Section 30 of this Agreement, no consent, authorization,
approval, license or other action by, and no notice to or filing with, any
Governmental Authority or regulatory body or other Person is required for
(x) the pledge by Pledgors of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement
by Pledgors, (y) the exercise by Collateral Agent of the rights provided
for in this Agreement, or (z) the exercise by Collateral Agent of the
remedies in respect of the Pledged Collateral pursuant to this Agreement
other than internal consents of the Collateral Agent.
Pledged Collateral. All information set forth herein, including the
Schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Secured Party in connection
with this Agreement, in each case, relating to the Pledged Collateral is
accurate and complete in all material respects.
System Agreements. The System Agreements listed on Schedule D hereto
are all of the System Agreements the Pledgors and ATel have entered into
with respect to Pledgors' and ATel's operation or planned development of
their System in effect on the date hereof. Such System Agreements have
been delivered to the Banks and are true and correct copies thereof.
Except as to matters which would not, individually or in the aggregate,
materially diminish the value of any Market, the System Agreements are in
full force and effect, have not been amended or modified except as
disclosed on Schedule D hereto, have not been assigned by any Pledgor, and
no Pledgor has sent
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or received any notice of default thereunder and to the best knowledge of
Pledgors no event has occurred as of the date hereof which with the passage
of time or the giving of notice, or both, would constitute a default
thereunder as of the date hereof. Each Pledgor shall perform and observe
(except as otherwise provided by law) each term and provision of each
System Agreement and maintain each System Agreement in full force and
effect except in the ordinary course of business consistent with past
practice and to the extent such actions would not have a Material Adverse
Effect.
No Amendments. Except as permitted by Section 6.10 of the Credit
Agreement, each Pledgor agrees that no amendment or modification of any
material term of any System Agreement shall be effective without the prior
written consent of Collateral Agent. Each Pledgor further agrees that, so
long as this Agreement is in effect, such Pledgor will not terminate any
System Agreement and will not assign, sell, pledge, mortgage or otherwise
transfer or encumber its interest in any System Agreement except in the
ordinary course of business consistent with past practice and to the extent
such actions would not have a Material Adverse Effect.
No Defaults. Neither the execution nor the delivery of this Agreement
constitutes the basis for a default under any System Agreement.
Notices. Each Pledgor shall notify Collateral Agent in the event it
receives any material notice or communication with respect to any System
Agreement, including, without limitation, notices of default, and shall
promptly forward copies of any such communications to Collateral Agent.
Default Under System Agreements. To the extent permitted under the
terms of any System Agreement and the terms of the written consent of the
lessor under any such System Agreement, in the event of a default by any
Pledgor under any System Agreement, the lessor under such agreement shall
permit Collateral Agent to cure such
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default and thereafter perform any of such Pledgor's obligations under such
System Agreement, and such performance by Collateral Agent will not
constitute a default under such System Agreement.
Governmental Licenses. Except as to matters which would not,
individually or in the aggregate, materially diminish the value of any
Market, the Governmental Licenses listed on Schedule E hereto are all of
the Governmental Licenses each Pledgor holds, leases or subleases in
connection with the operation of its System on the date hereof. All such
Governmental Licenses are validly existing and in full force and effect
under the Communications Act and any other statutes, laws, and regulations
pursuant to which the Governmental Licenses have been issued, including the
rules and regulations of the FCC. There is not now pending, or to the
knowledge of any Pledgor is there threatened, any action by or before any
governmental agency or entity, including the FCC, to revoke or materially
and adversely modify any of such Governmental Licenses issued to such
Pledgor, and such Pledgor is in substantial compliance with said
Governmental Licenses. There are not, or to the knowledge of any Pledgor
threatened, any notice of violation, notice of apparent liability or of
forfeiture or material complaint against such Pledgor in connection with
the System, except as incurred in the ordinary course of business and would
not have a Material Adverse Effect.
Special Provisions Concerning Receivables.
Special Representations and Warranties. As of the time when each of
its Receivables arises, each Pledgor shall be deemed to have represented
and warranted that such Receivable and all records, papers and documents
relating thereto to such Pledgor's knowledge (i) are genuine and correct
and in all respects what they purport to be, (ii) represent the legal,
valid and binding obligation of the account debtor, evidencing indebtedness
unpaid and owed by such account debtor, arising out of the performance of
labor or services or the sale or lease and delivery of the merchandise
listed therein or out of an advance or a loan, (iii) will, in the case of a
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Receivable, except for the original or duplicate original invoice sent to a
purchaser evidencing such purchaser's account, be the only original
writings evidencing and embodying such obligation of the account debtor
named therein, (iv) constitute and evidence true and valid obligations,
enforceable in accordance with their respective terms, not subject to any
defenses, set-offs or counterclaims except with respect to refunds, returns
and allowances in the ordinary course of business, or stamp or other taxes,
and (v) are in compliance and conform with all applicable federal, state
and local laws and applicable laws of any relevant foreign jurisdiction.
Maintenance of Records. Pledgors shall keep and maintain at their own
cost and expense complete records of each Receivable, in a manner
consistent with prudent business practice, including, without limitation,
records of all payments received, all credits granted thereon, all
merchandise returned and all other documentation relating thereto, and
Pledgors shall make the same available to Collateral Agent or any Secured
Party for inspection upon reasonable prior notice to such Pledgors, at such
times during normal business hours as Collateral Agent or an Secured Party
may request. Pledgors shall, at Pledgors' sole cost and expense, upon
Collateral Agent's demand made at any time after the occurrence of an Event
of Default, deliver all tangible evidence of Receivables, including,
without limitation, all documents evidencing Receivables and any books and
records relating thereto to Collateral Agent or to its representatives
(copies of which evidence and books and records may be retained by
Pledgors). Upon the occurrence of an Event of Default, Collateral Agent
may transfer a full and complete copy of each Pledgor's books, records,
credit information, reports, memoranda and all other writings relating to
the Receivables to and for the use by any Person that has acquired or is
contemplating acquisition of an interest in the Receivables or Collateral
Agent's security interest therein without the consent of such Pledgor;
provided that, to the extent any such document is subject to a
confidentiality agreement, Collateral Agent shall not transfer such
document unless such Person executes a confidentiality agreement in a form
satisfactory to the Collateral Agent.
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Legend. Pledgors shall legend, at the request of Collateral Agent
made at any time after the occurrence of an Event of Default and in form
and manner satisfactory to Collateral Agent, the Receivables and other
books, records and documents of Pledgors evidencing or pertaining to the
Receivables with an appropriate reference to the fact that the Receivables
have been assigned to Collateral Agent for the benefit of the Secured
Parties and that Collateral Agent has a security interest therein.
Modification of Terms, etc. Pledgors shall not rescind or cancel any
indebtedness evidenced by any Receivable or modify any term thereof or make
any adjustment with respect thereto except in the ordinary course of
business consistent with past business practice, or extend or renew any
such indebtedness except in the ordinary course of business consistent with
past business practice or compromise or settle any material dispute, claim,
suit or legal proceeding relating thereto or sell any Receivable or
interest therein without the prior written consent of Collateral Agent.
Pledgors shall timely fulfill all material obligations on their part to be
fulfilled under or in connection with the Receivables.
Collection. Pledgors shall cause to be collected from the account
debtor of each of the Receivables, as and when due (including, without
limitation, Receivables that are delinquent, such Receivables to be
collected in accordance with generally accepted commercial collection
procedures), any and all amounts owing under or on account of such
Receivable, and apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Receivable, except that
Pledgors may, with respect to a Receivable, allow in the ordinary course of
business (i) a refund or credit due as a result of returned or damaged or
defective merchandise and (ii) such extensions of time to pay amounts due
in respect of Receivables and such other modifications of payment terms or
settlements in respect of Receivables as shall be commercially reasonable
in the circumstances, all in accordance with Pledgors' ordinary course of
business consistent with their collection practices as in effect from time
to time. The costs and expenses (including, without limitation, attorneys'
fees) of collection, in any
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case, whether incurred by Pledgors, Collateral Agent or any Secured Party,
shall be paid by Pledgors.
Instruments. Pledgors shall deliver to Collateral Agent, within five
days after receipt thereof by Pledgors, any Instrument evidencing
Receivables which is in the principal amount of $25,000 or more. Any
Instrument delivered to Collateral Agent pursuant to this Section 6(f)
shall be appropriately endorsed (if applicable) to the order of Collateral
Agent, as agent for the Secured Parties, and shall be held by Collateral
Agent as further security hereunder.
Cash Collateral. Upon the occurrence of an Event of Default, if
Collateral Agent so directs, Pledgors shall cause all payments on account
of the Receivables to be held by Collateral Agent as cash collateral, upon
acceleration or otherwise. Without notice to or assent by Pledgors,
Collateral Agent may apply any or all amounts then or thereafter held as
cash collateral in the manner provided in Section 11. The costs and
expenses (including, without limitation, reasonable attorneys' fees) of
collection, whether incurred by Collateral Agent or any Secured Party,
shall be paid by Pledgors.
Provisions Concerning All Pledged Collateral.
Protection of Collateral Agent's Security. Pledgors shall not take
any action that impairs the rights of Collateral Agent or any Secured Party
in the Pledged Collateral. Pledgors shall at all times keep the Inventory
and Equipment insured, at Pledgors' own expense, to Collateral Agent's
reasonable satisfaction against fire, theft and all other risks to which
the Pledged Collateral may be subject, in such amounts and with such
deductibles as would be maintained by operators of businesses similar to
the business of Pledgors or as Collateral Agent may otherwise reasonably
require. Each policy or certificate with respect to such insurance shall
be endorsed to Collateral Agent's satisfaction for the benefit of
Collateral Agent (including, without limitation, by naming Collateral Agent
as an additional
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named insured and sole loss payee as Collateral Agent may request) and such
policy or certificate shall be delivered to Collateral Agent. Each such
policy or certificate shall state that such policy cannot be cancelled
without 30 days' prior written notice to Collateral Agent. At least 30
days prior to the expiration of any such policy of insurance, Pledgors
shall deliver to Collateral Agent an extension or renewal policy or an
insurance certificate evidencing renewal or extension of such policy. If
Pledgors shall fail to insure such Pledged Collateral to Collateral Agent's
reasonable satisfaction, Collateral Agent shall have the right (but shall
be under no obligation) to advance funds to procure or renew or extend such
insurance and Pledgors agree to reimburse Collateral Agent for all costs
and expenses thereof, with interest on all such funds from the date
advanced until paid in full at the highest rate then in effect under the
Credit Agreement.
Insurance Proceeds. Upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the option to apply any
proceeds of insurance received by it pursuant to this Agreement toward the
payment of the Secured Obligations in accordance with Section 11 hereof or
to continue to hold such proceeds as additional collateral to secure the
performance by each Pledgor of the Secured Obligations. So long as no
Event of Default shall have occurred and be continuing, each Pledgor shall
have the option (i) to direct Collateral Agent to apply any proceeds of
insurance received by it toward payment of the Secured Obligations in
accordance with Section 11 hereof or (ii) to elect, by delivery of written
notice to Collateral Agent, to apply the proceeds of such insurance to the
repair or replacement of the item or items of Pledged Collateral in respect
of which such proceeds were received. In the event that any Pledgor elects
to apply such proceeds to the repair or replacement of any item of Pledged
Collateral pursuant to clause (ii) of the preceding sentence, Collateral
Agent shall release such proceeds as soon as practicable following its
receipt of such Pledgor's written notice of such election. Such Pledgor
shall upon its receipt of such proceeds promptly commence and diligently
continue to perform such repair or promptly effect such replacement.
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Maintenance of Equipment. Each Pledgor shall cause the Equipment to
be operated in compliance with all applicable FCC requirements and
maintained and preserved in the same condition, repair and working order as
when new, ordinary wear and tear excepted, and to the extent consistent
with current business practice in accordance with any manufacturer's
manual, and shall forthwith, or in the case of any loss or damage which
(individually or in the aggregate) exceeds $100,000 to any of the Equipment
(of which prompt notice shall be given to Collateral Agent) as quickly as
commercially practicable after the occurrence thereof, make or cause to be
made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable to such end.
Payment of Taxes; Claims. Pledgors shall pay promptly when due all
property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Pledged Collateral including all fees assessed or
imposed by the FCC; provided, that, no such tax, assessment, charge, levy
or claim shall be required to be paid to the extent that it is being
diligently contested in good faith and by appropriate proceedings.
Notwithstanding the foregoing, Pledgors may at their own expense contest
the amount or applicability of any of the obligations described in the
preceding sentence by appropriate legal or administrative proceedings,
prosecution of which operates to prevent the collection thereof and the
sale or forfeiture of the Pledged Collateral or any part thereof to satisfy
the same; provided, however, that in connection with such contest, Pledgors
shall have made provision for the payment of such contested amount on
Pledgors' books if and to the extent required by generally accepted
accounting principles.
Further Actions. Pledgors shall, at their sole cost and expense,
make, execute, endorse, acknowledge, file or refile and/or deliver to
Collateral Agent from time to time such lists, descriptions and
designations of the Pledged Collateral, copies of warehouse receipts,
receipts in the nature of warehouse receipts, bills of lading, documents of
title, vouchers, invoices, schedules,
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confirmatory assignments, supplements, additional security agreements,
conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and
take such further steps relating to the Pledged Collateral and other
property or rights covered by the security interest hereby granted, which
Collateral Agent deems reasonably appropriate or advisable to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral and to perfect, preserve or protect the security interest in the
Pledged Collateral created and granted by this Agreement.
Financing Statements. Pledgors shall sign and deliver to Collateral
Agent such financing and continuation statements, in form acceptable to
Collateral Agent, as may from time to time be required to continue and
maintain a valid, enforceable, first priority security interest in the
Pledged Collateral as are to the extent provided herein and the other
rights, as against third parties, provided hereby, all in accordance with
the UCC as enacted in any and all relevant jurisdictions or any other
relevant law. Pledgors shall pay any applicable filing fees and other
expenses related to the filing of such financing and continuation
statements. Pledgors authorize Collateral Agent to file any such financing
or continuation statements without the signature of Pledgors where
permitted by law.
Warehouse Receipts Non-Negotiable. If any warehouse receipt or
receipt in the nature of a warehouse receipt is issued with respect to any
of the Inventory, Pledgors shall not permit such warehouse receipt or
receipt in the nature thereof to be "negotiable" (as such term is used in
Section 7-104 of the UCC or under other relevant law).
Transfers and Other Liens. Pledgors shall not (a) sell, convey,
assign or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral except as permitted by the Credit Agreement or (b) create or
permit to exist any Lien upon or with respect to any of the Pledged Collateral
other than (i) Prior Liens, (ii) the Lien and security interest granted to
Collateral Agent under this
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Agreement, (iii) Liens of the type described in clauses (a), (b), (c), (d), (i)
and (j) of the definition of Permitted Encumbrances and (iv) Liens for taxes
being contested in accordance with the Credit Agreement.
Reasonable Care. Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which Collateral Agent, in its individual capacity, accords
its own property, it being understood that Collateral Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
Person with respect to any Pledged Collateral.
Remedies upon Default; Obtaining the Pledged Collateral upon Event of
Default. (a) Subject to any necessary prior or subsequent FCC approval, if an
Event of Default shall have occurred, then and in every such case, Collateral
Agent may:
Personally, or by agents or attorneys, immediately take possession of
the Pledged Collateral or any part thereof, from Pledgors or any other
Person who then has possession of any part thereof with or without notice
or process of law, and for that purpose may enter upon Pledgors' premises
where any of the Pledged Collateral is located and remove such Pledged
Collateral and use in connection with such removal any and all services,
supplies, aids and other facilities of Pledgors.
Instruct the obligor or obligors on any agreement, instrument or other
obligation (including, without limitation, the Receivables, the Contracts
and the System Agreements) constituting the Pledged Collateral to make any
payment required by the terms of such instrument or agreement directly to
Collateral Agent; provided, however, that in the event that any such
payments are made directly to Pledgors, prior to receipt by any such
obligor of such instruction, Pledgors shall segregate all amounts received
pursuant thereto in a separate account and pay the same promptly to
Collateral Agent.
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Sell, assign or otherwise liquidate, or direct Pledgors to sell,
assign or otherwise liquidate, any or all investments made in whole or in
part with the Pledged Collateral or any part thereof, and take possession
of the proceeds of any such sale, assignment or liquidation.
Take possession of the Pledged Collateral or any part thereof, by
directing Pledgors in writing to deliver the same to Collateral Agent at
any place or places so designated by Collateral Agent, in which event
Pledgors shall at their own expense: (A) forthwith cause the same to be
moved to the place or places designated by Collateral Agent and there
delivered to Collateral Agent; (B) store and keep any Pledged Collateral so
delivered to Collateral Agent at such place or places pending further
action by Collateral Agent; and (C) while the Pledged Collateral shall be
so stored and kept, provide such security and maintenance services as shall
be necessary to protect the same and to preserve and maintain them in good
condition. Pledgors' obligation to deliver the Pledged Collateral is of
the essence of this Agreement. Upon application to a court of equity
having jurisdiction, Collateral Agent shall be entitled to a decree
requiring specific performance by Pledgors of such obligation.
Collateral Agent shall be entitled to the appointment, as a matter of
right and without giving notice to any Pledgor, of a receiver with respect
to the Pledged Collateral, without regard to the adequacy or inadequacy of
any Pledged Collateral for the Secured Obligations or the solvency or
insolvency of any Person or entity then legally or equitably liable for the
Secured Obligations or any portion thereof, and each Pledgor does hereby
irrevocably consent to such appointment. Any such receiver shall have all
the usual qualifications, powers and duties of receivers in similar cases,
including the full power to conduct the business of such Pledgor.
Subject to the provisions of Section 30 of this Agreement, Collateral
Agent may assume the rights and obligations under any System Agreement, and
in connection therewith request that any Pledgor or its subsidiaries
immediately take all steps and actions necessary for the
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assignment of such System Agreements to Collateral Agent, and such Pledgor
or its subsidiaries shall immediately take all such steps and actions
necessary for the effective assignment of such System Agreements to
Collateral Agent, including, without limitation, the execution of an
assignment of lease and obtaining the consent of any Persons which is or
may be required for the assignment of such System Agreements to Collateral
Agent. Collateral Agent shall have the right to seek specific performance
of Pledgors' obligations under this Section 10 in accordance with Section
30 of this Agreement.
Remedies; Disposition of the Pledged Collateral. (i) Upon the
occurrence of an Event of Default, Collateral Agent may from time to time,
subject to any necessary prior or subsequent FCC approval, exercise in
respect of the Pledged Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC, and Collateral Agent
may also in its sole discretion, without notice except as specified below,
sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as
Collateral Agent may deem commercially reasonable. Collateral Agent or any
other Secured Party or any of their respective Affiliates may be the
purchaser of any or all of the Pledged Collateral at any such sale and
shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Pledged
Collateral sold at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of the purchase
price of any Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely free
from any claim or right on the part of Pledgors, and Pledgors hereby waive,
to the fullest extent permitted by law, all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
Collateral Agent shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given.
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Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgors hereby waive, to the fullest extent permitted by law,
any claims against Collateral Agent arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public
sale, even if Collateral Agent accepts the first offer received and does
not offer such Pledged Collateral to more than one offeree.
(ii) Pledgors acknowledge and agree that, to the extent notice of
sale shall be required by law, five days' notice to Pledgors of the time and
place of any public sale or of the time after which any private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters. No notification need be given to Pledgors if it
has signed, after the occurrence of an Event of Default, a statement renouncing
or modifying any right to notification of sale or other intended disposition.
Waiver of Notice and Claims. Pledgors hereby waive, to the fullest
extent permitted by applicable law, notice or judicial hearing in
connection with Collateral Agent's taking possession or Collateral Agent's
disposition of any of the Pledged Collateral, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy
or remedies and any such right which Pledgors would otherwise have under
law, and Pledgors hereby further waive, to the fullest extent permitted by
applicable law: (i) all damages occasioned by such taking of possession;
(ii) all other requirements as to the time, place and terms of sale or
other requirements with respect to the enforcement of Collateral Agent's
rights hereunder; and (iii) all rights of redemption, appraisal, valuation,
stay, extension or moratorium now or hereafter in force under any
applicable law. Collateral Agent shall not be liable for any incorrect or
improper payment made pursuant to this Section 10 in the absence of gross
negligence or willful misconduct. Any sale of, or the grant of options to
purchase, or any other realization upon, any Pledged Collateral shall
operate to divest all right, title, interest, claim and demand, either at
law or in equity, of Pledgors therein and thereto, and shall be a perpetual
bar
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both at law and in equity against Pledgors and against any and all Persons
claiming or attempting to claim the Pledged Collateral so sold, optioned or
realized upon, or any part thereof, from, through or under Pledgors.
Certain Sales of Pledged Collateral. Pledgors recognize that, by
reason of certain prohibitions contained in law, rules, regulations or
orders of any foreign Governmental Authority, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged
Collateral, to limit purchasers to those who meet the requirements of such
foreign Governmental Authority. Pledgors acknowledge that any such sales
may be at prices and on terms less favorable to Collateral Agent than those
obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale
shall be deemed to have been made in a commercially reasonable manner.
Application of Proceeds. The proceeds received by Collateral Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Pledged Collateral pursuant to the exercise by Collateral Agent of
its remedies as a secured creditor as provided in Section 10 hereof shall be
applied, together with any other sums then held by Collateral Agent pursuant to
this Agreement, promptly by Collateral Agent as follows:
First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable compensation to Collateral Agent
and its agents and counsel, and all reasonable expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Second, to the payment of all other costs and expenses of such sale,
collection or other realization,
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including, without limitation, compensation to the Banks and their agents
and counsel and all reasonable expenses, liabilities and advances made or
incurred by the Banks in connection therewith, together with interest on
each such amount at the highest rate then in effect under the Credit
Agreement from and after the date such amount is due, owing or unpaid until
paid in full;
Third, to the indefeasible payment in full in cash of interest and all
amounts other than principal under the Credit Agreement at any time and
from time to time owing by Pledgors under or in connection with the Credit
Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Fourth, to the indefeasible payment in full in cash of principal at
any time and from time to time owing by Pledgors under or in connection
with the Credit Agreement, ratably according to the unpaid amounts thereof,
without preference or priority of any kind, among amounts of principal so
due and payable, together with interest on each such amount at the highest
rate then in effect under the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full; and
Fifth, to the Pledgors, or their respective successors or assigns, or
to whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
Expenses. Pledgors will upon demand pay to Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and the reasonable fees and expenses of any experts and
agents which Collateral Agent may incur in connection with (i) the collection
of the Secured Obligations, (ii) the enforcement and administration of this
Agreement, (iii) the custody or
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preservation of, or the sale of, collection from, or other realization upon,
any of the Pledged Collateral, (iv) the exercise or enforcement of any of the
rights of Collateral Agent or any Secured Party hereunder or (v) the failure by
Pledgors to perform or observe any of the provisions hereof. All amounts
payable by Pledgors under this Section 12 shall be due upon demand and shall be
part of the Secured Obligations. Pledgors' obligations under this Section 12
shall survive the termination of this Agreement and the discharge of Pledgors'
other obligations hereunder.
No Waiver; Cumulative Remedies. (a) No failure on the part of
Collateral Agent to exercise, no course of dealing with respect to, and no
delay on the part of Collateral Agent in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
(b) In the event Collateral Agent shall have instituted any proceeding
to enforce any right, power or remedy under this Agreement by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to Collateral
Agent, then and in every such case, Pledgors, Collateral Agent and each Secured
Party shall be restored to their respective former positions and rights
hereunder with respect to the Pledged Collateral, and all rights, remedies and
powers of Collateral Agent and the Secured Parties shall continue as if no such
proceeding had been instituted.
Collateral Agent. Collateral Agent has been appointed as collateral
agent pursuant to the Credit Agreement. The actions of Collateral Agent
hereunder are subject to the provisions of the Credit Agreement. Collateral
Agent shall have the right hereunder to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking action (including, without limitation, the release or substitution of
Pledged Collateral), in accordance with this Agreement and the Credit
Agreement. Collateral Agent
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may resign and a successor Collateral Agent may be appointed in the manner
provided in the Credit Agreement; provided, however, that at the time of
appointment of a successor Collateral Agent, if Collateral Agent, through its
possession, control, or ownership of Pledged Collateral or otherwise, holds,
owns, or controls any Governmental License issued by the FCC such that the FCC
must consent to the appointment of a successor Collateral Agent, until the FCC
has consented to the appointment of a successor Collateral Agent the Collateral
Agent shall retain control over such Pledged Collateral or Government Licenses.
Upon the acceptance of any appointment as Collateral Agent by a successor
Collateral Agent, that successor Collateral Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent under this Agreement, and the retiring Collateral
Agent shall thereupon be discharged from its duties and obligations under this
Agreement. After any retiring Collateral Agent's resignation, the provisions
of this Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it under this Agreement while it was Collateral Agent.
Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If Pledgors shall fail to do any act or thing that they have
covenanted to do hereunder or if any warranty on the part of Pledgors contained
herein shall be breached, Collateral Agent or any Secured Party may (but shall
not be obligated to), subject to Section 30 of this Agreement, do the same or
cause it to be done or remedy any such breach, and may expend funds for such
purpose. Any and all reasonable amounts so expended by Collateral Agent or
such Secured Party shall be paid by Pledgors promptly upon demand therefor,
with interest at the highest rate then in effect under the Credit Agreement
during the period from and including the date on which such funds were so
expended to the date of repayment. Pledgors' obligations under this Section 15
shall survive the termination of this Agreement and the discharge of Pledgors'
other obligations under this Agreement, the Credit Agreement and the other
Credit Documents. Pledgors hereby appoint Collateral Agent their
attorney-in-fact, with full authority in the place and stead of Pledgors and in
the name of Pledgors, or otherwise, from time to time in Collateral Agent's
discretion to take any action and to execute any instrument consistent with the
terms of this Agreement and the other Credit Documents which Collateral Agent
may deem necessary or advisable to
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accomplish the purposes of this Agreement, except that with respect to any FCC
applications or filings or other actions subject to FCC rules, regulations or
policy, Collateral Agent shall serve as attorney-in-fact only to the extent
permitted under the Communications Act and FCC rules, regulations and policies.
The foregoing grant of authority is a power of attorney coupled with an
interest and such appointment shall be irrevocable for the term of this
Agreement. Pledgors hereby ratify all that such attorney shall lawfully do or
cause to be done by virtue hereof.
Indemnity.
Indemnity. Pledgors agree to indemnify, pay and hold harmless
Collateral Agent and each of the Secured Parties and the officers,
directors, employees, agents and Affiliates of Collateral Agent and each of
the Secured Parties (collectively, the "Indemnitees") from and against any
and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs (including, without limitation,
settlement costs), expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or
not such Indemnitee shall be designated a party thereto), which may be
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or any other Credit Document
(including, without limitation, any misrepresentation by Pledgors in this
Agreement or any other Credit Document) (the "indemnified liabilities");
provided that Pledgors shall have no obligation to an Indemnitee hereunder
with respect to indemnified liabilities if it has been determined by a
final decision (after all appeals and the expiration of time to appeal) of
a court of competent jurisdiction that such indemnified liability arose
from the gross negligence or willful misconduct of that Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of
any law or public policy, Pledgors shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law, to the
payment and
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satisfaction of all indemnified liabilities incurred by the Indemnitees or
any of them.
Survival. The obligations of Pledgors contained in this Section 16
shall survive the termination of this Agreement and the discharge of
Pledgors' other obligations under this Agreement and under the other Credit
Documents.
Reimbursement. Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by Pledgors therefrom, shall be effective unless the same shall
be made in accordance with the terms of the Credit Agreement and unless in
writing and signed by Collateral Agent and Pledgors. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement and any consent to any departure by Pledgors
from the terms of any provision of this Agreement shall be effective only in
the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement or any other
Credit Document, no notice to or demand on Pledgors in any case shall entitle
Pledgors to any other or further notice or demand in similar or other
circumstances.
Termination; Release. When all the Secured Obligations have been paid
in full and the Commitments of the Banks to make any Loan shall have expired or
been sooner terminated, this Agreement shall terminate. Upon termination of
this Agreement or any release of Pledged Collateral in accordance with the
provisions of the Credit Agreement, Collateral Agent shall, upon the request
and at the sole cost and expense of Pledgors, forthwith assign, transfer and
deliver to Pledgors, against receipt and without recourse to or warranty by
Collateral Agent, such of the Pledged Collateral to be released (in the case of
a release) as may be in possession of Collateral Agent and as shall not have
been sold or otherwise applied pursuant to the terms hereof, and, with
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respect to any other Pledged Collateral, proper instruments (including UCC
termination statements on Form UCC-3) acknowledging the termination of this
Agreement or the release of such Pledged Collateral, as the case may be.
Definitions. The following terms shall have the following meanings.
All such definitions shall be equally applicable to the singular and plural
forms of the terms defined.
"Communications Act" shall mean the Communications Act of 1934, as
amended, or any successor statute or law.
"Contracts" shall mean all right, title and interest of Pledgors in,
to and under, or derived from, any and all sale, service, performance and
equipment lease contracts, agreements and grants (whether written or oral),
channel lease agreements, and any other contract (whether written or oral)
between Pledgors and third parties other than Excluded Contracts.
"Documents" shall have the meaning assigned to that term under the
UCC.
"Equipment" shall mean "equipment", as such term is defined in the
UCC, and, in any event shall include, without limitation, all equipment used in
connection with any single or multichannel multipoint distribution service,
instructional television fixed service or operational-fixed microwave service
or other audio and video, including television, reception and distribution
systems or franchises either presently or hereafter owned or operated by any
Pledgor, all machinery, equipment, office machinery, furniture, conveyors,
tools, materials, storage and handling equipment, automotive equipment, cameras
and other studio equipment, amplifiers, transmitters, converters and similar
equipment, cables, antennae, earth stations, connections, transmitting towers
and associated equipment, reception, processing and distribution equipment,
interconnection and control equipment, cable television and electronic data
communications equipment, recreational equipment, and related goods and
equipment,
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meters, oscilloscopes, test sets, electrical power equipment, security systems
equipment, coaxial cable systems (or parts thereof) and microwave relay systems
for the transmission and distribution of electromagnetic signals, including but
not limited to all trunk, feeder and drop and coaxial cables and all electronic
equipment, amplifiers, house drops, head ends, converters, repeaters, power
supplies, batteries, controls, fittings, splitters and directional couplers
incorporated therein or attached thereto, and all other equipment of every kind
and nature, wherever situated, and owned by any Pledgor or in which any Pledgor
may have any interest (to the extent of such interest), all modifications,
alterations, repairs, substitutions, additions and accessions thereto, all
replacements and all parts therefor, and together with all substitutes for any
of the foregoing.
"Excluded Contracts" shall mean contracts which prohibit the
assignment, transfer or the grant of a security interest therein or which
terminate upon any such assignment, transfer or grant; provided that each
channel lease agreement which prohibits such assignment, transfer or grant
shall be deemed a "Contract" hereunder on the date any Pledgor receives a
consent to such assignment, transfer or the grant of a security interest
therein.
"FCC" shall mean the Federal Communications Commission or any
governmental body or agency succeeding to the functions thereof.
"Governmental Authority" means any federal, state, local, foreign or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission or other similar dispute-resolving
body including, without limitation, those governing the regulation and
protection of the environment.
"Governmental Licenses" shall mean any radio, television or other
license, permit, certificate or approval granted or issued by the FCC or any
other Governmental Authority (including, without limitation, any single or
multichannel multipoint distribution service, operational-fixed
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microwave service, local multipoint distribution service, instructional
television fixed service, cable antenna relay service, or experimental licenses
or permits issued by the FCC) described in Schedule E hereto or hereafter
acquired in connection with the System.
"Instrument" shall have the meaning assigned that term under the UCC.
"Insurance Policies" shall mean all insurance policies held by
Pledgors or naming any Pledgor as insured, additional insured or loss payee
(including, without limitation, casualty insurance, liability insurance,
property insurance and business interruption insurance) and all such insurance
policies entered into after the date hereof other than insurance policies (or
certificates of insurance evidencing such insurance policies) relating to
health and welfare insurance and life insurance policies in which any Pledgor
is not named as beneficiary (i.e., insurance policies that are not "Key Man"
insurance policies).
"Intangibles" shall mean "general intangibles", as such term is
defined in the UCC, and, in any event shall include, without limitation, all
manuals, blueprints, know-how, warranties and records in connection with the
Equipment; all documents of title or documents representing the Inventory and
all records, files and writings with respect thereto; any and all other rights,
claims and causes of action of Pledgors against any other Person and the
benefits of any and all collateral or other security given by any other Person
in connection therewith, including, without limitation, all rights under any
Contracts other than Excluded Contracts; all information, customer lists,
identification of suppliers, data, plans, blueprints, specification designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, materials, standards, processing standards, performance standards,
catalogs, research data, computer and automatic machinery software and
programs, and the like pertaining to operations by Pledgors; all information
relating to sales of products now or hereafter manufactured, distributed or
franchised by Pledgors; all accounting information pertaining to Pledgors'
operations or any of the Equipment, Inventory, Receivables or Intangibles and
all media in which or on which
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any of the information or knowledge or data or records relating to such
operations or any of the Equipment, Inventory, Receivables, Contracts or
Intangibles may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data; all
rights and goodwill of Pledgors; all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held by
Pledgors pertaining to operations now or hereafter conducted by Pledgors or
assets now or hereafter held by Pledgors; all causes of action, claims and
warranties now or hereafter owned or acquired by Pledgors; and any other
property consisting of a general intangible under the UCC applicable in such
other location where Pledgors maintain its records relating to such property.
"Inventory" shall mean, all "inventory", as such term is defined in
the UCC, and, in any event, shall include, without limitation, wherever
located, and whether now existing or hereafter acquired, all raw materials,
work in process, returned goods, finished goods, samples and consigned goods to
the extent of the consignee's interest therein, materials and supplies of any
kind or nature which are or might be used in connection with the manufacture,
printing, publication, packing, shipping, advertising, selling or finishing of
any such goods, and all other products, goods, materials and supplies.
"Pension Plan Reversions" shall mean Pledgors' right to receive the
surplus funds, if any, which are payable to Pledgors following the termination
of any employee pension plan and the satisfaction of all liabilities of
participants and beneficiaries under such plan in accordance with applicable
law.
"Proceeds" shall mean all "proceeds", as such term is defined in the
UCC or under other relevant law, and, in any event, shall include, without
limitation, any and all (i) proceeds of any insurance (except payments made to
a Person which is not a party to this Agreement), indemnity, warranty or
guaranty payable to Collateral Agent or to Pledgors from time to time with
respect to any of the Pledged Collateral, (ii) payments (in any form
whatsoever) made or due and payable to Pledgors from time to time in connection
with any
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requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Pledged Collateral by any Governmental Authority (or any person
acting on behalf of a Governmental Authority), (iii) instruments representing
obligations to pay amounts in respect of Equipment, Intangibles, Inventory or
Receivables, (iv) products of the Pledged Collateral and (v) other amounts from
time to time paid or payable under or in connection with any of the Pledged
Collateral.
"Receivables" shall mean all "accounts," as such term is defined in
the UCC, and in any event shall include, without limitation, all of Pledgors'
rights to payment for goods sold or leased or services performed by Pledgors or
any other party, whether now in existence or arising from time to time
hereafter, and all rights evidenced by an account, contract other than Excluded
Contracts, security agreement, chattel paper, or other evidence of indebtedness
or security together with (i) all security pledged, assigned, hypothecated or
granted to or held by Pledgors to secure the foregoing, (ii) general
intangibles arising out of Pledgors' rights in any goods, the sale of which
gave rise thereto, (iii) all guarantees, endorsements and indemnifications on,
or of, any of the foregoing, (iv) all powers of attorney for the execution of
any evidence of indebtedness or security or other writing in connection
therewith, and (v) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured
parties, and certificates from filing or other registration officers.
"System" shall mean, collectively, the MDS, MMDS, ITFS, and other
similar television distribution and reception systems (including any non-video
service provided over such facilities) constructed and operated, or to be
constructed and operated by the Credit Parties to provide a wireless cable
service pursuant to the System Agreements and all rights incident or
appurtenant to such System Agreements.
"System Agreements" shall mean, collectively, all material
instruments, leases, licenses, permits and agreements of the Credit Parties,
whether now existing, or hereafter
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acquired or obtained, relating to the construction and operation of the System.
"UCC" means the Uniform Commercial Code as in effect in any relevant
jurisdiction.
Notices. Unless otherwise provided herein or in the Credit Agreement,
any notice or other communication herein required or permitted to be given
shall be given in the manner set forth in the Credit Agreement, as to either
party, addressed to it at the address set forth in the Credit Agreement or at
such other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section 20;
provided that notices to Collateral Agent shall not be effective until received
by Collateral Agent.
Continuing Security Interest; Assignment. This Agreement shall create
a continuing security interest in the Pledged Collateral and shall (i) be
binding upon Pledgors, their successors and assigns and (ii) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Persons (including, without
limitation, any other creditor of Pledgors) shall have any interest herein or
any right or benefit with respect hereto. Without limiting the generality of
the foregoing clause (ii), any Bank may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank, herein or otherwise, subject however, to the
provisions of the Credit Agreement.
GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
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CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGORS WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT PLEDGORS ACCEPT FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
PLEDGORS DESIGNATE AND APPOINT AMERICAN TELECASTING, INC., WITH AN ADDRESS AT
5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS, COLORADO 80919 AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY PLEDGORS IRREVOCABLY AGREEING IN
WRITING TO SO SERVE, AS THEIR AGENT TO RECEIVE ON THEIR BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
PLEDGORS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO PLEDGORS AT THEIR
ADDRESSES PROVIDED FOR IN THE CREDIT AGREEMENT EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY PLEDGORS REFUSES TO
ACCEPT SERVICE, PLEDGORS HEREBY AGREE THAT SERVICE UPON THEM BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGORS IN THE COURTS OF ANY
OTHER JURISDICTION.
Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
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Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Obligations Absolute. All obligations of Pledgors hereunder shall be
absolute and unconditional irrespective of:
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of either of any Pledgor or any other
Credit Party;
any lack of validity or enforceability of the Credit Agreement, the
Guarantee or any other Credit Document, or any other agreement or
instrument relating thereto;
any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, the Guarantee or any other Credit Document, or any other
agreement or instrument relating thereto;
any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, the Guarantee or
any other Credit Document except as specifically set forth in a waiver
granted pursuant to the provisions of Section 17 hereof; or
any other circumstances which might otherwise constitute a defense
available to, or a discharge of, Pledgors.
______________________________________
Footnote continued from previous page.
<PAGE> 292
-36-
Collateral Agent's Right to Sever Indebtedness. (a) Pledgors
acknowledge that (i) the Pledged Collateral does not constitute the sole source
of security for the payment and performance of the Secured Obligations and that
the Secured Obligations are also secured by other types of property of Pledgors
and their Affiliates in other jurisdictions (all such property, collectively,
the "Collateral"), (ii) the number of such jurisdictions and the nature of the
transaction of which this instrument is a part are such that it would have been
impracticable for the parties to allocate to each item of Collateral a specific
loan amount and to execute in respect of such item a separate credit agreement,
and (iii) Pledgors intend that Collateral Agent have the same rights with
respect to the Pledged Collateral, in any judicial proceeding relating to the
exercise of any right or remedy hereunder or otherwise, that Collateral Agent
would have had if each item of Collateral had been pledged or encumbered
pursuant to a separate credit agreement and security instrument. In
furtherance of such intent, Pledgors agree to the greatest extent permitted by
law that Collateral Agent may at any time by notice (an "Allocation Notice") to
Pledgors allocate a portion of the Secured Obligations (the "Allocated
Indebtedness") to all or a specified portion of the Pledged Collateral and
sever from the remaining Secured Obligations the Allocated Indebtedness. From
and after the giving of an Allocation Notice with respect to any of the Pledged
Collateral, the Secured Obligations hereunder shall be limited to the extent
set forth in the Allocation Notice and (as so limited) shall, for all purposes,
be construed as a separate credit obligation of Pledgors unrelated to the other
transactions contemplated by the Credit Agreement, any other Credit Document or
any document related to any thereof. To the extent that the proceeds of any
judicial proceeding relating to the exercise of any right or remedy hereunder
of the Pledged Collateral shall exceed the Allocated Indebtedness, such
proceeds shall belong to Pledgors and shall not be available hereunder to
satisfy any Secured Obligations of Pledgors other than the Allocated
Indebtedness. In any action or proceeding to exercise any right or remedy
under this Agreement which is commenced after the giving by Collateral Agent of
an Allocation Notice, the Allocation Notice shall be conclusive proof of the
limits of the Secured Obligations hereby secured, and Pledgors may introduce,
by way of defense or counterclaim, evidence thereof in any such action or
proceeding. Notwithstanding any provision of this Section 28, the proceeds
received by Collateral Agent pursuant to this
______________________________________
Footnote continued from previous page.
<PAGE> 293
-37-
Agreement shall be applied by Collateral Agent in accordance with the
provisions of Section 11 hereof.
(b) Pledgors hereby waive to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial proceedings or
otherwise) constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable any further judgment or any other right
or remedy provided for herein because Collateral Agent elected to proceed with
the exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, Pledgors shall not (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against
Pledgors of any remedy in the Credit Agreement or any other Credit Document or
(ii) seek to have such judgment recognized or entered in any other
jurisdiction, and any such judgment shall in all events be limited in
application only to the state or jurisdiction where rendered and only with
respect to the collateral referred to in such judgment.
(c) In the event any instrument in addition to the Allocation Notice
is necessary to effectuate the provisions of this Section 28, including,
without limitation, any amendment to this Agreement, any substitute promissory
note or affidavit or certificate of any kind, Collateral Agent may execute and
deliver such instrument as the attorney-in-fact of Pledgors. Such power of
attorney is coupled with an interest and is irrevocable.
(d) Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 28 shall be effective only to the maximum extent
permitted by law.
______________________________________
Footnote continued from previous page.
<PAGE> 294
-38-
Future Advances. This Agreement shall secure the payment of any
amounts advanced from time to time pursuant to the Credit Agreement.
Facilitating Governmental Approvals; Specific Performance. (a) In
connection with the exercise by Collateral Agent of its rights under this
Agreement relating to the disposition of or operation of the Pledged Collateral
under any licenses issued by the FCC or any other authorizations, agreements,
permits, licenses, and franchises of any Pledgor, it may be necessary to obtain
the prior consent or approval of the FCC or other governmental authority to the
exercise of rights with respect to the Pledged Collateral. To the extent that
any such consent or approval is required for any action that Collateral Agent
may take under this Agreement with respect to the Pledged Collateral, receipt
of such FCC or governmental authority approval shall be a condition precedent
to Collateral Agent's exercise of such rights. In furtherance of the first
sentence of this Section, each Pledgor hereby agrees, at its own cost, to use
its best efforts to take any and all actions which Collateral Agent may request
in order to obtain such consents or approvals or any other governmental
authorization as may be necessary to enable Collateral Agent to exercise and
enjoy the full rights and benefits granted to it under this Agreement, the
Credit Agreement, or any other Credit Document, including, without limitation,
the preparation, execution, delivery or filing on any Pledgor's behalf and in
any Pledgor's name, or in such other name as may be appropriate or required, or
causing to be prepared, executed, delivered or filed, all applications,
certificates, filings, instruments, information, reports and other documents
(including, without limitation, any application for any assignment or transfer
of control of ownership).
(b) Each Pledgor hereby acknowledges that a breach of any of its
obligations contained in this Agreement will cause irreparable injury to
Collateral Agent, and that such a breach would not be adequately compensable in
damages, and therefore each Pledgor agrees that its obligations under this
Agreement shall be specifically enforceable.
Non-Disturbance. To the extent required to obtain a security interest
under any Contract in the event of a
______________________________________
Footnote continued from previous page.
<PAGE> 295
-39-
foreclosure or other action taken pursuant to such security interest the rights
of the counterparty under such Contract will continue in full force and effect
so long as the counterparty is not in default thereunder.
______________________________________
Footnote continued from previous page.
<PAGE> 296
-40-
IN WITNESS WHEREOF, Pledgors and Collateral Agent have caused this
Agreement to be duly executed and delivered by their duly authorized officers
as of the date first above written.
AMERICAN TELECASTING DEVELOPMENT INC.
By: /s/ AMERICAN TELECASTING DEVELOPMENT INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF ANCHORAGE, INC.
By: /s/ AMERICAN TELECASTING OF ANCHORAGE, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BEND, INC.
By: /s/ AMERICAN TELECASTING OF BEND, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF BILLINGS, INC.
By: /s/ AMERICAN TELECASTING OF BILLINGS, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 297
-41-
Title:
AMERICAN TELECASTING OF BISMARK, INC.
By: /s/ AMERICAN TELECASTING OF
BISMARK, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CENTRAL
FLORIDA, INC.
By: /s/ AMERICAN TELECASTING OF CENTRAL
FLORIDA, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF CINCINNATI, INC.
By: /s/ AMERICAN TELECASTING OF
CINCINNATI, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF COLORADO
SPRINGS, INC.
By: /s/ AMERICAN TELECASTING OF
COLORADO SPRINGS, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 298
-42-
AMERICAN TELECASTING OF COLUMBUS, INC.
By: /s/ AMERICAN TELECASTING OF
COLUMBUS, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF DENVER, INC.
By: /s/ AMERICAN TELECASTING OF
DENVER, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF FORT COLLINS,
INC.
By: /s/ AMERICAN TELECASTING OF FORT
COLLINS, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 299
-43-
AMERICAN TELECASTING OF FORT MYERS, INC.
By: /s/ AMERICAN TELECASTING OF FORT MYERS, INC.
-----------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF GREEN BAY, INC.
By: /s/ AMERICAN TELECASTING OF GREEN BAY, INC.
-----------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF HAWAII, INC.
By: /s/ AMERICAN TELECASTING OF HAWAII, INC.
-----------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSON, INC.
By: /s/ AMERICAN TELECASTING OF JACKSON, INC.
-----------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF JACKSONVILLE,
INC.
By: /s/ AMERICAN TELECASTING OF JACKSONVILLE, INC.
-----------------------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 300
-44-
AMERICAN TELECASTING OF LANSING, INC.
By: /s/ AMERICAN TELECASTING OF LANSING, INC.
---------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF LINCOLN, INC.
By: /s/ AMERICAN TELECASTING OF LINCOLN, INC.
---------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF LITTLE ROCK,
INC.
By: /s/ AMERICAN TELECASTING OF LITTLE ROCK, INC.
---------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF LOUISVILLE, INC.
By: /s/ AMERICAN TELECASTING OF LOUISVILLE, INC.
---------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF MEDFORD, INC.
By: /s/ AMERICAN TELECASTING OF MEDFORD, INC.
---------------------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 301
-45-
AMERICAN TELECASTING OF MICHIANA, INC.
By: /s/ AMERICAN TELECASTING OF MICHIANA, INC.
--------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF MINNESOTA, INC.
By: /s/ AMERICAN TELECASTING OF MINNESOTA, INC.
--------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF MONTEREY, INC.
By: /s/ AMERICAN TELECASTING OF MONTEREY, INC.
--------------------------------------------
Name:
Title:
AMERICAN TELECASTING OF NEBRASKA, INC.
By: /s/ AMERICAN TELECASTING OF NEBRASKA, INC.
--------------------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 302
-46-
AMERICAN TELECASTING OF NORTH DAKOTA,
INC.
By: /s/ AMERICAN TELECASTING OF NORTH
DAKOTA, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF OKLAHOMA, INC.
By: /s/ AMERICAN TELECASTING OF
OKLAHOMA, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF PORTLAND, INC.
By: /s/ AMERICAN TELECASTING OF
PORTLAND, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF RAPID CITY INC.
By: /s/ AMERICAN TELECASTING OF RAPID
CITY, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 303
-47-
AMERICAN TELECASTING OF REDDING, INC.
By: /s/ AMERICAN TELECASTING OF
REDDING, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF ROCKFORD, INC.
By: /s/ AMERICAN TELECASTING OF
ROCKFORD, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SALEM/EUGENE,
INC.
By: /s/ AMERICAN TELECASTING OF
SALEM/EUGENE, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SANTA BARBARA,
INC.
By: /s/ AMERICAN TELECASTING OF SANTA
BARBARA, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SANTA ROSA, INC.
By: /s/ AMERICAN TELECASTING OF SANTA
ROSA, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 304
-48-
AMERICAN TELECASTING OF SARASOTA, INC.
By: /s/ AMERICAN TELECASTING OF
SARASOTA, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SHERIDAN, INC.
By: /s/ AMERICAN TELECASTING OF
SHERIDAN, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SIOUX VALLEY,
INC.
By: /s/ AMERICAN TELECASTING OF SIOUX
VALLEY, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF SOUTH DAKOTA,
INC.
By: /s/ AMERICAN TELECASTING OF SOUTH
DAKOTA, INC.
-----------------------------------
Name:
Title:
______________________________________
Footnote continued from previous page.
<PAGE> 305
-49-
AMERICAN TELECASTING OF TOLEDO, INC.
By: /s/ AMERICAN TELECASTING OF
TOLEDO, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YOUNGSTOWN, INC.
By: /s/ AMERICAN TELECASTING OF
YOUNGSTOWN, INC.
-----------------------------------
Name:
Title:
AMERICAN TELECASTING OF YUBA CITY, INC.
By: /s/ AMERICAN TELECASTING OF
YUBA CITY, INC.
-----------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH as
Collateral Agent
By: /s/ BANQUE INDOSUEZ
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE> 306
______________________________________
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
February 26, 1997, is made and entered into by and among AMERICAN TELECASTING,
INC., a Delaware corporation (the "Company"), and the holders (collectively,
together with their assigns, the "Holders") of the Warrants (as defined
herein).
WHEREAS, concurrently with the issuance of the Warrants the Company is
entering into this Agreement to define the rights which exist among the
Holders, on the one hand, and the Company, on the other, with respect to the
registration of the Common Stock (as defined herein) into which the Warrants
are exercisable;
NOW, THEREFORE, in consideration of the mutual premises, agreements
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE
Definitions
For purposes of this Agreement, the following terms shall have the
following respective meanings (each such meaning to be equally applicable to
the singular and plural forms thereof):
"Agreement" means this Registration Rights Agreement.
"Commission" shall mean the Securities and Exchange Commission, and
any other similar or successor agency of the federal government at the time
administering the Securities Act or the Securities Exchange Act.
______________________________________
Footnote continued from previous page.
<PAGE> 307
______________________________________
"Common Stock" means the Company's voting Common Stock, par value
$0.01 per share, and any stock into which such Common Stock may hereafter
be changed or for which such Common Stock may be exchanged after giving
effect to the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation or otherwise) and shall also
include any Common Stock of the Company hereafter authorized which has
ordinary voting power for the election of directors and any capital stock
of the Company of any other class hereafter authorized which is not
preferred as to dividends or distribution of assets in liquidation over any
other class of capital stock of the Company or which has ordinary voting
power for the election of directors of the Company.
"Company" has the meaning assigned such term in the preamble hereto.
"Holders" has the meaning assigned such term in the preamble hereto.
"Holders of Registrable Securities" shall mean a person who owns
Registrable Securities or has the right to acquire such Registrable
Securities, whether or not such acquisition has actually been effected and
disregarding any legal restrictions upon the exercise of such right.
"NASD" means the National Association of Securities Dealers, Inc.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering, registering for sale any of the
Registrable Securities and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"Registrable Securities" means any Common Stock which may be acquired
upon the exercise of the Warrants in accordance with their terms; provided,
that any security's
______________________________________
Footnote continued from previous page.
<PAGE> 308
______________________________________
status as a Registrable Security shall cease when the registration rights
with respect to such security shall have terminated pursuant to Section
2.6.
"Registration Statement" means any registration statement of the
Company which registers for sale any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"Requisite Holders" means the holders, at any time, of the outstanding
Warrants representing more than 50% of the aggregate of Registrable
Securities at the time outstanding.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Warrants" means the warrants to purchase an aggregate of 141,667
shares of Common Stock issued by the Company to the Holders.
ARTICLE
______________________________________
Footnote continued from previous page.
<PAGE> 309
______________________________________
Registration Rights
SECTION .. Registration on Demand
2.1.1 Demand. At any time following six months from the date the
Warrants become exercisable, upon the written request (the "Demand") of the
Requisite Holders (the "Demand Holders") that the Company effect the
registration under the Securities Act of the number of Registrable Securities
specified by the Demand Holders, the Company shall, subject to the provisions
hereof, use its best efforts to effect, as soon as practicable and in any event
within 60 days after the Demand is received from the Demand Holders, the
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register by the Demand Holders.
2.1.2 Shelf Registration. At any time that the Company is eligible
to use a short-form registration statement for registering securities for sale
to the public at large, the Demand Holders may, at their option, request (the
"Shelf Demand") that any registration statement effected pursuant to a Demand
be effected on a delayed or continuous basis, pursuant to Rule 415 under the
Securities Act (the "Shelf Registration"). The Company agrees to keep
effective such registration statement (the "Shelf Registration Statement")
until the earlier of (i) such date as of which all the Registrable Securities
under the Shelf Registration Statement have been disposed of in the manner
described in such registration statement, and (ii) 180 days after the date on
which such Shelf Registration Statement is declared effective.
2.1.3 Registration Statement Form. Registrations under this Section
2.1 shall be on such appropriate registration form of the Commission as shall
be selected by the
______________________________________
Footnote continued from previous page.
<PAGE> 310
______________________________________
Company. The Company shall include in any such registration statement all
information which, in the opinion of counsel to the Company, is required to be
included.
2.1.4 Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to the Holders and
has not thereafter become effective, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection
with such registration are not satisfied or waived, other than by reason of a
failure on the part of the Holders or (iv) if a Shelf Registration Statement,
if such registration statement has not been kept effective until the earlier of
(a) such date as of which all of the Registrable Securities under such Shelf
Registration Statement have been disposed of in the manner described in such
registration statement and (b) 180 days after the date on which such Shelf
Registration Statement is declared effective.
2.1.5 Limitations on Registration on Demand, Shelf Registrations.
The Company shall not be required to prepare and file a registration statement
pursuant to this Section 2.1 which would become effective within 120 days
following the effective date of a registration statement (other than pursuant
to registrations on Form S-4 or Form S-8 or any successor form or other forms
not available for registering securities for sale to the public at large) filed
by the Company with the Commission pertaining to an underwritten public
offering of convertible debt securities or equity securities for cash for the
account of the Company or another holder of securities of the Company, and in
such case the Holders are afforded the opportunity to include Registrable
Securities in such registration pursuant to Section 2.2. Notwithstanding
anything in this Section 2.1 to the contrary, in no event shall the Company be
required to effect in the aggregate, more than one registration pursuant to
this Section 2.1.
2.1.6 Holders' Ability to Withdraw Registration Statement. The
Holders of a majority of the Registrable
______________________________________
Footnote continued from previous page.
<PAGE> 311
______________________________________
Securities to be included in such registration shall have the right to request
that the Company not have a registration statement filed pursuant to a Demand
declared effective. If the Demand Holders elect to pay or reimburse the
Company for the Company's out-of-pocket expenses incurred in connection with
such registration, such withdrawn registration statement shall not be counted
for purposes of the requests for registration to which such Demanding Holder is
entitled pursuant to Section 2.1.5 hereof.
2.1.7 Selection of Underwriter. If a registration under this Section
2.1 is an underwritten offering, the Holders of a majority of the Registrable
Securities to be included in such registration shall select a managing
underwriter or underwriters of recognized national standing reasonably
acceptable to the Company to administer the offering.
2.1.8 Registration of Other Securities. A registration statement
filed pursuant to the request of the Demand Holders may, subject to the
provisions of Section 2.5 hereof, include (i) Registrable Securities of Holders
not making a demand pursuant to this Section 2.1 and (ii) other securities of
the Company with respect to which registration rights have been granted and may
include securities of the Company being sold for the account of the Company.
2.1.9 Suspension. The Company may delay, suspend or withdraw the
registration of the Registrable Securities required pursuant to this Section
2.1 or the preparation or furnishing of a supplemental or amended prospectus
pursuant to Section 2.3(i) for a period not exceeding 90 days if the Company
shall in good faith determine that any such registration would require the
Company to include disclosure that would reasonably be expected to have a
detrimental effect on any proposal, negotiations or plan by the Company or any
of its subsidiaries to engage in any acquisition or disposition of assets or
any merger, consolidation, tender offer, reorganization or similar transaction,
or any other material corporate event contemplated by the Company. In
addition, the Company shall not be required to register Registrable Securities
on a date on which, under the general rules and regulations of the Commission
as advised by counsel, the inclusion therein, by incorporation or by reference,
of financial statements of the Company contained in the annual or
______________________________________
Footnote continued from previous page.
<PAGE> 312
______________________________________
quarterly report of the Company most recently filed with the Commission would
not be permitted, provided that this exception shall not permit delay or
suspension of registration beyond the filing of the next required annual or
quarterly filing under the Securities Exchange Act.
SECTION .. Incidental Registration. If the Company, at any time or
any one or more occasions after the date of this Agreement, proposes to
register (other than pursuant to Section 2.1) any of its equity securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (other than pursuant to
registrations on Form S-4 or Form S-8 or any successor form or other forms not
available for registering securities for sale to the public at large), the
Company shall give not less than 30 days' nor more than 90 days' prior written
notice to each Holder of Registrable Securities of its intention to do so.
Upon the written request of any Holder of Registrable Securities given within
20 days after receipt of such notice from the Company, the Company will use its
best efforts to cause the Registrable Securities requested to be registered to
be so registered under the Securities Act. A request pursuant to this Section
2.2 shall state the number of Registrable Securities requested to be registered
and the intended method of distribution thereof. In connection with any
registration subject to this Section 2.2, the Holders shall enter into such
underwriting, lock-up and other agreements, and shall execute and complete such
questionnaires and other documents, as are customary in a secondary offering.
The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 2.2 prior to the effectiveness of such
registration whether or not any Holder has elected to include any securities in
such registration. Notwithstanding any other provision of this Agreement, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 2.5 hereof.
No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect the registration required under Section
2.1.
______________________________________
Footnote continued from previous page.
<PAGE> 313
______________________________________
SECTION .. Registration Procedures. In connection with the
registration of any Registrable Securities, the Company shall effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant
thereto the Company shall as expeditiously as possible:
() prepare and file with the Commission within the time limits
prescribed herein a Registration Statement with respect to such securities
and use its best efforts to cause such Registration Statement to become
effective and remain effective as provided herein;
() prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be
necessary and use its best efforts to keep such Registration Statement
continuously effective; cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Securities Exchange Act and the rules and regulations of the Commission
promulgated thereunder applicable to it with respect to the disposition of
all securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented; the Company shall not be deemed to have
used its best efforts to keep a registration statement effective during a
period if it voluntarily takes any action that results in participating
Holders not being able to sell such Registrable Securities during such
period, unless such action (i) is required under applicable law or (ii) is
determined in good faith by the Board of Directors of the Company to be in
the Company's best interest;
() notify the Holders of Registrable Securities and underwriters,
if any, promptly (but in any event within two business days), and confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of the issuance (or, to the Company's best
knowledge, the threat
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or contemplation) by the Commission of any stop order suspending the
effectiveness of such Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, and (iii) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Securities for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose;
() use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, and, if any such order is issued,
to obtain the withdrawal of any such order at the earliest possible moment;
() furnish to each seller and to each duly authorized broker or
underwriter of each seller such number of authorized copies of a
prospectus, including copies of a preliminary Prospectus, in conformity
with the requirements of the Securities Act, and such other customary
documents as such seller, broker or underwriter may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
() use its best efforts to register or qualify (and to keep each
such registration and qualification effective, including through new
filings, renewals or amendments, during the period such registration
statement is required to be kept effective) the securities covered by such
Registration Statement under such securities or blue sky laws of such
jurisdictions as each seller shall reasonably request, and do any and all
other reasonable acts and things which may be necessary under such
securities or blue sky laws to enable such seller to consummate the public
sale or other disposition in such jurisdictions of the Registrable
Securities to be sold by such seller, except that the Company shall not for
any
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such purpose be required to qualify to do business as a foreign
corporation, or to consent to the jurisdiction of any court or subject
itself to suit in any jurisdiction wherein it is not qualified;
() before filing the Registration Statement or Prospectus or
amendments or supplements thereto, furnish to counsel for the Holders of
Registrable Securities included in such Registration Statement copies of
all such documents proposed to be filed, all of which shall be subject to
the review and comment of such counsel in the exercise of their reasonable
judgment;
() use its best efforts to cause such Registrable Securities
covered by such Registration Statement to be registered with or approved by
such other governmental agencies or authorities exercising jurisdiction
over the Company as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities;
() notify each seller of any such Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto
is required to be delivered under the Securities Act, of the Company's
becoming aware that the Prospectus included in such Registration Statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, and, at the written request of any such
seller, promptly prepare and furnish to such seller and each underwriter a
reasonable number of copies of a Prospectus supplemented or amended
(whereupon all previous versions of the Prospectus shall not be used by
such seller or underwriter and shall be promptly returned to the Company or
destroyed) so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
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() comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at
least twelve consecutive months beginning with the first day of the
Company's first calendar quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
() use its best efforts to cause all such Registrable Securities
covered by such Registration Statement to be listed or quoted on the
principal securities exchange (including NASDAQ) on which similar
securities issued by the Company are then listed or quoted, if the listing
or quoting of such Registrable Securities is then permitted under the rules
of such exchange;
() provide a transfer agent and registrar for all such Registrable
Securities covered by such Registration Statement not later than the
effective date of such Registration Statement;
() cooperate with the selling holders of Registrable Securities and
the underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends; and enable such
Registrable Securities to be in such denominations and registered in such
names as the underwriters, if any, or holders may reasonably request at
least two business days prior to any sale of Registrable Securities in a
firm commitment underwritten public offering, or at least ten business days
prior to any other such sale;
() enter into such reasonable and customary agreements (including
an underwriting agreement in customary form) and take such other reasonable
and customary actions as the Requisite Holders shall reasonably request in
order to expedite or facilitate the
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registration and disposition of such Registrable Securities;
() obtain an opinion from the Company's counsel and a "cold
comfort" letter from the Company's independent public accountants in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters;
() upon execution and delivery of such confidentiality agreements
as the Company shall reasonably request (which agreement shall not restrict
any such person's obligations under applicable securities laws), make
available for inspection by any seller of such Registrable Securities
covered by such Registration Statement, by any underwriter participating in
any disposition to be effected pursuant to such Registration Statement and
by any attorney, accountant or other agent retained by any such seller or
any such underwriter, pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such Registration Statement, all as necessary to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act; and
() permit any Holder of Registrable Securities which Holder, in the
sole reasonable judgment of such Holder, exercised in good faith, might be
deemed to be a controlling person of the Company to participate through
counsel in the preparation of such Registration Statement and, if
specifically requested by such counsel, in discussions between the Company
and the Commission or its staff with respect to such Registration
Statement, to require the insertion therein of material, furnished in
writing, which in the written opinion of such counsel is necessary to
include in order to avoid a likelihood of potential liability for any such
Holder of Registrable Securities or such counsel.
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If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (i) the insertion therein of language, in form
and substance satisfactory to such Holder, to the effect that the holding by
such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not in the judgment
of the Company, as advised by counsel, required by the Securities Act or any
similar federal statute or any state "blue sky" or securities law then in
force, the deletion of the reference to such Holder.
SECTION .. Expenses. All expenses incurred in effecting the
registrations (whether or not such registrations are consummated) provided for
in this Article II, including without limitation all registration and filing
fees, printing expenses, fees and disbursements of counsel for the Company,
expenses of any audits incident to or required by any such registration
(including the costs of any comfort letter) and expenses of complying with the
securities or blue sky laws of any jurisdictions pursuant to Subsection 2.3(f)
hereof, the costs and expenses associated with the filing required to be made
by the NASD (including, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel as may be required by the rules and
regulations of the NASD, provided such fees and expenses are not paid by the
underwriter), transfer taxes, fees of transfer agents and registrars, costs of
insurance (but excluding underwriting discounts and commissions to the extent
they relate to Registrable Securities), duplicating fees, delivery expenses,
expenses incurred with the listing of the securities on any securities
exchange, shall be paid by the Company, and the Company shall pay all
reasonable fees and disbursements of one counsel for the Holders of Registrable
Securities for the performance of the normal and customary functions of counsel
for selling shareholders in each such registration.
SECTION .. Marketing Restrictions. If (i) any Holder of Registrable
Securities requests registration of Registrable Securities under Section 2.1 or
2.2, (ii) the offering proposed to be made is to be an underwritten public
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offering and (iii) the managing underwriters of such public offering furnish a
written opinion that the total amount of securities to be included in such
offering would exceed the maximum amount of securities (the "Maximum Amount")
(as specified in such opinion) which can be marketed at a price reasonably
related to the then current market value of such securities and without
materially and adversely affecting such offering, then the rights of the
Company, the Holders of Registrable Securities and the holders of other
securities having the right to include such securities in such registration to
participate in such offering shall be as follows:
If such registration shall have been proposed by the Company, (i) the
Company shall be entitled to participate in such registration first; (ii)
then Holders of Registrable Securities under this Agreement shall be
entitled to participate in such registration (pro rata based on the number
of Registrable Securities or shares of Common Stock, respectively, held by
each) and (iii) other security holders of the Company shall be entitled to
participate in such registration (pro rata based on the number of
securities held by each security holder and in accordance with the relative
priorities, if any, as shall exist among them). If such registration shall
have been requested by the Demand Holders of Registrable Securities
pursuant to Section 2.1 hereof, (i) the Holders of Registrable Securities
shall be entitled to participate in such registration (pro rata based on
the number of Registrable Securities held by each) first; and (ii) then the
Company and other security holders of the Company entitled to participate
will be entitled to participate in such registration (with the holders of
such securities being entitled to participate in accordance with the
relative priorities, if any, as shall exist among them), in each case with
further pro rata allocations to the extent any such person has requested
registration of fewer securities than such person is entitled to have
registered so that the number of securities to be included in such
registration will not exceed the Maximum Amount. If such registration
shall have been requested by the holders of other securities pursuant to a
right granted by the Company to request such registration, (i) the holders
requesting such registration shall be entitled to participate in such
registration (with such holders being entitled to participate in accordance
with the relative
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priorities, if any, as shall exist among them); (ii) then the Holders of
Registrable Securities shall be entitled to participate in accordance with
the number of shares held by them (pro rata based on the number of
Registrable Securities or shares of Common Stock, respectively, held by
each); and (iii) then the Company and other security holders of the Company
entitled to participate will be entitled to participate in such
registration (with the holders of such securities being entitled to
participate in accordance with the relative priorities, if any, as shall
exist among them), in each case with further pro rata allocations to the
extent any such person has requested registration of fewer securities than
such person is entitled to have registered so that the number of securities
to be included in such registration will not exceed the Maximum Amount;
and no securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition in
a transaction which would require registration under the Securities Act (but
excluding any issuance of shares pursuant to registrations on Form S-4 or Form
S-8 or any successor form or other forms not available for registering capital
stock for sale to the public at large) until the expiration of 90 days after
the effective date of the Registration Statement in which Registrable
Securities were included pursuant to Section 2.2 or such shorter period as may
be acceptable to the Company and the Holders of a majority of the Registrable
Securities who may be participating in such offering.
SECTION .. Termination of Rights. Notwithstanding the foregoing
provisions of this Article II, the rights to registration shall terminate as to
any particular Registrable Securities when (a) a Registration Statement
covering such Registrable Securities has been declared effective and such
Registrable Securities have been disposed of in accordance with such effective
Registration Statement, (b) written opinion(s), to the effect that such
Registrable Securities may be sold without registration under the Securities
Act or applicable state law and without restriction as to the volume and timing
of such sale, shall have been received from counsel for the Company reasonably
acceptable to the Holders of a majority of such Registrable Securities, (c) the
Warrants expire unexercised or are otherwise terminated or (d) such Registrable
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Securities have been sold through a broker, dealer or underwriter in a public
distribution or a public securities transaction in which the transferee
receives a certificate without a restrictive legend.
SECTION .. Rule 144. The Company shall file the reports required to
be filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations promulgated thereunder (or, if the Company is not
required to file such reports, it will, upon the written request of any Holder
of Registrable Securities as soon as practicable, make publicly available other
information so long as such information is necessary to permit sales under Rule
144), and will take such further actions as any Holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemption provided by Rule 144.
Upon the request of any Holder of Registrable Securities, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such requirements.
SECTION .. Indemnification. () In the event of any registration
of any Registrable Securities under the Securities Act pursuant to this
Agreement, the Company will, and hereby does, indemnify and hold harmless, to
the fullest extent permitted by law, the seller of any Registrable Securities
covered by such Registration Statement, its directors and officers or general
and limited partners (and the directors and officers thereof) (each, a
"Person"), each person who participates as an underwriter or qualified
independent underwriter/pricer ("independent underwriter"), if any, in the
offering or sale of such securities, each officer, director or partner of such
underwriter or independent underwriter, and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, and expenses (including fees of counsel and any amounts paid
in any settlement approved by the Company (which such approval shall not be
unreasonably withheld or delayed)) to which such seller, any such director or
officer or general or limited partner or any such underwriter or independent
underwriter, such officer, director or partner of such underwriter or
independent underwriter or controlling person may become subject under the
Securities Act, common law or
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otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof),
or expenses arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
under which such securities were registered under the Securities Act or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary, final or summary Prospectus (together with the documents
incorporated by reference or filed with the Commission) and any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein 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 or (iii) any violation by the Company of any federal
or state rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such
registration, and the Company will reimburse as incurred such seller and each
such director, officer, general or limited partner, underwriter, independent
underwriter, director, or officer or partner of such underwriter or independent
underwriter and controlling person for any legal or any other expenses incurred
by any of them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided, that the Company shall not be
liable to any such seller or any such director, officer, general or limited
partner, underwriter, independent underwriter, director or officer or partner
of such underwriter or independent underwriter or controlling person in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding, whether commenced or threatened, in respect thereof) or expense
arises out of or is based upon (i) any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement
or amendment thereof or supplement thereto or in any such preliminary, final or
summary Prospectus in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any such seller or any
such director, officer, general or limited partner, underwriter, independent
underwriter, director or officer or partner of such underwriter or independent
underwriter or controlling person, expressly for use in the preparation thereof
or (ii) the failure of any such seller or any such director, officer, general
or limited partner, underwriter, independent
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underwriter or controlling person, to comply with any legal requirement
applicable to him to deliver a copy of a Prospectus or any supplements or
amendments thereto after the Company has made such documents available to such
Persons. Such indemnity and reimbursement of expenses shall remain in full
force and effect following the transfer of such securities by such seller.
() The Company, as a condition to including any Registrable
Securities in any Registration Statement filed in accordance with this
Agreement, shall have received an undertaking reasonably satisfactory to it
from the prospective seller of such Registrable Securities and any underwriter
or independent underwriter, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in paragraph (a) of this Section 2.8) the
Company and its directors and officers and all other prospective sellers and
their directors, officers, general and limited partners and respective
controlling Persons (within the meaning of the Securities Act) with respect to
any statement or alleged statement in or omission or alleged omission from such
Registration Statement, any preliminary, final or summary Prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or information has been furnished in writing to the
Company or its representative by or on behalf of such seller or underwriter
expressly for use in the preparation of such Registration Statement,
preliminary, final or summary Prospectus or amendment or supplement; provided,
however, that the aggregate amount which any such seller or prospective seller
shall be required to pay pursuant to such undertaking shall be limited to the
amount of the net proceeds received by such Person upon the sale of the
Registrable Securities pursuant to the Registration Statement giving rise to
such claim. Such indemnity shall remain in full force and effect following the
transfer of such securities by such seller.
() As soon as possible after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding
with respect to which a claim for indemnification may be made pursuant to this
Section 2.8, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of any indemnified
party to
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give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.8, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party; provided, that the indemnifying party shall not be entitled
to so participate or so assume the defense if, in the indemnified party's
reasonable judgment, a conflict of interest between the indemnified party and
the indemnifying party exists or may exist in respect of such claim. After
notice from the indemnifying party to such indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 2.8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof unless the indemnifying party has failed to assume the defense
of such claim or to employ counsel reasonably satisfactory to such indemnified
party; provided that the indemnified parties shall have the right to employ one
counsel (in each case together with appropriate local counsel) (such counsel to
be selected by the Holders of a majority of the Registrable Securities included
in such registration) to represent such indemnified parties if, in such
indemnified parties' reasonable judgment, a conflict of interest between the
indemnified parties and the indemnifying parties exists or may exist in respect
of such claim, and in that event the fees and expenses of such separate counsel
shall be paid as incurred by the indemnifying party; and provided, further that
if, in the reasonable judgment of any of the indemnified parties, a conflict of
interest between such indemnified parties, and any other indemnified parties
exists in respect of such claim, such indemnified parties shall be entitled to
additional counsel or counsels and the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimants or plaintiffs to such indemnified party of an unconditional
release from all liability in respect to such claim or litigation. No
indemnifying party will be liable
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for any settlement effected without its prior written consent, which consent
will not be unreasonably withheld or delayed.
() Indemnification similar to that specified in the preceding
paragraphs of this Section 2.8 (with appropriate modifications) shall be given
by the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under any state
securities and "blue sky" laws.
() If the indemnification provided for in this Section 2.8 is
unavailable or insufficient to hold harmless an indemnified party under Section
2.8(a) or (b) of this Agreement, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in Section 2.8(a) or (b) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other hand
in connection with statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or other omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 2.8(e) were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this Section 2.8(e). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this Section 2.8(e) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in Section 2.8(c) if the indemnifying
party has assumed the defense of any such action in accordance with the
provisions thereof) which is the subject of this Section 2.8(e). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any
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person who was not guilty of such fraudulent misrepresentation. Promptly after
receipt by an indemnified party under this Section 2.8(e) of notice of the
commencement of any action against such party in respect of which a claim for
contribution may be made against an indemnifying party under this Section
2.8(e), such indemnified party shall notify the indemnifying party in writing
of the commencement thereof if the notice specified in Section 2.8(c) has not
been given with respect to such action; provided that the omission so to notify
the indemnifying party shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise under this
Section 2.8(e), except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. Notwithstanding anything in this
Section 2.8(e) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 2.8(e) to contribute any amount in
excess of the proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate.
() The provisions of this Section 2.8 shall be in addition to any
other rights to indemnification or contribution which any indemnified party may
have pursuant to law or contract and shall remain in full force and effect
following the transfer of the Registrable Securities by any such party.
ARTICLE
Changes in Common Stock
If, and as often as, there is any change in the Common Stock by way of
a combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Registrable
Securities as so changed.
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ARTICLE
Representations and Warranties of the Company
The Company represents and warrants to the Holders of the Registrable
Securities as of the date of this Agreement as follows:
() Due Authorization. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all requisite
action.
() Binding Obligation. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
() No Violation. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated herein, by
the Company does not violate any provision of law, any order of any court
or other agency of government, any organizational document of the Company
or any provision of any material indenture, agreement or other instrument
to which the Company or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Company which violation, conflict, breach or default or
lien, charge, restriction or encumbrance would have a material adverse
effect on the business, condition (financial or otherwise) of the Company
taken as a whole.
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() Government Action. No action has been taken and no statute,
rule or regulation or order has been enacted, no injunction, restraining
order or order of any nature has been issued by a federal or state court of
competent jurisdiction and no action, suit or proceeding is pending against
or affecting or threatened against, the Company before any court or
arbitrator or any governmental body, agency or official which, if adversely
determined, would in any manner draw into question the validity of this
Agreement. Other than filings required with the Commission and under state
securities laws, no action or approval by, or filing or registration with,
any court or governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement by the Company.
ARTICLE
Benefits of Agreement
The obligations of the Company under this Agreement shall inure to the
benefit of, and be enforceable by, the initial Holders and their successors and
permitted assigns without any further action on the part of any party hereto.
ARTICLE
Miscellaneous
SECTION .. Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be effective
upon delivery in person, faxed
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or telecopied, or mailed by certified or registered mail, return receipt
requested, postage pre-paid, addressed as follows:
() if to the Company, 5575 Tech Center Drive, Suite 300, Colorado
Springs, CO 80919, Attention: President; with a copy to Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention:
Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, N.W., Suite
450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.;
() if to an initial Holder of Registrable Securities, at such
address as may have been furnished to the Company in writing by such
Holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Registrable
Securities) or to the Holders of Registrable Securities (in the case of the
Company) in accordance with the provisions of this paragraph.
SECTION .. Waivers; Amendments. No failure or delay of any Holder of
Registrable Securities or the Company in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies
of such Holder and the Company are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Agreement
may be amended, modified or waived with (and only with) the written consent of
the Company and a majority of the Holders of Registrable Securities outstanding
(exclusive of Registrable Securities then owned by the Company or any
subsidiary thereof). No notice or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in similar or
other circumstances.
SECTION .. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the
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State of New York without regard to principles of conflicts of law.
SECTION .. Survival of Agreements; Representations and Warranties,
etc. All warranties, representations and covenants made by the Company herein
or in any certificate or other instrument delivered by it or on its behalf in
connection with this Agreement shall be considered to have been relied upon by
the Holders of Registrable Securities and shall continue in full force and
effect so long as this Agreement is in effect regardless of any investigation
made by such Holders. All statements in any such certificate or other
instrument shall constitute representations and warranties hereunder.
SECTION .. Covenants to Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Agreement contained by
or on behalf of the parties hereto shall bind their successors and assigns,
whether so expressed or not.
SECTION .. Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION .. Section Headings. The section headings used herein are
for convenience of reference only, are not part of this Agreement and are not
to affect the construction of or be taken into consideration in interpreting
this Agreement.
SECTION .. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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SECTION .. Termination. The obligations of the Company to register
the Registrable Securities hereunder shall terminate in accordance with the
terms of this Agreement.
SECTION .. Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter
hereof in any way, and any other agreements or understandings as to securities
registration or similar rights among the parties hereto are hereby terminated.
SECTION .. No More Favorable Agreements. The Company has not
previously, and will not hereafter, enter into any agreement with respect to
its securities with any person which grants such person rights that are, taken
as a whole, more favorable than the rights granted to the Holders in this
Agreement.
SECTION .. Submission to Jurisdiction; Venue. () Any legal
action or proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Company hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid
courts. The Company further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
CT Corporation Systems at its address at 1633 Broadway, New York, New York
10019, such service to become effective 30 days after such mailing. Nothing
herein shall affect the right of any Holder to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Company in any other jurisdiction.
() The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
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courts referred to in clause (a) above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first set forth above.
AMERICAN TELECASTING, INC.
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
HOLDERS:
INDOSUEZ CM II, INC.
By: /s/ INDOSUEZ CM II, INC.
----------------------------
By:
----------------------------
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EXHIBIT C-2 TO THE
CREDIT AGREEMENT
SECURITIES PLEDGE AGREEMENT
This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of
February 26, 1997, made by AMERICAN TELECASTING, INC., a Delaware corporation
having an office at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO
80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an
office at 1211 Avenue of the Americas, New York, New York 10036, as pledgee,
assignee and secured party, in its capacity as collateral agent (in such
capacities and together with any successors in such capacities, the "Collateral
Agent") for the lending institutions (the "Banks") under the Credit Agreement
(as hereinafter defined).
R E C I T A L S :
A. Pursuant to a certain credit agreement, dated as of the date
hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; unless otherwise defined herein,
capitalized terms used herein have the meanings assigned to them in the Credit
Agreement), among the Pledgor, the Banks and Banque Indosuez, New York Branch,
as Agent for the Banks, the Banks have agreed to make to or for the account of
the Pledgor certain Loans up to an aggregate principal amount of $17,000,000.
B. The Pledgor is the legal and beneficial owner of the Pledged
Collateral (as hereinafter defined) pledged by it.
C. It is a condition precedent to the obligations of the Banks to
make the Loans under the Credit Agreement that the Pledgor execute and deliver
the applicable Credit Documents, including this Agreement.
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D. This Agreement is given by the Pledgor in favor of Collateral
Agent for its benefit and the benefit of the Banks and the Agent (collectively,
the "Secured Parties") to secure the payment and performance of all of the
Secured Obligations (as defined in Section 2).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows:
Pledge. As collateral security for the payment and performance when
due of all the Secured Obligations, the Pledgor hereby pledges, assigns,
transfers and grants to Collateral Agent for the benefit of the Secured
Parties, a continuing first priority security interest in and to all of the
right, title and interest of the Pledgor in and to the following property,
whether now existing or hereafter acquired, (collectively, the "Pledged
Collateral"):
the issued and outstanding shares of capital stock described on
Schedule I hereto ("the Pledged Shares"), including the certificates
representing the Pledged Shares and any interest of the Pledgor in the
entries on the books of any financial intermediary pertaining to the
Pledged Shares;
all additional shares of capital stock of any issuer of the Pledged
Shares from time to time acquired by the Pledgor in any manner (which
securities shall be deemed to be part of the Pledged Shares) and the
certificates representing such additional securities and any interest of
the Pledgor in the entries on the books of any financial intermediary
pertaining to such additional securities;
all intercompany notes described on Schedule II hereto (the
"Intercompany Notes") now owned or held by
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Pledgor and from time to time acquired by Pledgor in any way, and all
certificates or instruments evidencing such Intercompany Notes and all
proceeds thereof, all accessions thereto and substitutions therefor;
all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed to the Pledgor in respect of or in exchange for any or all of
the Pledged Shares (collectively, "Distributions"); and
all Proceeds (as defined under the Uniform Commercial Code as in
effect in any relevant jurisdiction (the "UCC") or under other relevant
law) of any of the foregoing, and in any event, including, without
limitation, any and all (i) proceeds of any insurance (except payments
made to a Person which is not a party to this Agreement), indemnity,
warranty or guarantee payable to Collateral Agent or to the Pledgor from
time to time with respect to any of its respective Pledged Collateral, (ii)
payments (in any form whatsoever) made or due and payable to the Pledgor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of its respective
Pledged Collateral by any Governmental Authority (or any person acting
under color of a Governmental Authority), (iii) instruments representing
obligations to pay amounts in respect of Pledged Shares, (iv) products of
the Pledged Collateral and (v) other amounts from time to time paid or
payable under or in connection with any of the Pledged Collateral.
Secured Obligations. This Agreement secures, and the Pledged
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would
accrue and become due but for the filing of a petition in bankruptcy or the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)) of (i) all Obligations of the Pledgor now existing or
hereafter arising under or in respect of the Credit Agreement (including,
without limitation, the obligations of the Pledgor to pay principal, interest
and all other reasonable charges, fees, expenses, commissions,
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reimbursements, premiums, indemnities and other payments related to or in
respect of the Obligations contained in the Credit Agreement), and (ii) without
duplication of the amounts described in clause (i), all Obligations of the
Pledgor now existing or hereafter arising under or in respect of this Agreement
or any other Security Document, including, without limitation, with respect to
all reasonable charges, fees, expenses, commissions, reimbursements, premiums,
indemnities and other payments related to or in respect of the obligations
contained in this Agreement (the obligations described in clauses (i) and (ii),
collectively, the "Secured Obligations").
No Release. Subject to Section 18 of this Agreement, nothing set
forth in this Agreement shall relieve the Pledgor from the performance of any
term, covenant, condition on the Pledgor's part to be performed or observed
under or in respect of any of the Pledged Collateral or from any liability to
the Person under or in respect of any of the Pledged Collateral or shall impose
any obligation on Collateral Agent or any Secured Party to perform or observe
any such term, covenant, condition or agreement on the Pledgor's part to be so
performed or observed or shall impose any liability on Collateral Agent or any
Secured Party for any act or omission on the part of the Pledgor relating
thereto or for any breach of any representation or warranty on the part of the
Pledgor contained in this Agreement, or any other Credit Document or under or
in respect of the Pledged Collateral or made in connection herewith or
therewith. Subject to Section 18 of this Agreement, the obligations of the
Pledgor contained in this Section 3 shall survive the termination of this
Agreement and the discharge of the Pledgors' other obligations under this
Agreement and the other Credit Documents.
Delivery of Pledged Collateral.
All certificates, agreements or instruments representing or evidencing
the Pledged Collateral, to the extent not previously delivered to Collateral
Agent, shall immediately upon receipt thereof by the Pledgor be delivered to
and held by or on behalf of Collateral Agent pursuant hereto. All Pledged
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank
(with signatures appropriately guaranteed), all in form and substance
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satisfactory to Collateral Agent. Subject to the provisions of Section 29 of
this Agreement, Collateral Agent shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of Collateral Agent
or any of its nominees any or all of the Pledged Collateral. Collateral Agent
shall provide the Pledgor with notice of any endorsement, assignment or other
transfer made pursuant to the preceding sentence. In addition, upon the
occurrence and during the continuance of an Event of Default, Collateral Agent
shall have the right at any time to exchange certificates representing or
evidencing Pledged Collateral for certificates of smaller or larger
denominations.
If an issuer of Pledged Shares is incorporated in a jurisdiction which
does not permit the use of certificates to evidence equity ownership, then the
Pledgor shall, to the extent permitted by applicable law, record such pledge on
the stock register of such issuer, execute any customary stock pledge forms or
other documents necessary or appropriate to complete the pledge and give
Collateral Agent the right to transfer the Pledged Shares under the terms
hereof and provide to Collateral Agent an opinion of counsel, in form and
substance satisfactory to Collateral Agent, confirming such pledge.
Notwithstanding any provision of this Section 4 to the contrary, if
the exercise of any rights provided in this Section 4 or Section 10 relates to
the ownership or control of any radio, television or other license, permit,
certificate or approval granted or issued by the FCC or any other Governmental
Authority (including, without limitation, any multichannel or single channel
multipoint distribution service, local multipoint distribution service,
operational-fixed microwave service, cable television relay service station,
business radio, instructional television fixed service, earth station or
experimental licenses or permits issued by the FCC) (each, a "Governmental
License") held by the Pledgor or a subsidiary of the Pledgor and it may be
necessary to obtain the consent or approval of the FCC prior to the exercise of
such rights, the provisions of Section 29 of this Agreement shall apply.
Supplements, Further Assurances.
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The Pledgor agrees that at any time and from time to time, at the sole
cost and expense of such Pledgor, the Pledgor shall promptly execute and
deliver all further instruments and documents, including, without limitation,
supplemental or additional UCC-1 financing statements, and take all further
action that may be necessary or that Collateral Agent may reasonably request,
in order to perfect and protect the pledge, security interest and Lien granted
or purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
The Pledgor shall, upon obtaining any Pledged Shares of any Person
promptly (and in any event within three Business Days) deliver to Collateral
Agent a pledge amendment, duly executed by the Pledgor, in substantially the
form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of such
Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Shares
listed on any Pledge Amendment delivered to Collateral Agent shall for all
purposes hereunder be considered Pledged Collateral.
Representations, Warranties and Covenants. The Pledgor represents,
warrants and covenants as follows (as to itself only):
No Liens. The Pledgor is, and at the time of any delivery of any
Pledged Collateral to Collateral Agent pursuant to Section 4 of this
Agreement will be, the sole legal and beneficial owner of the Pledged
Collateral pledged by it pursuant to this Agreement. All Pledged
Collateral is on the date hereof, and will be, so owned by the Pledgor, as
applicable, free and clear of any Lien except for the Lien created by this
Agreement.
Authorization, Enforceability. The Pledgor has the requisite
corporate power, authority and legal right to pledge and grant a security
interest in all of the Pledged Collateral pledged by it pursuant to this
Agreement, and
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this Agreement constitutes the legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms.
No Consents, etc. No consent of any party (including, without
limitation, any stockholders or creditors of the Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or other Person is
required either (x) for the pledge by the Pledgor of the Pledged Collateral
pledged by it pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor, or (y) for the exercise by
Collateral Agent of the voting or other rights provided for in this
Agreement, or (z) for the exercise by Collateral Agent of the remedies in
respect of the Pledged Collateral pursuant to this Agreement; provided,
however, that under the Communications Act and the rules and regulations of
the FCC, FCC consent may be required prior to the transfer of control or
assignment of any Governmental License issued by the FCC, or the exercise
of any voting rights or management over the Pledgor or an issuer of Pledged
Shares to the extent it holds, owns or controls any Governmental License
issued by the FCC.
Due Authorization and Issuance. All of the Pledged Shares have been,
and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
Chief Executive Office. The Pledgor's chief executive office is
located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado
80919. Pledgor shall not move its chief executive office except to such
new location as Pledgor may establish in accordance with the last sentence
of this Section 6(e). Pledgor shall not establish a new location for its
chief executive office nor shall it change its name until (i) it shall have
given Collateral Agent not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location or name and
providing such other information in connection therewith as Collateral
Agent or any Secured Party may request, and (ii) with respect to such new
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location or name, Pledgor shall have taken all action satisfactory to
Collateral Agent and the Secured Parties to maintain the perfection and
priority of the security interest of Collateral Agent for the benefit of
the Secured Parties in the Pledged Collateral intended to be granted
hereby.
Delivery of Pledged Collateral; Filings. The Pledgor has delivered to
Collateral Agent all certificates representing the Pledged Shares and
Intercompany Notes and has caused to be filed with the Secretary of State
of the State of New York, the State of incorporation of the Pledgor and the
State of Colorado, which is the State of the chief executive office of the
Pledgor, UCC-1 financing statements evidencing the Lien created by this
Agreement, and such delivery, filing and pledge of the Pledged Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Collateral securing the payment of the
Secured Obligations pursuant to the UCC, including, without limitation, the
UCC as in effect in the States of New York, the State of incorporation of
the Pledgor and the State of Colorado, which is the State of the chief
executive office of the Pledgor.
Pledged Collateral. All information set forth herein, including the
Schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Secured Party in connection
with this Agreement, in each case, relating to the Pledged Collateral is
accurate and complete in all respects.
No Violations, etc. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation G, T, U or X of the Federal
Reserve Board.
Ownership of Pledged Collateral. Except as otherwise permitted by the
Credit Agreement, the Pledgor at all times will be the sole beneficial
owner of the Pledged Collateral pledged by it pursuant to this Agreement.
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No Options, Warrants, etc. Except as disclosed in the Credit
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which the Pledgor is a party or by which it
is bound obligating the Pledgor to issue, deliver or sell or cause to be
issued, delivered or sold, additional securities of any issuer of the
Pledged Shares or obligating any issuer of the Pledged Shares to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no voting trusts or other agreements or
understandings to which the Pledgor or any issuer of the Pledged Shares is
a party with respect to the voting of the securities of any issuer of the
Pledged Shares.
Endorsement, Assignment or Pledge of Instruments. None of the Pledged
Collateral is, as of the date of this Agreement, and as to Pledged
Collateral which arises from time to time after such date will be,
evidenced by any instrument, note or chattel paper, except such as have
been or will be endorsed, assigned or pledged and delivered to Collateral
Agent by Pledgors simultaneously with the creation thereof.
Systems. The Pledged Shares include the Pledgor's interest in each
Credit Party operating Systems or holding System Agreements.
Voting Rights; Distributions; etc.
So long as no Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares pledged
by it pursuant to this Agreement or any part thereof for any
purpose not inconsistent with the terms or purpose of this
Agreement or any of the other Credit Documents and each Pledgor
shall not in any event exercise such rights in any manner which
may have an adverse effect on the value of its respective Pledged
Collateral or the
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security intended to be provided by this Agreement.
(ii) Subject to the terms of the Credit Agreement, each Pledgor shall
be entitled to receive and retain, and to utilize free and clear
of the Lien of this Agreement, any and all Distributions, but
only if and to the extent made in accordance with the provisions
of the Credit Agreement; provided, however, that any and all
such Distributions consisting of rights or interests in the form
of securities shall be, and shall be forthwith delivered to
Collateral Agent to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of
Collateral Agent, be segregated from the other property or funds
of such Pledgor, and be forthwith delivered to Collateral Agent
as Pledged Collateral in the same form as so received (with any
necessary endorsement).
(iii) Collateral Agent shall be deemed without further action or
formality to have granted to each Pledgor all necessary consents
relating to voting rights and shall, if necessary, upon written
request of the Pledgor and at such Pledgor's sole cost and
expense, from time to time execute and deliver (or cause to be
executed and delivered) to such Pledgor all such instruments as
such Pledgor may reasonably request in order to permit such
Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 7(a)(i) hereof and to
receive the Distributions which it is authorized to receive and
retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default:
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(i) All rights of the Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise
pursuant to Section 7(a)(i) hereof without any action or the
giving of any notice shall cease, and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon
have the sole right to exercise such voting and other consensual
rights; provided, however, to the extent the Pledgor or an issuer
of Pledged Shares hold, own or control any Governmental License
issued by the FCC, if and to the extent required under the
Communications Act or the FCC's rules, until the FCC has consented
to a transfer of control or assignment of Pledgor, an issuer of
Pledged Shares, or such Governmental License issued by the FCC,
Pledgor shall continue to exercise the voting and other consensual
rights.
(ii) All rights of the Pledgor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to
Section 7(a)(ii) hereof shall cease and all such rights shall
thereupon become vested in Collateral Agent, which shall thereupon
have the sole right to receive and hold as Pledged Collateral such
Distributions.
(iii) Subject to any necessary prior or subsequent FCC approval,
Collateral Agent shall be entitled to the appointment, as a matter
of right and without giving notice to the Pledgor, of a receiver
with respect to the Pledged Collateral, without regard to the
adequacy or inadequacy of any Pledged Collateral for the Secured
Obligations or the solvency or insolvency of any person or entity
then legally or equitably liable for the Secured Obligations or
any portion thereof, and each Pledgor does hereby irrevocably
consent to such appointment. Any such receiver shall have all the
usual qualifications, powers and duties of receivers in similar
cases, including the full power to conduct the business of the
Pledgors.
(c) The Pledgor shall, at such Pledgor's sole cost and expense, from
time to time execute and deliver to Collateral Agent and any other Person
directed by Collateral
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Agent, appropriate instruments as Collateral Agent may request in order to
permit Collateral Agent to exercise the voting and other rights which it may be
entitled to exercise pursuant to Section 7(b)(i) hereof and to receive all
Distributions which it may be entitled to receive under Section 7(b)(ii)
hereof.
(d) All Distributions which are received by the Pledgor contrary to
the provisions of Section 7(b)(ii) hereof shall be received in trust for the
benefit of Collateral Agent, shall be segregated from other funds of such
Pledgor and shall immediately be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).
Transfers and Other Liens; Additional Shares; Principal Office.
The Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the Pledged
Collateral pledged by it pursuant to this Agreement, (ii) create or permit to
exist any Lien upon or with respect to any Pledged Collateral pledged by it
pursuant to this Agreement other than the Lien granted to Collateral Agent
under this Agreement, or (iii) permit any issuer of the Pledged Shares to
merge, consolidate or change its legal form unless a majority of the
outstanding capital stock of the surviving or resulting corporation is, upon
such merger or consolidation, pledged to Collateral Agent pursuant to a pledge
agreement in form and substance, satisfactory to Collateral Agent, and no cash,
securities or other property is distributed in respect of the outstanding
shares of any other constituent corporation.
The Pledgor shall (i) cause each issuer of the Pledged Shares not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to such Pledgor and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock or other equity securities of
any issuer of the Pledged Shares which are required to be pledged hereunder.
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Reasonable Care. Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which Collateral Agent, in its individual capacity, accords
its own property consisting of similar instruments or interests, it being
understood that neither the Collateral Agent nor any of the Secured Parties
shall have responsibility for (i) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating to
any Pledged Collateral, whether or not Collateral Agent or any other Secured
Party has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any Person with respect to any
Pledged Collateral.
Remedies Upon Default; Decisions Relating to Exercise of Remedies.
If any Event of Default shall have occurred and be continuing, subject to the
provisions of Section 29 of this Agreement, Collateral Agent shall have the
right, in addition to other rights and remedies provided for herein or
otherwise available to it to be exercised from time to time, (i) to retain and
apply the Distributions to the Secured Obligations as provided in Section 11
hereof, and (ii) to exercise all the rights and remedies of a secured party on
default under the UCC, and Collateral Agent may also in its sole discretion,
without notice except as specified below, sell the Pledged Collateral or any
part thereof (including, without limitation, any partial interest in the
Pledged Shares) in one or more parcels at public or private sale, at any
exchange, broker's board or at any of Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and at such price or prices and
upon such other terms as Collateral Agent may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral. Collateral Agent or any other Secured Party or any of their
respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion
of the Pledged Collateral sold at such sale, to use and apply any of the
Secured Obligations owed to such Person as a credit on account of the purchase
price of any Pledged Collateral payable by such Person
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at such sale. Each purchaser at any such sale shall acquire the property sold
absolutely free from any claim or right on the part of the Pledgor, and Pledgor
hereby waives (to the fullest extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Pledgor acknowledges and agrees that, to the extent notice of sale shall be
required by law, five (5) days' notice to such Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. No notification need be given to the
Pledgor if it has signed, after the occurrence of an Event of Default, a
statement renouncing or modifying any right to notification of sale or other
intended disposition. Collateral Agent shall not be obligated to make any sale
of Pledged Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Pledgor hereby waives any claims against Collateral Agent arising by reason of
the fact that the price at which any Pledged Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Collateral Agent accepts the first offer received and does
not offer such Pledged Collateral to more than one offeree. Notwithstanding any
provision of this subsection 10(a) to the contrary, in the event of a private
or public sale of the Pledged Collateral, prior to the consummation of the
sale, to the extent required under the Communications Act of 1934, as amended,
or any successor statute or law (the "Communications Act"), the prior consent
of the FCC pursuant to the Communications Act and the rules and regulations of
the FCC will be obtained.
The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws, Collateral Agent may be compelled, with
respect to any sale of all or any part of the Pledged Collateral, to limit
purchasers to Persons who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to Collateral Agent
than those obtainable through a public sale without such
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restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that Collateral Agent shall have
no obligation to engage in public sales and no obligation to delay the sale of
any Pledged Collateral for the period of time necessary to permit the issuer
thereof to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if such
issuer would agree to do so.
Notwithstanding the foregoing and to the extent commercially
reasonable, each Pledgor shall, upon the occurrence and during the continuance
of an Event of Default, at the request of Collateral Agent, for the benefit of
Collateral Agent, cause any registration, qualification under or compliance
with any federal or state securities law or laws to be effected with respect to
all or any part of the Pledged Collateral as soon as practicable and at such
Pledgor's sole cost and expense. The Pledgor will use its best efforts to
cause such registration to be effected (and be kept effective) and will use its
best efforts to cause such qualification and compliance to be effected (and be
kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Collateral, including, without
limitation, registration under the Securities Act (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements. The Pledgor will cause Collateral Agent to be kept advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to Collateral Agent
such number of prospectuses, offering circulars or other documents incident
thereto as Collateral Agent from time to time may request, and will indemnify
and will cause the issuer of the Pledged Collateral to indemnify Collateral
Agent and all others participating in the distribution of such Pledged
Collateral against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to
be stated therein or necessary to make the statements therein not misleading.
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If Collateral Agent determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, each Pledgor shall from
time to time furnish to Collateral Agent all such information as Collateral
Agent may request in order to determine the number of securities included in
the Pledged Collateral which may be sold by Collateral Agent as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
The Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign Governmental
Authority, Collateral Agent may be compelled, with respect to any sale of all
or any part of the Pledged Collateral, to limit purchasers to those who meet
the requirements of such foreign Governmental Authority. The Pledgor
acknowledges that any such sales may be at prices and on terms less favorable
to Collateral Agent than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agrees that any such
restricted sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales.
In addition to any of the other rights and remedies hereunder,
Collateral Agent shall have the right to institute a proceeding seeking
specific performance in connection with any of the agreements or obligations
hereunder.
Without limiting the generality of the provisions in Section 15
hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full
power of substitution, its true and lawful attorney-in-fact, in its name, place
and stead to take any action upon the occurrence and during the continuance of
an Event of Default required to reflect the foreclosure sale of the Pledged
Collateral or the exercise of any remedy hereunder. The foregoing grant of
authority is a power of attorney coupled with an interest and such appointment
shall be irrevocable for the term of this Agreement.
Application of Proceeds. All Distributions held from time to time by
Collateral Agent and all cash proceeds received by Collateral Agent in respect
of any sale of, collection from,
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or other realization upon all or any part of the Pledged Collateral pursuant to
the exercise by Collateral Agent of its remedies as a secured creditor as
provided in Section 10 hereof shall be applied, together with any other sums
then held by Collateral Agent pursuant to this Agreement, promptly by
Collateral Agent as follows:
First, to the payment of all reasonable costs and expenses, fees,
commissions and taxes of such sale, collection or other realization,
including, without limitation, reasonable compensation to Collateral Agent
and its agents and counsel, and all reasonable expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Second, to the payment of all other reasonable costs and expenses of
such sale, collection or other realization, including, without limitation,
reasonable compensation to the Banks and their agents and counsel and all
reasonable expenses, liabilities and advances made or incurred by the
Banks in connection therewith, together with interest on each such amount
at the highest rate then in effect under the Credit Agreement from and
after the date such amount is due, owing or unpaid until paid in full;
Third, to the indefeasible payment in full in cash of interest and all
amounts other than principal under the Credit Agreement at any time and
from time to time owing by the Pledgor under or in connection with the
Credit Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable,
together with interest on each such amount at the highest rate then in
effect under the Credit Agreement from and after the date such amount is
due, owing or unpaid until paid in full;
Fourth, to the indefeasible payment in full in cash of principal at
any time and from time to time owing by the Pledgor under or in connection
with the Credit
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Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind, among amounts of principal so due and
payable, together with interest on each such amount at the highest rate
then in effect under the Credit Agreement from and after the date such
amount is due, owing or unpaid until paid in full; and
Fifth, to the applicable Pledgor, or its successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
Expenses. The Pledgor will upon demand pay to Collateral Agent the
amount of any and all expenses, including the reasonable fees and expenses of
its counsel and the fees and expenses of any experts and agents, which
Collateral Agent may incur in connection with (i) the collection of the Secured
Obligations, (ii) the enforcement and administration of this Agreement, (iii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of Collateral Agent or any Secured Party
hereunder or (v) the failure by the Pledgor to perform or observe any of the
provisions hereof. All amounts payable by the Pledgor under this Section 12
shall be due upon demand and shall be part of the Secured Obligations. The
Pledgor's obligations under this Section 12 shall survive the termination of
this Agreement and the discharge of such Pledgor's other obligations hereunder.
No Waiver; Cumulative Remedies.
No failure on the part of Collateral Agent to exercise, no course of
dealing with respect to, and no delay on the part of Collateral Agent in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
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In the event Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this instrument by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to Collateral
Agent, then and in every such case, each Pledgor, Collateral Agent and each
holder of any of the Secured Obligations shall be restored to their respective
former positions and rights hereunder with respect to the Pledged Collateral,
and all rights, remedies and powers of Collateral Agent and the Secured Parties
shall continue as if no such proceeding had been instituted.
Collateral Agent. Collateral Agent has been appointed as collateral
agent pursuant to the Credit Agreement. The actions of Collateral Agent
hereunder are subject to the provisions of the Credit Agreement. Collateral
Agent shall have the right hereunder to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking action (including, without limitation, the release or substitution of
Pledged Collateral), in accordance with this Agreement and the Credit
Agreement. Collateral Agent may resign and a successor Collateral Agent may be
appointed in the manner provided in the Credit Agreement; provided, however,
that at the time of appointment of a successor Collateral Agent, if Collateral
Agent, through its possession, control, or ownership of Pledged Collateral or
otherwise, holds, owns, or controls any Governmental License issued by the FCC
such that the FCC must consent to the appointment of a successor Collateral
Agent, until the FCC has consented to the appointment of a successor Collateral
Agent the Collateral Agent shall retain control over such Pledged Collateral
or Government Licenses. Upon the acceptance of any appointment as Collateral
Agent by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent under this Agreement, and the
retiring Collateral Agent shall thereupon be discharged from its duties and
obligations under this Agreement. After any retiring Collateral Agent's
resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it
was Collateral Agent.
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Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has
covenanted to do hereunder or any warranty on the part of such Pledgor
contained herein shall be breached, Collateral Agent or any Secured Party may
(but shall not be obligated to), subject to the provisions of Section 29 of
this Agreement, do the same or cause it to be done or remedy any such breach,
and may expend funds for such purpose. Any and all amounts so expended by
Collateral Agent or such Secured Party shall be paid by such Pledgor promptly
upon demand therefor, with interest at the highest rate then in effect under
the Credit Agreement during the period from and including the date on which
such funds were so expended to the date of repayment. The Pledgor's
obligations under this Section 15 shall survive the termination of this
Agreement and the discharge of such Pledgor's other obligations under this
Agreement, the Credit Agreement and any other Credit Document. The Pledgor
hereby appoints Collateral Agent its attorney-in-fact with an interest, with
full authority in the place and stead of such Pledgor and in the name of such
Pledgor, or otherwise, from time to time in Collateral Agent's discretion to
take any action and to execute any instrument consistent with the terms of this
Agreement and the other Credit Documents which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement except that
with respect to any FCC applications or filings or other action subject to FCC
rules, regulations and policies, Collateral Agent shall serve as
attorney-in-fact only to the extent permitted under the Communications Act and
FCC rules, regulations and policies. The foregoing grant of authority is a
power of attorney coupled with an interest and such appointment shall be
irrevocable for the term of this Agreement. The Pledgor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
Indemnity.
Indemnity. The Pledgor agrees to indemnify, pay and hold harmless
Collateral Agent and each of the Secured Parties and the officers, directors,
employees, agents and affiliates of Collateral Agent and each of the Secured
Parties (collectively called the "Indemnitees") from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs),
expenses or
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disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or any
other Credit Document (including, without limitation, any misrepresentation by
the Pledgor in this Agreement or any other Credit Document) (the "indemnified
liabilities"); provided that the Pledgors shall not have any obligation to an
Indemnitee hereunder with respect to indemnified liabilities if it has been
determined by a final decision (after all appeals and the expiration of time to
appeal) by a court of competent jurisdiction that such indemnified liability
arose from the gross negligence or willful misconduct of that Indemnitee. To
the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, each Pledgor shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them.
Survival. The obligations of each Pledgor contained in this Section
16 shall survive the termination of this Agreement and the discharge of each
Pledgor's other obligations under this Agreement and under the other Credit
Documents.
Reimbursement. Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Secured Obligations
secured by the Pledged Collateral.
Modification in Writing. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, nor consent to
any departure by the Pledgor therefrom, shall be effective unless the same
shall be done in accordance with the terms of the Credit Agreement and unless
in writing and signed by Collateral Agent and Pledgor. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by the
Pledgor from the terms
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of any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement or any other Credit Document,
no notice to or demand on the Pledgor in any case shall entitle any such
Pledgor to any other or further notice or demand in similar or other
circumstances.
Termination; Release. When all the Secured Obligations have been
indefeasibly paid in full and the Commitments of the Banks to make any Loan
under the Credit Agreement shall have expired, this Agreement shall terminate.
Upon termination of this Agreement or any release of Pledged Collateral in
accordance with the provisions of the Credit Agreement, Collateral Agent shall,
upon the request and at the sole cost and expense of the applicable Pledgor,
forthwith assign, transfer and deliver to such Pledgor, against receipt and
without recourse to or warranty by Collateral Agent, such of the Pledged
Collateral to be released (in the case of a release) as may be in the
possession of Collateral Agent and as shall not have been sold or otherwise
applied pursuant to the terms hereof, on the order of and at the sole cost and
expense of such Pledgor, and proper instruments (including UCC termination
statements on Form UCC-3) acknowledging the termination of this Agreement or
the release of such Pledged Collateral, as the case may be.
Notices. Unless otherwise provided herein or in the Credit Agreement,
any notice or other communication herein required or permitted to be given
shall be given in the manner set forth in the Credit Agreement; provided that
notices to Collateral Agent shall not be effective until received by Collateral
Agent.
Continuing Security Interest; Assignment. This Agreement shall create
a continuing security interest in the Pledged Collateral and shall (i) be
binding upon each Pledgor, its respective successors and assigns, and (ii)
inure, together with the rights and remedies of Collateral Agent hereunder, to
the benefit of Collateral Agent and the other Secured Parties and each of their
respective successors, transferees and assigns; no other Persons (including,
without limitation, any other creditor of the Pledgor) shall have any interest
herein or any right or benefit with respect hereto.
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Without limiting the generality of the foregoing clause (ii), any Bank may
assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Bank, herein or
otherwise, subject however, to the provisions of the Credit Agreement.
GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION
SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE PLEDGOR IRREVOCABLY AGREEING
IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 19 HEREOF EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
THE PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE PLEDGOR HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
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Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts together shall constitute one and the same agreement.
Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Obligations Absolute. All obligations of the Pledgor hereunder shall
be absolute and unconditional irrespective of:
any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Pledgor or any other Credit
Party;
any lack of validity or enforceability of the Credit Agreement or any
other Credit Document or any other agreement or instrument relating
thereto;
any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Credit Agreement, any
other Credit Document or any other agreement or instrument relating
thereto;
any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or
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consent to any departure from any guarantee, for all or any of the Secured
Obligations;
any exercise or non-exercise, or any waiver of any right, remedy,
power or privilege under or in respect of this Agreement, or any other
Credit Document except as specifically set forth in a waiver granted
pursuant to the provisions of Section 17 hereof; or
any other circumstances which might otherwise constitute a defense
available to, or a discharge of, any other Pledgor.
Collateral Agent's Right to Sever Indebtedness.
The Pledgor acknowledges that (i) the Pledged Collateral does not
constitute the sole source of security for the payment and performance of the
Secured Obligations and that the Secured Obligations are also secured by other
types of property of such Pledgor and its Affiliates in other jurisdictions
(all such property, collectively, the "Collateral"), (ii) the number of such
jurisdictions and the nature of the transaction of which this instrument is a
part are such that it would have been impracticable for the parties to allocate
to each item of Collateral a specific loan amount and to execute in respect of
such item a separate credit agreement, and (iii) each Pledgor intends that
Collateral Agent have the same rights with respect to the Pledged Collateral,
in any judicial proceeding relating to the exercise of any right or remedy
hereunder or otherwise, that Collateral Agent would have had if each item of
collateral had been pledged or encumbered pursuant to a separate credit
agreement and security instrument. In furtherance of such intent, each Pledgor
agrees to the greatest extent permitted by law that Collateral Agent may at any
time by notice (an "Allocation Notice") to the Pledgor allocate a portion of
the Secured Obligations (the "Allocated Indebtedness") to the Pledged
Collateral of such Pledgor and sever from the remaining Secured Obligations the
Allocated Indebtedness. From and after the giving of an Allocation Notice with
respect to the Pledged Collateral, the Secured Obligations hereunder shall be
limited to the extent set forth in the Allocation Notice and (as so limited)
shall, for all purposes, be construed as a separate credit obligation
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of each Pledgor unrelated to the other transactions contemplated by the Credit
Agreement or any other Credit Document or any document related to either
thereof. To the extent that the proceeds of any judicial proceeding relating
to the exercise of any right or remedy hereunder of the Pledged Collateral
shall exceed the Allocated Indebtedness, such proceeds shall belong to such
Pledgor and shall not be available hereunder to satisfy any Secured Obligations
of such Pledgor other than the Allocated Indebtedness. In any action or
proceeding to exercise any right or remedy under this Agreement which is
commenced after the giving by Collateral Agent of an Allocation Notice, the
Allocation Notice shall be conclusive proof of the limits of the Secured
Obligations hereby secured, and the Pledgor may introduce, by way of defense or
counterclaim, evidence thereof in any such action or proceeding.
Notwithstanding any provision of this Section 27, the proceeds received by
Collateral Agent pursuant to this Agreement shall be applied by Collateral
Agent in accordance with the provisions of Section 11 hereof.
The Pledgor hereby waives to the greatest extent permitted under law
the right to a discharge of any of the Secured Obligations under any statute or
rule of law now or hereafter in effect which provides that the exercise of any
particular right or remedy as provided for herein (by judicial proceedings or
otherwise) constitutes the exclusive means for satisfaction of the Secured
Obligations or which makes unavailable any further judgment or any other right
or remedy provided for herein because Collateral Agent elected to proceed with
the exercise of such initial right or remedy or because of any failure by
Collateral Agent to comply with laws that prescribe conditions to the
entitlement to such subsequent judgment or the availability of such subsequent
right or remedy. In the event that, notwithstanding the foregoing waiver, any
court shall for any reason hold that such subsequent judgment or action is not
available to Collateral Agent, no Pledgor shall (i) introduce in any other
jurisdiction any judgment so holding as a defense to enforcement against such
Pledgor of any remedy in the Credit Agreement or executed in connection with
the Credit Agreement or (ii) seek to have such judgment recognized or entered
in any other jurisdiction, and any such judgment shall in all events be limited
in application only to the state or jurisdiction where rendered and only with
respect to the collateral referred to in such judgment.
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In the event any instrument in addition to the Allocation Notice is
necessary to effectuate the provisions of this Section 27, including, without
limitation, any amendment to this Agreement, any substitute promissory note or
affidavit or certificate of any kind, Collateral Agent may execute and deliver
such instrument as the attorney-in-fact of the Pledgor.
Notwithstanding anything set forth herein to the contrary, the
provisions of this Section 27 shall be effective only to the maximum extent
permitted by law.
Future Advances. This Agreement shall secure the payment of any
amounts advanced from time to time pursuant to the Credit Agreement.
Facilitating Governmental Approvals; Specific Performance.
In connection with the exercise by Collateral Agent of its rights
under this Agreement relating to the disposition of the Pledged Collateral as
it may affect the control of any Governmental License issued by the FCC or any
other authorizations, agreements, permits, licenses, and franchises of the
Pledgor, it may be necessary to obtain the prior consent or approval of the FCC
or other Governmental Authority to the exercise of Collateral Agent's rights
with respect to the Pledged Collateral. To the extent that any such consent or
approval is required for any action that Collateral Agent may take under this
Agreement with respect to the Pledged Collateral, receipt of such FCC or
Governmental Authority approval shall be a condition precedent to Collateral
Agent's exercise of such rights. In furtherance of the first sentence of this
Section, the Pledgor hereby agrees, at its own cost, to use its best efforts to
take any and all actions which Collateral Agent may request in order to obtain
such consents or approvals or any other governmental authorization as may be
necessary to enable Collateral Agent to exercise and enjoy the full rights and
benefits granted to it under this Agreement, the Credit Agreement, or any other
Credit Document, including, without limitation, the preparation, execution,
delivery or filing on the Pledgor's behalf and in such Pledgor's name, or in
such other name as may be appropriate or required, or causing to be prepared,
executed, delivered or filed, all
___________________________________________
Footnote continued from previous page.
<PAGE> 361
___________________________________________
applications, certificates, filings, instruments, information, reports and
other documents (including, without limitation, any application for any
assignment or transfer of control or ownership).
The Pledgor hereby acknowledges that a breach of any of its respective
obligations contained in this Agreement will cause irreparable injury to
Collateral Agent, and that such a breach would not be adequately compensable in
damages, and therefore Pledgors agree that their obligations under this
Agreement shall be specifically enforceable.
___________________________________________
Footnote continued from previous page.
<PAGE> 362
___________________________________________
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
AMERICAN TELECASTING, INC., as Pledgor
By: /s/ AMERICAN TELECASTING, INC.
-----------------------------------
Name:
Title:
BANQUE INDOSUEZ, NEW YORK BRANCH,
as Collateral Agent
By: /s/ BANQUE INDOSUEZ
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Notice Address:
Banque Indosuez, New York Branch
1211 Avenue of the Americas
New York, N.Y. 10036
Attention: Michael Arougheti
___________________________________________
Footnote continued from previous page.
<PAGE> 363
EXHIBIT D-1 TO THE
ALIGN CREDIT AGREEMENT
FORM OF NOTICE OF ASSIGNMENT
[DATE]
Banque Indosuez, New York Branch, as Agent
1211 Avenue of the Americas
7th Floor
New York, New York 10036
Attention:
Re: Credit Agreement dated as of February __, 1997 among American
Telecasting, Inc., the lending institutions listed therein (the
"Banks") and Banque Indosuez, New York Branch as Agent and Collateral
Agent for the Banks.
Reference is made to the above-referenced Credit Agreement (herein the
"Credit Agreement"); all terms defined in the Credit Agreement shall have the
same meanings when used herein.
________________ ("Assignor") has sold to ________________ ("Assignee") an
assignment in the aggregate amount of $_________ representing an assignment of
the total Commitment as set forth on Annex I].
The Assignee hereby elects to become party to, and be bound by each of the
provisions of, the Credit Agreement as a "Bank," as defined in the Credit
Agreement, with a Commitment as set forth in clause 2 above.
Assignee hereby confirms, as to itself, that (i) it has received a copy of
the Credit Agreement and such other information that it has deemed appropriate
to make its own credit analysis and decision to purchase its assignment, (ii)
will independently and without reliance upon the Agent or
______________________________________
Footnote continued from previous page.
<PAGE> 364
______________________________________
any other Bank and based on such documents and other information as it deems
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, (iii) it has purchased its
assignment without recourse or warranty to the Agent or any of the other Banks
and that all such Persons have made no representations or warranties, and have
no responsibility, to the Assignee with respect to any representation or
warranty in the Credit Documents, or the legality, enforceability or
sufficiency of any thereof, the financial condition of any of the Borrower or
any of the Guarantors or the performance or non-performance by the Borrower or
any of the Guarantors of any of their respective obligations or duties under
the Credit Documents, and (iv) effective on the Assignment Effective Date (as
defined in the Assignment and Assumption Agreement) Assignor shall be released
from all of its obligations under the Credit Agreement as relating to
Assignee's Share (as defined in the Assignment and Assumption Agreement)
pursuant to the terms of the Credit Agreement.
The Assignee's address for purposes of notices under the Credit Agreement
is listed on Annex I hereto.
The recordation fee referred to in Section 10.04(b)(A) of the Credit
Agreement is delivered herewith to the Agent.
Very truly yours,
[NAME OF ASSIGNOR]
By:
-----------------------------------
[NAME OF ASSIGNEE]
By:
-----------------------------------
ACCEPTED AND ACKNOWLEDGED:
BANQUE INDOSUEZ,
NEW YORK BRANCH
______________________________________
Footnote continued from previous page.
<PAGE> 365
______________________________________
By:
-----------------------------
Date:
---------------------------
______________________________________
Footnote continued from previous page.
<PAGE> 1
EXHIBIT 11.1
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
Earnings Per Share
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------
Years Ended December 31
------------------------------------------------
1994 1995 1996
------------------------------------------------
<S> <C> <C> <C>
Loss before extraordinary charge and cumulative effect of
accounting change, net of income taxes . . . . . . . . . . . . . . $(15,478) $(55,696) $(98,380)
Extraordinary charge on early retirement of debt. . . . . . . . . . . -- (11,541) --
Cumulative effect of accounting change, net of income taxes . . . . . -- 602 --
------------------------------------------------
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(15,478) $(66,635) $(98,380)
Dividend embedded in conversion of Series B Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (6,250)
------------------------------------------------
Net Loss applicable to Class A Common Stock . . . . . . . . . . . . . $(15,478) $(66,635) $(104,630)
================================================
Weighted average number of shares outstanding . . . . . . . . . . . . 14,357,116 15,977,377 18,095,961
================================================
Loss per share applicable to Class A Common Stock before
extraordinary charge and cumulative effect of accounting change . . $(1.08) $(3.49) $(5.78)
Loss per share from extraordinary charge . . . . . . . . . . . . . . -- (0.72) --
Income per share from cumulative effect of accounting change . . . . -- 0.04 --
------------------------------------------------
Net loss per share applicable to Class A Common Stock . . . . . . . . $(1.08) $(4.17) $(5.78)
================================================
Pro Forma Unaudited
Shares used to compute net loss per share . . . . . . . . . . . . . . 14,357,116
Incremental Common Shares for pro forma conversion of Series A
Convertible Preferred Stock at beginning of period . . . . . . . . 88,289
-----------------
Shares used to compute pro forma net loss per share . . . . . . . . . 14,445,405
=================
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . $(1.07)
=================
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
The following corporations and partnerships are all of the
subsidiaries of ATI. Each subsidiary was incorporated or organized in Delaware
(except where indicated otherwise), and they each do business only under their
own name, "WANTV," "Choice TV," or "Superchannels of Las Vegas."
American Telecasting Development, Inc.
American Telecasting of Anchorage, Inc.
American Telecasting of Bend, Inc.
American Telecasting of Billings, Inc.
American Telecasting of Bismarck, Inc.
American Telecasting of Central Florida, Inc.
American Telecasting of Cincinnati, Inc.
American Telecasting of Colorado Springs, Inc.
American Telecasting of Columbus, Inc.
American Telecasting of Denver, Inc.
American Telecasting of Fort Collins, Inc.
American Telecasting of Fort Myers, Inc.
American Telecasting of Green Bay, Inc.
American Telecasting of Hawaii, Inc.
American Telecasting of Jackson, Inc.
American Telecasting of Jacksonville, Inc.
American Telecasting of Lansing, Inc.
American Telecasting of Lincoln, Inc.
American Telecasting of Little Rock, Inc.
American Telecasting of Louisville, Inc.
American Telecasting of Medford, Inc.
American Telecasting of Michiana, Inc.
American Telecasting of Minnesota, Inc.
American Telecasting of Monterey, Inc.
American Telecasting of Nebraska, Inc.
American Telecasting of North Dakota, Inc.
American Telecasting of Oklahoma, Inc.
American Telecasting of Portland, Inc.
American Telecasting of Rapid City, Inc.
American Telecasting of Redding, Inc.
American Telecasting of Rockford, Inc.
American Telecasting of Salem/Eugene, Inc.
American Telecasting of Santa Barbara, Inc.
American Telecasting of Santa Rosa, Inc.
<PAGE> 2
American Telecasting of Sarasota, Inc.
American Telecasting of Seattle, Inc.
American Telecasting of Sheridan, Inc.
American Telecasting of Sioux Valley, Inc.
American Telecasting of South Dakota, Inc.
American Telecasting of Toledo, Inc.
American Telecasting of Youngstown, Inc.
American Telecasting of Yuba City, Inc.
FMA Licensee Subsidiary, Inc. (State of California)
Fresno MMDS Associates, a general partnership (State of California)
Fresno Wireless Cable Television, Inc. (State of Washington)
Superchannels of Las Vegas, Inc. (State of Arizona)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 21, 1997 (except with respect to the Facility and the
BellSouth Transaction discussed in Notes 1 and 7, as to which the date is
March 18, 1997), included in this Form 10-K into the Company's previously filed
Registration Statements on Form S-8, File No. 33-86010 and Form S-8, File No.
333-05385.
ARTHUR ANDERSEN LLP
Washington, D.C.
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,476
<SECURITIES> 0
<RECEIVABLES> 1,867
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,133
<PP&E> 99,271
<DEPRECIATION> 0
<TOTAL-ASSETS> 283,572
<CURRENT-LIABILITIES> 21,271
<BONDS> 254,398
0
13,237
<COMMON> 176,299
<OTHER-SE> (186,423)
<TOTAL-LIABILITY-AND-EQUITY> 283,572
<SALES> 0
<TOTAL-REVENUES> 62,032
<CGS> 0
<TOTAL-COSTS> 128,221
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,281
<INCOME-PRETAX> (101,677)
<INCOME-TAX> (3,297)
<INCOME-CONTINUING> (98,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,380)
<EPS-PRIMARY> (5.78)
<EPS-DILUTED> (5.78)
</TABLE>
