<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
AMERICAN TELECASTING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------
To the Stockholders of American Telecasting, Inc.:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of American
Telecasting, Inc. (the "Company"), will be held on Thursday, April 24, 1997, at
10:00 a.m., Mountain Time in Salon E at the Marriott Hotel, 5580 Tech Center
Drive, Colorado Springs, Colorado 80919, to consider and act upon the following
matters:
I. to elect six directors for the ensuing year;
II. to consider and act upon a proposal to amend Article IV of the
Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 40,000,000 to
55,000,000, consisting of 45,000,000 shares of Class A Common
Stock and 10,000,000 shares of Class B Common Stock.
III. to approve the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending
December 31, 1997; and
IV. to transact such other business as may properly come before the
meeting.
In accordance with Delaware law, a list of the Company's stockholders
entitled to vote at the meeting will be available for examination at the
Company's headquarters for ten business days prior to the meeting, between the
hours of 9:00 a.m. and 5:00 p.m., Mountain Time, and at the meeting, during the
entire time thereof.
Accompanying this notice is a Proxy and Proxy Statement and a copy of
the Company's Annual Report for the year ended December 31, 1996. Whether or
not you expect to be present at the meeting, please sign and date the Proxy and
return it in the enclosed envelope provided for that purpose prior to the date
of the Annual Meeting. The Proxy may be revoked at any time prior to the time
that it is voted at the meeting. Only stockholders of record at the close of
business on March 11, 1997 will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT D. HOSTETLER
President and Chief Executive Officer
March __, 1997
<PAGE> 3
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
---------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1997
---------------
This Proxy Statement is being furnished to the stockholders of American
Telecasting, Inc. (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company for the 1997 Annual Meeting of
Stockholders and any adjournments thereof (the "Annual Meeting"). The Annual
Meeting will be held on Thursday, April 24, 1997 in Salon E at the Marriott
Hotel, 5580 Tech Center Drive, Colorado Springs, Colorado 80919, at 10:00 a.m.,
Mountain Time.
This Proxy Statement and the accompanying proxy card are being sent to
stockholders on or about March 27, 1997. The Annual Report of the Company for
the fiscal year ended December 31, 1996, is being mailed to stockholders with
this Proxy Statement and the accompanying proxy card.
VOTING
GENERAL
Only holders of record of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), as of the close of business on
March 11, 1997 (the "Record Date") will be entitled to vote at the Annual
Meeting. As of the Record Date, 25,743,607 shares of Class A Common Stock were
issued and outstanding. Each share of Class A Common Stock outstanding on the
record date is entitled to one vote on each matter submitted to the
stockholders.
The presence in person or by proxy of the holders of a majority of the
shares of Class A Common Stock issued and outstanding and entitled to vote at
the Annual Meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of the holders of a plurality of the shares of Class A Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Class A Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat is required for approval of all other items being
submitted to the stockholders for their consideration. Donald R. DePriest,
Chairman of the Board of the Company, controls directly or indirectly
approximately 19.4% of the Company's outstanding Class A Common Stock,
including the approximately 8.9% held of record by MCT Investors, L.P. ("MCT").
Mr. DePriest has indicated his intention to vote FOR the election to the Board
of Directors of the individuals named as nominees herein and FOR the
appointment of Arthur Andersen LLP as independent auditors of the Company.
<PAGE> 4
An automated system administered by the Company's transfer agent
will tabulate the votes. Abstentions and proxies relating to "street name"
shares for which brokers have not received voting instructions from the
beneficial owner ("Broker Non-Votes") will be counted to determine whether a
quorum is present. With respect to the proposed amendment to the Company's
Restated Certificate of Incorporation (Proposal No.2) (the "Amendment"), both
abstentions and Broker Non-Votes will be counted as part of the total number of
votes cast on such proposal in determining whether the proposal has been
approved by the stockholders. Thus, both abstentions and Broker Non-Votes will
have the effect of votes "against" the Amendment. With respect to all other
matters submitted to the stockholders for their consideration, abstentions will
be counted as part of the total number of votes cast on such proposals in
determining whether the proposals have received the requisite number of
favorable votes, whereas Broker Non-Votes will not be counted as part of the
total number of votes cast on such proposals. Thus, abstentions will have the
same effect as votes against any given proposal, whereas Broker Non-Votes will
have no effect in determining whether any given proposal has been approved by
the stockholders.
VOTING BY PROXY
With respect to the proposal regarding election of directors,
stockholders may (a) vote in favor of all nominees, (b) withhold their votes as
to all nominees, or (c) withhold their votes as to specific nominees by so
indicating in the appropriate space on the enclosed proxy card. With respect to
all other proposals being submitted to the stockholders for their
consideration, stockholders may (i) vote "for" such proposal, (ii) vote
"against" such proposal, or (iii) abstain from voting on such proposal. All
properly executed proxy cards delivered by stockholders and not revoked will be
voted at the Annual Meeting in accordance with the directions given. IF NO
SPECIFIC INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTERS TO BE VOTED UPON,
THE SHARES REPRESENTED BY A SIGNED PROXY CARD WILL BE VOTED "FOR" THE ELECTION
OF ALL DIRECTORS, "FOR" THE AMENDMENT, AND "FOR" THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS INDEPENDENT AUDITORS. Management knows of no other matters that
may come before the meeting for consideration by the stockholders. However, if
any other matter properly comes before the meeting, the persons named in the
enclosed proxy card as proxies will vote upon such matters in accordance with
their judgment.
Stockholders who do not expect to attend the Annual Meeting in person
are urged to execute and return the enclosed proxy card promptly. Any
stockholder delivering a proxy has the power to revoke it at any time before it
is voted by giving written notice of revocation to the Secretary of the
Company, by executing and delivering to the Secretary a proxy card bearing a
later date, or by voting in person at the Annual Meeting. Any stockholder also
may be represented by another person at the Annual Meeting by executing a form
of proxy designating such person to act on the stockholder's behalf at the
meeting.
In addition to soliciting proxies through the mail, the Company may
solicit proxies through its directors, officers and employees in person and by
telephone. Directors, officers and employees will receive no additional
compensation for such solicitation. The Company has retained Georgeson &
Company, Inc. a proxy solicitation firm, to assist in the solicitation of
proxies at a fee of approximately $7,500 plus reimbursement of out-of-pocket
costs. All expenses incurred in connection with the solicitation of proxies
(including the cost of preparing, assembling, printing and mailing this Proxy
Statement, the accompanying proxy card and any additional material which may be
furnished to stockholders) will be borne by the Company. Brokerage firms,
nominees, custodians and other fiduciaries may be requested to forward proxy
materials to the beneficial owners of shares held of record by them, and will
be reimbursed for their expenses incurred in connection therewith.
2
<PAGE> 5
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Class A Common Stock at February 14, 1997 by (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Class A Common Stock, (ii) each director or nominee, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each such person
(alone or with family members) has sole voting and dispositive power of the
shares listed opposite such person's name. The address of MCT is 625 Slaters
Lane, Suite G-100, Alexandria, Virginia, 22314. The address of CFW
Communications Company ("CFW") is 401 Spring Lane, Suite 300, Waynesboro,
Virginia 22980.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF OF
NAME BENEFICIAL OWNERSHIP CLASS
---- -------------------- -----
<S> <C> <C>
MCT Investors, L.P.(1) . . . . . . . . . . . 2,213,648 8.9%
CFW Communications Company(2) . . . . . . . . 1,486,434 6.0%
James S. Quarforth(3) . . . . . . . . . . . . 2,820 *
Donald R. DePriest(4) . . . . . . . . . . . . 4,799,135 19.4%
Richard F. Seney(5) . . . . . . . . . . . . . 120,750 *
Robert D. Hostetler(6) . . . . . . . . . . . 385,475 1.5%
Carl A. Rosberg(7) . . . . . . . . . . . . . 1,900 *
Mitchell R. Hauser . . . . . . . . . . . . . 3,918 *
David K. Sentman . . . . . . . . . . . . . . -- *
John B. Suranyi . . . . . . . . . . . . . . . 718 *
Terry J. Holmes . . . . . . . . . . . . . . . 13,316 *
Brian E. Gast(8) . . . . . . . . . . . . . . 110,000 *
All current directors and executive officers
as a group (9 persons) . . . . . . . . . . . 5,328,032 21.2%
</TABLE>
- ---------------
* Less than 1%.
(1) Consists solely of 2,213,648 shares which are held of record by MCT but
owned beneficially by Donald R. DePriest. Mr. DePriest is the Chairman
of the Board, President and sole stockholder of MedCom Development
Corporation ("MedCom"), which is the sole general partner of MCT. Mr.
DePriest has sole voting and investment power with respect to these
shares, which power is exercised through MedCom and MCT. MCT disclaims
beneficial ownership with respect to these shares.
(2) Includes 74,322 shares owned by CFW Communications Foundation, a
Virginia non-stock corporation. Seven of nine directors of CFW are also
directors of CFW Communications Foundation.
(3) Includes 20 shares owned by Mr. Quarforth's minor children, of which Mr.
Quarforth disclaims beneficial ownership. Excludes 1,486,434 shares
owned beneficially by CFW, of which Mr. Quarforth disclaims beneficial
ownership. Mr. Quarforth is President and Chief Executive Officer of
CFW.
(4) Includes 2,213,648 shares held of record by MCT over which Mr. DePriest
has sole voting and investment power, 41,058 shares held of record by
MedCom over which Mr. DePriest has sole voting and investment power, and
2,520,236 shares held directly by Mr. DePriest. See Note 1 above. Also
includes 24,193 shares held of record by CD Partners ("CD Partners"), a
general partnership of which Mr. DePriest is a 50% partner, over which
Mr. DePriest has shared voting and investment power. Mr. DePriest
disclaims beneficial ownership over all shares held by MCT and CD
Partners, except to the extent of Mr. DePriest's pro rata interest in
the profits and losses of MCT and CD Partners, respectively.
(5) Excludes 2,213,648 shares held by MCT, of which Mr. Seney disclaims
beneficial ownership. Mr. Seney is Vice President and General Manager of
MedCom, the sole general partner of MCT.
(6) Includes the right to acquire 37,500 shares of Class A Common Stock
within 6 days upon the exercise of outstanding stock options.
(7) Excludes 1,486,434 shares owned beneficially by CFW, of which
Mr. Rosberg disclaims beneficial ownership. Mr. Rosberg is Senior Vice
President and a director of CFW.
(8) Includes the right to acquire 110,000 shares of Class A Common Stock
within 60 days upon the exercise of outstanding stock options.
3
<PAGE> 6
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Each director of the Company is elected to serve until the next annual
meeting of the stockholders or until his successor is duly elected and
qualified. The Board of Directors has nominated the six persons named below to
serve as directors until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. All nominees are currently members
of the Board.
Each of the nominees has consented to serve on the Board of Directors
until the next Annual Meeting of Stockholders or until his successor is duly
elected and qualified. If any of the nominees should be unable to serve for any
reason (which management has no reason to anticipate at this time), the Board
of Directors may designate a substitute nominee or nominees (in which case the
persons named as proxies in the enclosed proxy card will vote all valid proxy
cards for the election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate or candidates
are located, or by resolution provide for a lesser number of directors.
The affirmative vote of the holders of a plurality of the shares of
Class A Common Stock present in person or represented by proxy at the Annual
Meeting is required for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED HEREIN (ITEM NO. 1 ON THE ENCLOSED PROXY CARD).
4
<PAGE> 7
The following table sets forth certain biographical information as of
February 14, 1997 about each of the individuals nominated for election as a
Director of the Company. Information with respect to the number of shares of
the Company's Class A Common Stock beneficially owned by each of the nominees,
directly or indirectly, as of February 14, 1997, appears on page 3 of this
Proxy Statement.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND
NAME AND AGE SINCE: OTHER INFORMATION
------------- ------- -----------------
<S> <C> <C>
Donald R. DePriest (57) December 1988 Chairman of the Board of Directors
of the Company since March 1990;
President of the Company from 1988
through March 1990; Chairman of the
Board of Directors, President and
sole stockholder of MedCom, the sole
general partner of MCT, an
investment partnership specializing
in the communications and health
care industries and the Company'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) March 1990 Vice Chairman of the Board of
Directors of the Company since
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 (54) March 1994 President and Chief Executive
Officer of the Company since January
1996; Vice President - Development
of the Company from January 1995
through December 1995; Director of
Mergers and Acquisitions of the
Company from December 1993 through
December 1994; served as director
and/or officer of several entities
engaged in the business of
constructing and operating wireless
cable television systems, certain of
which were acquired by the Company
in December 1993 (the "Choice TV
Group") from 1988 to 1993.
Mitchell R. Hauser (37) October 1993 President and Chief Executive
Officer of WJG Maritel, a marine
telecommunications company, since
July 1996; Vice President of Granite
Capital, an investment manager, from
August 1990 to September 1993; Vice
President and Portfolio Manager of
National Securities and Research, a
mutual fund manager, from July 1989
to August 1990; Vice President and
Director of Research of IMI
Securities, a brokerage firm, prior
to July 1989; limited partner and
associate of MCT.
James R. Quarforth (42) January 1991 President, Chief Executive Officer
and Director of CFW, a publicly
traded telecommunications company;
has served in various capacities
with CFW since 1984, including
Executive Vice President -
Operations, Vice President -
Administration and Controller;
currently a director of Planters
Bank and Trust Company, a publicly
traded bank.
Carl A. Rosberg (44) April 1994 Senior Vice President and Director
of CFW; has served in various
capacities with CFW since 1988,
including Vice President -
Administration and Senior Vice
President - Operations.
</TABLE>
5
<PAGE> 8
PENDING LITIGATION INVOLVING CERTAIN EXECUTIVE OFFICERS AND A DIRECTOR OF THE
COMPANY
On or about February 17, 1994, a complaint (the "Complaint") was filed
by 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, 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. Mr. Hostetler became President and Chief Executive Officer of the
Company in January 1996. From 1991 until June 1995, Mr. Holmes was General
Manager of the Fresno Partnership. He is currently Managing Director of the
Fresno Partnership. Mr. Holmes has been employed by the Company since June
1995, and became Vice President - Operations of the Company in January 1996.
The Complaint alleges that, while he was a director and employee of FTI, Mr.
Hostetler engaged in wrongful conduct, including misappropriation of corporate
opportunity, fraud and unfair competition by exploiting business opportunities
that were the property of FTI. The Complaint also alleges that Mr. Holmes
engaged in a misappropriation of corporate opportunities belonging to FTI. The
Complaint further alleges that all defendants, including the Company,
participated in a conspiracy to misappropriate corporate opportunities
belonging to FTI and that the Company and the unnamed defendants engaged in
wrongful interference with fiduciary relationship by intentionally causing Mr.
Hostetler to breach his fiduciary duty to FTI and causing Mr. Hostetler to
wrongfully transfer FTI's corporate opportunities to the Company.
On August 28, 1996, ATI filed a Cross-Complaint (the "Cross-Complaint")
against FTI and certain of its officers and directors (the "Cross Defendants").
The Cross-Complaint alleges that the Cross-Defendants have engaged in a
violation of Section 26-1-8-401 of the Indiana Code, conversion, conspiracy,
and breach of trust by failing to acknowledge and record ATI's ownership of
approximately 7% of FTI's capital stock purchased by ATI from a former
shareholder of FTI, and continuing to represent that FTI qualifies for
Subchapter S status under the Internal Revenue Code. The Cross-Complaint seeks
specific performance of the transfer of shares to ATI, compensatory damages,
punitive damages, an injunction against any further actions by the Cross-
Defendants in breach of trust or with the effect of dissipating and diverting
the property and assets of FTI, and the appointment of a receiver to handle the
affairs of FTI during the pendency of the FTI proceeding.
On or about February 24, 1997, the Company and Mr. Holmes each filed a
motion for summary judgment seeking dismissal of the claims in the Complaint
relating to an alleged conspiracy to misappropriate corporate opportunities of
FTI. The motion to dismiss is scheduled to be heard on March 28, 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 condition or
future results of operations.
6
<PAGE> 9
ORGANIZATION AND REMUNERATION OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee,
and an Executive Committee.
The Audit Committee oversees the audit of the Company's accounts through
independent accountants whom it recommends for selection by the Board of
Directors. The Audit Committee is also responsible for reviewing the adequacy
of the Company's system of internal accounting controls and the scope and
results of the Company's procedures for internal auditing. The Audit Committee
is authorized to direct and supervise such special investigations as it may
deem appropriate. The Audit Committee held three meetings during fiscal year
1996. The current members of the Audit Committee are Mr. Quarforth, Mr. Rosberg
and Mr. Seney.
The Compensation Committee monitors and recommends compensation to be
paid to management of the Company. The Compensation Committee's
responsibilities include formulating the Company's compensation philosophy,
establishing the policies, standards and objectives upon which compensation
decisions are based, and making recommendations to the Board of Directors
regarding the cash compensation to be paid to executive officers and other
employees. The Compensation Committee also makes recommendations to the Board
of Directors regarding option grants under the Company's stock option plan and
reviews and revises all of the Company's plans that are intended to qualify
under Section 401 of the Internal Revenue Code. The Compensation Committee
members communicate with each other from time to time in person and by
telephone and act on matters by way of a formal meeting or by unanimous written
consent. The Compensation Committee held four meetings during fiscal year 1996.
The current members of the Compensation Committee are Mr. DePriest, Mr.
Quarforth and Mr. Seney.
The Executive Committee has the authority to exercise all the powers and
authority of the Board of Directors in the management and business of the
Company during the interval between regular meetings of the Board of Directors,
subject to certain limitations imposed by law, the Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws, or by resolution
of the Board of Directors. The Executive Committee also has the power to
authorize the issuance of the Company's Common Stock. The Executive Committee
members communicate with each other from time to time by telephone or in person
and act on matters by means of a formal meeting or by unanimous written
consent. The Executive Committee met three times during fiscal year 1996. The
Committee also acted from time to time by unanimous written consent. During
1996, the members of the Executive Committee were Mr. DePriest, Mr. Hostetler,
Mr. Quarforth and Mr. Seney.
The Company's Board of Directors held three meetings during the fiscal
year ended December 31, 1996, and also acted from time to time by unanimous
written consent. Each director, except for Mr. Rosberg, William J. Blake and
Jeffery A. Mathias, attended more than 75% of all meetings of the entire Board
and the committees on which they served. Messrs. Blake and Mathias are no
longer members of the Board of Directors.
Directors do not receive compensation for service on the Board of
Directors or any committee thereof but are reimbursed for their out-of-pocket
expenses incurred in connection with attending Board meetings. Directors, as
such, do not participate in any executive compensation plans.
7
<PAGE> 10
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the annual salary, bonus and other
compensation for each of the last three fiscal years awarded to or earned by
the Company's current chief executive officer, its former chief executive
officer and the three other most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers"). No other executive
officers of the Company earned more than $100,000 in total salary and bonus
during fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS (#) (2) COMPENSATION
- --------------------------- ---- ------ ----- ---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Hostetler, President 1996 $190,000 $-0- $-0- 75,000(3) $71,416 (4)(5)
and Chief Executive Officer 1995 115,817 27,796 (6) -0- 45,000 70,467 (7)(8)
1994 114,092 27,500 (9) -0- -0- 68,335 (10)
David K. Sentman, Senior Vice 1996 135,000 67,500 (11) -0- 20,000(3)(12) 14,709 (13)(5)
President and Chief Financial 1995 65,000 15,600 (14) -0- 50,000 77,007 (13)
Officer (15)
Terry J. Holmes, Vice President- 1996 123,021 60,500 (16) -0- 20,000(3)(12) 5,760
Operations (17) 1995 59,790 10,793 (18) -0- 30,000 -0-
John B. Suranyi, Vice President- 1996 121,771 62,500 (19) -0- 30,000(3)(12) 4,750 (5)
Operations 1995 89,497 10,292 (20) -0- 30,000 2,691 (8)
1994 70,680 25,000 (21) -0- -0- -0-
Brian E. Gast, Former President 1996 175,000 (22) -0- -0- -0- -0-
and Chief Executive Officer 1995 175,000 37,188 (23) 5,297 -0- -0-
1994 136,708 (24) 35,000 2,356 11,000 (25) 2,530 (26)
</TABLE>
- ---------------
( 1) The amounts disclosed in this column consist of premiums paid by the
Company for long-term medical disability and life insurance policies on
behalf of the Named Executive Officers.
( 2) The Company does not have any restricted stock, stock appreciation right
or long-term incentive plans.
( 3) Does not include replacement options granted to the Named Executive
Officer in exchange for the cancellation of all outstanding options held
by the Named Executive Officer in connection with the Company's
repricing of stock options on December 17, 1996. See "Report of the
Board of Directors on Executive Compensation and Stock Option
Repricing."
( 4) Includes $66,666 paid to Mr. Hostetler pursuant to a non-competition
provision contained in his original employment agreement with the
Company. See "Certain Relationships and Related Transactions".
( 5) Includes the following contributions made by the Company to the
Company's 401(k) plan on behalf of the Named Executive Officers during
1996: Mr. Hostetler - $4,750, Mr. Sentman - $4,750, Mr. Holmes - $2,543
and Mr. Suranyi - $4,750.
( 6) This amount was paid during 1996 based upon Mr. Hostetler's performance
during 1995.
( 7) Includes $66,667 that was earned in 1995 pursuant to the non-competition
provisions of Mr. Hostetler's original employment agreement. However,
payment was actually received by Mr. Hostetler in 1996.
( 8) Includes the following contributions made by the Company to the
Company's 401(k) plan on behalf of the Named Executive Officers: Mr.
Hostetler - $3,800 and Mr. Suranyi - $2,691.
( 9) This amount was paid during 1995 based upon Mr. Hostetler's performance
during 1994.
(10) Includes $66,667 that was paid to Mr. Hostetler pursuant to the non-
competition provision contained in his original employment agreement.
Also includes $1,668 contributed by the Company to its 401(k) plan on
behalf of Mr. Hostetler.
(11) Of this amount, $45,000 will be paid in 1997 based upon Mr. Sentman's
performance during 1996.
(12) 10,000 of such options were granted in 1997 based upon the Named
Executive Officer's performance during 1996.
8
<PAGE> 11
(13) Includes relocation expenses paid by the Company on behalf of the Named
Executive Officer.
(14) This amount was paid during 1996 based upon Mr. Sentman's performance
during 1995.
(15) Mr. Sentman joined the Company on July 1, 1995.
(16) Of this amount, $38,000 will be paid in 1997 based upon Mr. Holmes'
performance during 1996.
(17) Mr. Holmes joined the Company on June 12, 1995.
(18) This amount was paid during 1996 based upon Mr. Holmes' performance
during 1995.
(19) Of this amount, $40,000 will be paid in 1997 based upon Mr. Suranyi's
performance during 1996.
(20) This amount was paid during 1996 based upon Mr. Suranyi's performance
during 1995.
(21) This amount was paid during 1995 based upon Mr. Suranyi's performance
during 1994.
(22) Consists of amounts paid pursuant to the severance provisions in Mr.
Gast's employment agreement. Mr. Gast left the employ of the Company in
January 1996.
(23) This amount was paid during 1996 based upon Mr. Gast's performance
during 1995.
(24) $1,875 of this amount was paid during 1995 based upon a salary
adjustment for 1994.
(25) These options were granted to Mr. Gast on March 1, 1995, effective as of
March 2, 1995, based upon his performance during 1994.
(26) Consists of contributions made by the Company to the Company's 401(k)
plan on behalf of Mr. Gast.
9
<PAGE> 12
STOCK OPTION GRANTS AND VALUES
The following table sets forth certain information regarding option
grants to the Named Executive Officers during 1996.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE ---------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- -------------------- -------------------- ------------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Hostetler 75,000(1)(2) 29% $14.375 01/04/2004 $514,725(2) $1,232,925(2)
Robert D. Hostetler 45,000(3) -- 6.875 12/17/2004 147,645 353,790
Robert D. Hostetler 75,000(4) -- 6.875 12/17/2004 246,075 589,650
David K. Sentman 10,000(2) 4% 15.000 04/25/2004 71,620(2) 171,540(2)
David K. Sentman 60,000(6) -- 6.875 12/17/2004 196,860 471,720
Terry J. Holmes 10,000(5)(2) 4% 15.000 4/25/2004 71,620(2) 171,540(2)
Terry J. Holmes 40,000(7) -- 6.875 12/17/2004 131,240 314,480
John B. Suranyi 20,000(5)(2) 8% 15.000 4/25/2004 143,240(2) 343,080(2)
John B. Suranyi 50,000(8) -- 6.875 12/17/2004 164,050 393,100
</TABLE>
- ---------------
(1) 25,000 of such options were exercisable as of July 1, 1996 and the
remaining options were exercisable in increments of 4,166 shares per
month beginning on August 31, 1996.
(2) All of such options were cancelled and replaced with new options in
connection with the Company's repricing of stock options on December 17,
1996. See "Report of the Board of Directors on Executive Compensation
and Stock Option Repricing."
(3) These options were granted to Mr. Hostetler as replacement options in
return for the cancellation of 30,000 options that were granted to Mr.
Hostetler on February 28, 1995 with an exercise price of $11.75 per
share and 15,000 options that were granted to Mr. Hostetler on December
12, 1995 with an exercise price of $13.75 per share. Twenty- five
percent of such replacement options vest on June 18, 1997 and the
remaining 75% of such replacement options vest ratably over three years
beginning on the first anniversary of the date of grant. See "Report of
the Board of Directors on Executive Compensation and Stock Option
Repricing."
(4) These options were granted to Mr. Hostetler as replacement options in
return for the cancellation of 75,000 options that were granted to Mr.
Hostetler on January 4, 1996 with an exercise price of $14.375 per
share. Such replacement options vest in increments of 12,500 shares per
month beginning on January 31, 1997. See "Report of the Board of
Directors on Executive Compensation and Stock Option Repricing."
(5) These options were to vest in increments of 20% per year over a five-
year period beginning on the first anniversary of the date of grant.
(6) These options were granted to Mr. Sentman as replacement options in
return for the cancellation of 50,000 options that were granted to Mr.
Sentman on June 13, 1995 with an exercise price of $12.75 per share and
10,000 options that were granted to Mr. Sentman on April 25, 1996 with
an exercise price of $15.00 per share. Twenty-five percent of such
replacement options vest on June 18, 1997 and the remaining 75% of such
replacement options vest ratably over three years beginning on the first
anniversary of the date of grant. See "Report of the Board of Directors
on Executive Compensation and Stock Option Repricing."
(7) These options were granted to Mr. Holmes as replacement options in
return for the cancellation of 15,000 options that were granted to Mr.
Holmes on June 12, 1995 with an exercise price of $13.75 per share,
15,000 options that were granted to Mr. Holmes on December 12, 1995 with
an exercise price of $13.75 per share and 10,000 options that were
granted to Mr. Holmes on April 25, 1996 with an exercise price of $15.00
per share. Twenty-five percent of such replacement options vest on June
18, 1997 and the remaining 75% of such replacement options vest ratably
over three years beginning on the first anniversary of the date of
grant. See "Report of Board of Directors on Executive Compensation and
Stock Option Repricing."
(8) These options were granted to Mr. Suranyi as replacement options in
return for the cancellation of 15,000 options that were granted to Mr.
Suranyi on June 12, 1995 with an exercise price of $13.75 per share,
15,000 options that were granted to Mr. Suranyi on December 12, 1995
with an exercise price of $13.75 per share and 20,000 options that were
granted to Mr. Suranyi on April 25, 1996 with an exercise price of
$15.00 per share. Twenty-five percent of such replacement options vest
on June 18, 1997 and the remaining 75% of such replacement options vest
ratably over three years beginning on the first anniversary of the date
of grant. See "Report of Board of Directors on Executive Compensation
and Stock Option Repricing."
10
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES TABLE
The following table sets forth certain information with respect to
option exercises by the Named Executive Officers during 1996 and the value of
options owned by the Named Executive Officers at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
ACQUIRED ON ------------------------- ----------------------------
NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- ------------ ------------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Robert D. Hostetler -0- $-0- -0-/120,000 *
David K. Sentman -0- -0- -0-/ 60,000 *
Terry J. Holmes -0- -0- -0-/ 40,000 *
John B. Suranyi -0- -0- -0-/ 50,000 *
Brian E. Gast 36,500 276,700 110,000/-0- $412,500/-0-
</TABLE>
- ---------------
* All of the options held by such Named Executive Officers at December 31,
1996 had an exercise price of $6.875 per share. The closing price of
the Company's Common Stock on December 31, 1996, as quoted on the Nasdaq
National Market, was $5.75. Thus, none of the options held by such
Named Executive Officers were in-the-money at December 31, 1996.
11
<PAGE> 14
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Robert D. Hostetler, who
became President and Chief Executive Officer of the Company on January 4, 1996.
Mr. Hostetler's original employment agreement with the Company, which became
effective when Mr. Hostetler joined the Company in December 1993, was replaced
by a new employment agreement, which became effective as of January 4, 1996.
Mr. Hostetler's employment agreement established his annual base cash
compensation for 1996 at $190,000. After January 1, 1997, Mr. Hostetler's base
salary may be increased by the Company in its discretion. The agreement
further provides that Mr. Hostetler is eligible to receive an annual cash bonus
pursuant to the Company's bonus plan for executive officers. Mr. Hostetler is
also eligible to participate in the Company's stock option plan.
Mr. Hostetler's employment agreement expires on June 30, 1997, unless
earlier terminated. The agreement may be terminated by the Company with or
without cause at any time without prior notice, and by Mr. Hostetler at any
time upon 30 days prior notice to the Company. The agreement provides that Mr.
Hostetler is entitled to receive severance payments equal to the lesser of six
months' base salary or the amount of base salary otherwise payable pursuant to
the employment agreement through the remainder of the term of the employment
agreement in the event the agreement is terminated without cause. Mr.
Hostetler's new employment agreement prohibits him from competing with the
Company during the period of his employment and for one year thereafter. Mr.
Hostetler's previous employment agreement with the Company also contained a
covenant not-to-compete, for which Mr. Hostetler has received $500,000.
The Company also has an employment agreement with David K. Sentman,
Senior Vice President and Chief Financial Officer of the Company, effective as
of August 10, 1996. The agreement establishes Mr. Sentman's minimum base
salary at $130,000, subject to increases of 5% per year or such other increases
as may be approved by the Company. Pursuant to his employment agreement, Mr.
Sentman is also eligible to receive a cash bonus with respect to each calendar
year of up to 40% of his base salary. Pursuant to his employment agreement,
Mr. Sentman was granted options to purchase 50,000 shares of common stock at an
exercise price of $12.75 per share and was reimbursed for certain relocation
expenses incurred in connection with the commencement of his employment. The
agreement also provided for a relocation loan to Mr. Sentman of up to $180,000,
which loan was repaid during 1996. Pursuant to his employment agreement, Mr.
Sentman is eligible to participate in all benefit programs established by the
Company that are generally applicable to executive officers.
Mr. Sentman's employment agreement expires on August 10, 1998, unless
earlier terminated The agreement may be terminated by the Company with or
without cause at any time without prior notice, and by Mr. Sentman at any time
after August 10, 1997 upon 30 days prior written notice to the Company. The
agreement provides that Mr. Sentman is entitled to receive severance payments
equal to one year's base salary plus accrued bonus in the event the agreement
is terminated without cause, and two year's base salary plus accrued bonus
under certain circumstances following a change in control of the Company. The
agreement also prohibits Mr. Sentman from competing with the Company for the
term of his employment and for one year thereafter.
The Company has agreed to enter into employment agreements with Terry J.
Holmes and John B. Suranyi, each a Vice President - Operations of the Company.
Each of the employment agreements establishes an annual base salary of $131,500
and provides for base salary increases of 5% per year or such other increases
as may be approved by the Company. The agreements also provide that Messrs.
Holmes and Suranyi will be eligible to receive annual cash bonuses pursuant to
the Company's bonus plan for executive officers and to participate in all
benefit programs generally applicable to executive officers. The agreements
are expected to expire on December 31, 1999, unless earlier terminated. The
agreements will be terminable by the Company with or without cause at any time
and by the employees upon 30 days prior written notice to the Company. The
agreements provide that Messrs. Holmes and Suranyi are entitled to certain
severance payments in the event the agreements are terminated without cause.
The agreements also will prohibit Messrs. Holmes and Suranyi from competing
with the Company for their respective terms of employment and for one year
thereafter.
Brian E. Gast served as President and Chief Executive Officer of the
Company from March 1990 until January 1996 pursuant to an employment agreement
with the Company. The agreement established Mr. Gast's minimum base cash
compensation at $130,000 for 1994 and provided that, beginning January 1, 1995,
Mr. Gast's base compensation
12
<PAGE> 15
would be increased annually by the greater of 5% or such other amount that was
approved by the Board of Directors. Effective as of December 15, 1994, the
Compensation Committee increased Mr. Gast's base cash compensation to $175,000.
Pursuant to his employment agreement, Mr. Gast was also eligible to receive a
cash bonus for 1996 of up to 50% of his base compensation and options to
purchase common stock based upon certain objective and subjective performance
criteria. Mr. Gast's employment agreement provided that Mr. Gast's employment
with the Company could be terminated by the Company with or without cause at
any time without prior notice. Mr. Gast resigned from the Company on January
4, 1996. As a result, according to the terms of Mr. Gast's employment
agreement, the Company was obligated to pay Mr. Gast one year's base salary as
severance pay. No bonus or stock options were awarded to Mr. Gast based upon
his performance during 1996.
13
<PAGE> 16
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION AND STOCK OPTION REPRICING
The Board of Directors makes this report on executive compensation
pursuant to Item 402 of Regulation S-K. Notwithstanding anything to the
contrary set forth in any of the Company's previous filings under the
Securities Act of 1933, as amended (the "Act"), or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), that might incorporate future
filings, including this Proxy Statement in whole or in part, this report and
the graph which follows this report shall not be incorporated by reference into
any such filings, and such information shall be entitled to the benefits
provided in Item 402(a)(9) of Regulation S-K.
All compensation arrangements for the Company's executive management are
recommended by the Company's compensation committee (the "Committee") and
reviewed and approved by the Board of Directors. The Committee formulates the
Company's compensation philosophy and establishes the policies, standards and
objectives upon which the compensation decisions are based. Pursuant to these
policies and criteria, the Committee recommends to the Board of Directors the
cash compensation to be paid the Company's executive officers, including the
Chief Executive Officer. The Committee also recommends to the Board of
Directors the key employees to whom stock options should be granted under the
Company's 1990 Stock Option Program, As Amended (the "Plan"), the number of
shares covered by each such grant, the exercise or purchase price per share,
and the other terms and provisions governing each grant of options under the
Plan. The Committee typically meets two or three times per year to review
executive management performance and compensation and to recommend bonuses and
stock option grants for employees of the Company. The Committee also meets on
an as-needed basis to recommend compensation for newly created or expanded
executive positions. All cash compensation arrangements and stock option
grants recommended by the Committee are subject to approval by the full Board
of Directors.
Compensation Philosophy
The objectives of the Company's executive compensation policies are to
attract, retain and reward highly-skilled executive officers who contribute to
the Company's success, to align the financial interests of executive officers
with the performance of the Company, to strengthen the relationship between
executive pay and shareholder value, to motivate executive officers to achieve
the Company's business objectives and to reward individual performance. During
1996, the Company used base salary, executive officer cash and stock bonuses,
and stock option grants under the Plan to achieve these objectives. The Board
of Directors believes that a substantial portion of the annual compensation of
each executive officer should be influenced by the performance of the Company,
as well as the individual contribution of each executive officer and the
responsibility and authority of each position relative to other positions
within the Company.
Federal tax law establishes certain requirements in order for
compensation exceeding $1 million earned annually by certain executives to be
deductible. Because the total compensation for executive officers of the
Company is significantly below the $1 million threshold, the Board of Directors
has not yet had to address the issues relative thereto.
Base Salary
The Company's base salary levels are usually recommended by the
Committee and approved by the Board of Directors annually for each executive
officer. The level of base compensation is intended to be competitive with
other comparable positions within the wireless cable and telecommunications
industries. Base pay is determined on a case by case basis in relation to the
individual's background, experience, accomplishments and market conditions.
While the Committee and the Board of Directors consider the low, midpoint and
upper ranges of base salaries published by compensation surveys in
establishing base salaries of each executive officer of the Company, the
Company does not have a policy or target of how each executive officer's base
salary, or salaries of executive officers as a group, should compare with the
low, midpoint or upper ranges of compensation surveys.
14
<PAGE> 17
Cash and Stock Bonuses
In addition to base pay, certain executive officers, including the
Company's President and Chief Executive Officer, are eligible to receive annual
or other cash bonuses. Cash bonuses are typically determined on the basis of a
combination of performance criteria including (a) annual personal performance
objectives, usually linked substantially to the performance of the Company,
that are established at the beginning of the year, (b) the Company's
performance compared to its business plan, (c) the Company's performance toward
achieving its strategic objectives, and (d) an overall subjective performance
evaluation taking into account such factors as the individual's relative
contribution to the Company.
Early in 1996, the Committee determined that executive officers should
be eligible to earn bonuses of up to 40% of base cash compensation based on
their performance during 1996. The Committee further determined that
approximately one-half of the bonus should be determined objectively by
measuring the performance of each executive officer against pre-established
operating performance targets. The Committee established executive performance
targets for 1996 in eight areas that were determined by the Board of Directors
to be critical to improving the Company's operating results: revenue; earnings
before interest, taxes, depreciation and amortization; free cash flow; capital
expenditures; number of customers; customer churn levels; bad debt as a
percentage of revenue; and marketing expenses per gross customer addition.1 The
performance of each executive officer against the pre-established targets was
measured quarterly and for the year as a whole, and approximately one half of
each executive officer's bonus was awarded on the basis of such measurement.
The remaining part of each executive officer's bonus was based principally upon
a subjective evaluation of the individual's performance during 1996.
Since mid-1996, the Company has taken certain actions aimed at reducing
its costs and conserving its capital. Consistent with these actions, and as a
means of motivating management to increase shareholder value, the Committee
recommended that all bonuses awarded to exempt salary employees, including all
executive officers for their performance during 1996 be paid two-thirds in
Common Stock and one-third in cash. The Committee further recommended that the
award of such stock bonuses be deferred until late July 1997. Such
recommendations of the Committee were approved by the Board of Directors. In
approving such recommendations, the Board of Directors noted that the award of
a substantial part of the 1996 bonus in the form of Common Stock creates a
substantial incentive for these exempt salary employees, including executives,
to focus on the creation of shareholder value.
Stock Option Grants and Repricing
All executive officers and key employees of the Company are eligible to
participate in the Plan. The purpose of the Plan is to provide incentives to
management to maximize shareholder value by providing them with opportunities
to acquire shares of the Company's Common Stock. Options are granted to
executive officers and key employees whom the Board of Directors determines to
be responsible for the future growth and success of the Company, based on
recommendations of the Committee. The Board believes that equity ownership by
executive officers provides incentives to build shareholder value and aligns
the interests of executive officers with the shareholders. Options are granted
at the market price of the Company's Common Stock on the date of grant and,
consequently, have value only if the price of the Company's Common Stock
increases over the exercise price for the period during which the options are
exercisable.
The Committee typically recommends that a stock option be granted under
the Plan upon hiring executive officers, subject to a vesting schedule. The
size of the initial grant is usually determined with reference to the seniority
of the executive officer, the contribution that the executive officer is
expected to make to the Company, and comparable equity compensation offered by
other companies in the cable or telecommunication industries.
- ---------------
(1) In mid-1996, the Company revised its annual business plan to reflect
lower planned customer levels for year-end. In light of this revised
business plan, the Committee determined that it was in the best
interests of the Company to properly motivate its executives by
adjusting all of the performance targets except customer churn levels to
be more in line with the Company's realistic expectations.
15
<PAGE> 18
After the initial stock option grant, the Committee recommends
additional grants under the Plan, typically on an annual basis. Such awards
are based upon performance criteria similar to those applicable to cash bonus
payments and upon target levels of stock option compensation (using Black-
Scholes valuation estimates) over a five-year period as a multiple of annual
base salaries. In recommending the size of periodic grants, the Committee also
considers prior option grants to the executive officer, regardless of whether
the options have been exercised, the executive's historical performance, and
his or her expected future contributions. Exceptions are made to the annual
grants and typical vesting schedules when the Board believes, based upon
recommendations of the Committee, that additional option grants or accelerated
vesting will match special circumstances of the Company or reward the
contribution of an executive officer or key employee.
Prior to December 17, 1996, the Named Executive Officers had been
granted, as part of their incentive compensation, options to purchase Common
Stock of the Company at prices ranging from $11.75 to $15.00 per share (see
"Ten Year Option Repricings"). Subsequent to the grant of such options, the
market price of the Company's Common Stock decreased significantly and the
Company's financial position weakened. The Board of Directors determined,
based upon a recommendation of the Committee, that it was in the best interests
of the Company to offer to reprice all outstanding stock options previously
granted to key employees (including the Named Executive Officers) under the
Plan. In making this determination, the Board of Directors considered that the
exercise price of the vast majority of the outstanding options made them
substantially valueless from the viewpoint of the optionholder, considering the
current market price of the Common Stock. The Board of Directors was concerned
that the Company might, at this critical point in its development, lose the
benefit of a key incentive in its compensation philosophy and, thereby, make it
more difficult for the Company to retain talented personnel. By bringing the
exercise price of all outstanding options more in line with current market
conditions, the Board of Directors believes that the Company's key employees
will be more motivated to focus on increasing shareholder value.
Thus, on December 17, 1996, the Company offered to each optionholder,
including the Named Executive Officers, the right to surrender his or her
outstanding options to the Company in exchange for the grant of replacement
options for a like number of shares of Class A Common Stock at an exercise
price of $6.875, the closing price of the Class A Common Stock on the Nasdaq
National Market on December 17, 1996. All employees (including the Named
Executive Officers) holding options with an exercise price above $6.875 per
share surrendered their outstanding options to the Company in exchange for
replacement grants.
At the time of the repricing, the Committee also recommended to the
Board of Directors that future stock options generally be granted with three-
year vesting schedules instead of the five-year vesting schedules previously
used by the Company in order to better reflect the dynamic environment of the
Company and the wireless industry, and that the options also generally contain
an acceleration of one-year vesting in the event of a change in control of the
Company.
Compensation of the President and Chief Executive Officer
The Committee and the Board of Directors review the performance of the
Company's President and Chief Executive Officer at least annually. On January
4, 1996, Robert D. Hostetler was elected President and Chief Executive Officer
of the Company. He was formerly Vice President - Development, of the Company.
Pursuant to his employment agreement with the Company, Mr. Hostetler's annual
base salary was established at $190,000 for 1996. In setting Mr. Hostetler's
base salary, the Board of Directors and the Committee considered base
compensation levels of other chief executive officers in the cable and
telecommunications industries, Mr. Hostetler's executive experience and
knowledge of the wireless cable industry, and his expected future contribution
to the Company.
Pursuant to his employment agreement, Mr. Hostetler was eligible to
receive a bonus for 1996 to be calculated in the same manner as the bonuses for
other executive officers. See "-- Cash and Stock Bonuses". In considering the
objective portion of Mr. Hostetler's bonus, the Committee noted that the
Company's pre-established operating performance targets had been achieved at
the level of approximately 92%. In considering the subjective portion of Mr.
Hostetler's 1996 bonus, the Committee evaluated Mr. Hostetler's performance in
the following areas: aligning the Company with one or more strategic partners
in order to provide access to additional technologies,
16
<PAGE> 19
products and capital; improving the Company's liquidity through the sale of
certain non-strategic assets and additional equity; developing strategies for
implementing wireless digital video and non-video products; retaining certain
key employees; and improving the overall management and operating personnel of
the Company. The Committee noted that, while significant progress had been
made in these areas, the Company was not successful in completing a transaction
with a strategic partner or a sale of its non-strategic assets during 1996. As
a result, the Board of Directors and Mr. Hostetler agreed that consideration of
Mr. Hostetler's 1996 bonus would be deferred until his employment agreement is
renegotiated in June 1997.
Mr. Hostetler was offered and accepted the opportunity to reprice his
stock options as of December 17, 1996, along with all other optionholders. At
the time of such repricing, Mr. Hostetler had been granted options to purchase
120,000 shares of the Company's Common Stock. Of this amount, options to
acquire 75,000 shares at an exercise price of $14.375 per share would have
become fully vested on June 30, 1997, the termination date of Mr. Hostetler's
current employment agreement. The Board of Directors determined, based upon a
recommendation of the Committee, that the vesting schedule of Mr. Hostetler's
replacement options for these 75,000 shares should be identical to the vesting
schedule of the options surrendered, such that the replacement options would
vest ratably over a six month period beginning on January 31, 1997 and become
fully exercisable on June 30, 1997. The Board of Directors decided to retain
the original vesting period in order to continue to provide an incentive for
Mr. Hostetler to focus on the Company's ongoing strategic partnering and
liquidity objectives.
The Board of Directors believes that Mr. Hostetler's base cash
compensation for 1996 was in the middle of the compensation range for similar
positions in the wireless cable industry.1 Mr. Hostetler also holds a
substantial equity participation in the Company through his ownership of Class
A Common Stock and the stock option arrangements described above. Thus, a
portion of Mr. Hostetler's total compensation is linked directly to the
creation of shareholder value.
Respectfully submitted,
The Board of Directors
Donald R. DePriest
Richard F. Seney
James S. Quarforth
Carl A. Rosberg
Robert D. Hostetler
Mitchell R. Hauser
- ---------------
(1) In determining whether Mr. Hostetler's compensation was comparable to
the compensation of other chief executives, the Board of Directors
limited its comparison to other companies in the wireless cable
industry, a relatively small subset of the telecommunications industry.
To date, the Board has believed that such a comparison was more
meaningful than a comparison between its compensation levels and the
compensation levels of much larger and more highly capitalized companies
comprising the telecommunications industry as a whole. Because the
wireless cable industry is a relatively new industry, there is no
established line of business or industry index. Thus, for purposes of
the Stock Performance Graph, the Company compared its stock performance
to the Telecommunications Index, which is comprised of companies
representing the telecommunications industry as a whole.
17
<PAGE> 20
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK AT EXERCISE PRICE NEW TERM REMAINING
OPTIONS TIME OF AT TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
- ---------------------------- -------- ---------- ------------ -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Hostetler (1) 12/17/97 30,000 $ 6.875 $11.75 $ 6.875 7.00
Robert D. Hostetler 12/17/97 15,000 6.875 13.75 6.875 6.00
Robert D. Hostetler 12/17/97 75,000 6.875 14.375 6.875 7.00
David K. Sentman (2) 12/17/97 50,000 6.875 12.75 6.875 6.50
David K. Sentman 12/17/97 10,000 6.875 15.00 6.875 7.25
Terry J. Holmes (3) 12/17/97 15,000 6.875 13.75 6.875 6.50
Terry J. Holmes 12/17/97 15,000 6.875 13.75 6.875 7.00
Terry J. Holmes 12/17/97 10,000 6.875 15.00 6.875 7.25
John B. Suranyi (4) 12/17/97 15,000 6.875 13.75 6.875 6.50
John B. Suranyi 12/17/97 15,000 6.875 13.75 6.875 7.00
John B. Suranyi 12/17/97 20,000 6.875 15.00 6.875 7.25
</TABLE>
- ---------------
(1) President and Chief Executive Officer
(2) Senior Vice President and Chief Financial Officer
(3) Vice President - Operations
(4) Vice President - Operations
18
<PAGE> 21
COMMON STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total shareholder return on its Class A Common Stock for the period
during which the Class A Common Stock has been registered under Section 12 of
the Exchange Actagainst the cumulative total return of the Nasdaq Total Return
(U.S.) Index (the "Nasdaq Index") and the cumulative total return of the Nasdaq
Telecommunications Index (the "Telecommunications Index") for the same period.
The graph assumes an investment of $100 on December 10, 1993* in each of the
Class A Common Stock and the stocks comprising the Nasdaq Index and the
Telecommunications Index, and assumes reinvestment of dividends, if any.
[GRAPH]
<TABLE>
<CAPTION>
Percentage Change
-----------------------------------------------------------
12/10/93 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NASDAQ Index 0 2.79 0.47 42.09 74.78
Telecommunications Index 0 3.46 -13.65 13.06 15.58
American Telecasting, Inc. 0 0 -43.06 -19.44 -68.06
</TABLE>
- ---------------
o The Company's Class A Common Stock began trading on the Nasdaq National
Market on December 10, 1993. Prior to December 10, 1993, the Company's
Class A Common Stock was not publicly traded.
19
<PAGE> 22
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
All compensation arrangements for the Company's executive management are
recommended by the Compensation Committee and reviewed and approved by the
Board of Directors. Messrs. DePriest, Seney, Quarforth, Rosberg, Hostetler and
Hauser are members of the Board of Directors. Mr. Hostetler is President and
Chief Executive Officer of the Company. Pursuant to his original employment
agreement with the Company, Mr. Hostetler has received a total of $500,000 from
the Company in return for a covenant not-to-compete, of which $133,333 was
received in 1996. Mr. Hostetler is a Manager on the Board of Managers of the
Fresno Partnership and, along with his wife, owns 28% of FTI, which owns 35% of
the Fresno Partnership. As of December 31, 1996, the Fresno Partnership owed
the Company approximately $7.0 million. See "Certain Relationships and Related
Transactions". Messrs. DePriest and Seney are both officers of the Company,
but do not receive any compensation from the Company for their services as
officers, except for reimbursement of out-of-pocket expenses incurred in
connection with certain activities on behalf of the Company. No executive
officer of the Company served as a director or member of the Compensation
Committee of another entity, one of whose executive officers served as a
director of the Company, except for Mr. Quarforth, who is a director and member
of the Compensation Committee of the Company and a director and member of the
Compensation Committee of CFW.
20
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1995, the Company agreed to make a non-interest bearing
relocation loan of up to $180,000 to David K. Sentman, who joined the Company
as Vice President - Finance, Chief Financial Officer, Treasurer and Assistant
Secretary in July 1995. The loan was repaid in full during 1996.
Pursuant to an Investment Agreement dated January 19, 1991, between CFW
and the Company, the Company provides certain advisory services to CFW in
connection with the development of wireless cable systems developed by CFW in
the Commonwealth of Virginia. In return, the Company is entitled to receive
payments equal to 10% of the earnings (as defined in the agreement) of each
such wireless cable system for a 15-year period after the system has achieved
cumulative pre-tax income. CFW currently operates wireless cable systems in
Charlottesville and other cities within the Shenandoah Valley, and maintains
certain wireless cable channel rights in Richmond and Lynchburg, Virginia.
None of such systems have yet achieved cumulative pre-tax income.
The Company leases certain wireless cable licenses that it uses to
broadcast programming from certain companies (the "Wireless Companies") that
are owned and controlled by Donald R. DePriest, Chairman of the Board and a
Director of the Company, in exchange for a nominal fee pursuant to long-term
leases. The Wireless Companies assigned the majority of such licenses to the
Company in 1996.
Robert D. Hostetler, President and Chief Executive Officer of the
Company, is a Manager on the Board of Managers of the Fresno Partnership and,
along with his wife, owns 28% of FTI, which owns 35% of the Fresno Partnership.
The Fresno Partnership operates the Company's Fresno, Visalia and Merced
wireless cable systems. As of December 31, 1996, the Fresno Partnership owed
the Company approximately $7.0 million.
Pursuant to his original employment agreement with the Company, Mr.
Hostetler has received a total of $500,000 from the Company in return for a
covenant not-to-compete, of which $133,333 was received in 1996.
21
<PAGE> 24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, "Reporting Persons"),
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Reporting
persons also are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms that are filed with the SEC. Based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, the Company believes that
all Reporting Persons complied with all Section 16(a) filing requirements for
the fiscal year ended December 31, 1996, with the following exceptions: (i)
Bruce E. Dines, former Vice President - Operations of the Company, filed a late
Form 5 in March 1996 to report an option grant and a series of purchases of the
Company's Common Stock under the Company's employee stock purchase plan during
1996; (ii) John B. Suranyi and Terry J. Holmes each inadvertently under-
reported the number of stock options then owned by them in the Form 3s that
were timely filed upon their becoming executive officers of the Company, which
inaccuracies were corrected by the filing of amended Form 3s in February 1996;
and (iii) William J. Blake, a former director of the Company, filed two late
Form 5s in March 1996 to report two separate purchases of Common Stock in 1994,
to correct an error in his original Form 3 filed in December 1993, and to
report receipt of an in-kind distribution of Common Stock in July 1995.
22
<PAGE> 25
PROPOSAL NO. 2- PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
DESCRIPTION OF THE AMENDMENT
At the Annual Meeting the stockholders of the Company are being asked to
consider and act upon a proposal to approve an amendment (the "Amendment") to
Article IV of the Company's Restated Certificate of Incorporation, which would
increase the number of authorized shares of Common Stock from forty million
(40,000,000) to fifty-five million (55,000,000), consisting of forty-five
million (45,000,000) shares of Class A Common Stock and ten million
(10,000,000) shares of Class B Common Stock.
If the Amendment is adopted by the stockholders, the Board intends to
prepare and file a Certificate of Amendment to the Restated Certificate of
Incorporation of the Company. The Amendment will be effective immediately upon
acceptance of filing by the Secretary of State of Delaware. Although the Board
presently intends to file the Certificate of Amendment if the Amendment is
approved by the stockholders, the resolution of stockholders will reserve to
the Board the right to defer or abandon the Amendment and not file such
Certificate of Amendment even if the Amendment is approved by the stockholders.
REASONS FOR THE AMENDMENT
In reviewing the Company's capital structure and possible alternatives
for the future, management, after consultation with the Company's financial and
outside legal advisors, determined that the number of shares of the Company's
Class A Common Stock should be increased to provide the Company with additional
capital-raising flexibility, and management determined to present to the Board
of Directors a proposal to increase the number of authorized shares of Class A
Common Stock.
At its regular meeting on February 27, 1997, the Board of Directors
considered the proposal to increase the number of authorized shares of Class A
Common Stock. After discussion of the Amendment's likely benefits and possible
disadvantages, the Board authorized adoption of the Amendment and authorized
management to file with the SEC preliminary proxy materials describing the
Amendment.
The Company's Restated Certificate of Incorporation, as amended,
presently authorizes 40,000,000 shares of Common Stock, of which 30,000,000
shares are Class A Common Stock and 10,000,000 shares are Class B Common Stock.
As of the date hereof, 25,743,607 shares of Class A Common Stock and no shares
of Class B Common Stock are issued and outstanding. The Amendment would
increase the total authorized number of shares of Common Stock from 40,000,000
to 55,000,000, authorizing the issuance of up to 45,000,000 shares of Class A
Common Stock and up to 10,000,000 shares of Class B Common Stock. Thus, upon
implementation of the Amendment, 19,256,393 shares of Class A Common Stock and
10,000,000 shares of Class B Common Stock would be available for issuance from
time to time for any proper corporate purpose, including stock splits, stock
dividends, acquisitions, stock option plans, funding of employee benefit plans
and public and private equity offerings. No further action or authorization by
the stockholders would be necessary prior to the issuance of the additional
shares of Class A Common Stock authorized pursuant to the Amendment unless
applicable laws or regulations would require such approval in a given instance.
The Board of Directors of the Company believes that is desirable to have
the additional authorized shares of Class A Common Stock available for possible
future financing and acquisition transactions, and other general corporate
purposes. Having such additional authorized shares of Class A Common Stock
available for issuance in the future will give the Company greater flexibility
and may allow such shares to be issued without the expense and delay of a
special stockholders' meeting. The Company does not presently have any
agreement, understanding, arrangement or plans that would result in the
issuance of any of the additional shares of Class A Common Stock to be
authorized. The Company's Restated Certificate of Incorporation, as amended,
will permit the holders of a majority of the outstanding shares of the Class A
Common Stock to amend the Restated Certificate of Incorporation to increase the
number of authorized shares of Class A Common Stock or Class B Common Stock.
23
<PAGE> 26
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the outstanding
Class A Common Stock is required for approval of the Amendment. Abstentions
and Broker Non-Votes will have the effect of votes against the Amendment. The
Company has been advised by Mr. DePriest, who controls directly or indirectly
approximately 19.4% of the outstanding Class A Common Stock entitled to vote at
the meeting, that he intends to vote in favor of approval of the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
(ITEM NO. 2 ON THE ENCLOSED PROXY CARD).
24
<PAGE> 27
PROPOSAL NO. 3- SELECTION OF INDEPENDENT AUDITORS
Since 1988, the firm of Arthur Andersen LLP, independent auditors, has
examined and reported on the financial statements of the Company. The Board of
Directors, upon recommendation of the Audit Committee, has appointed Arthur
Andersen LLP as independent auditors to examine and report on the financial
statements of the Company for the fiscal year ending December 31, 1997, subject
to stockholder approval.
During the year ended December 31, 1996, Arthur Andersen LLP provided
the Company with audit services, including examinations of and reporting on the
Company's consolidated financial statements, and certain accounting advisory
services. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and will have the opportunity to make any statements they
may desire. They also will be available to respond to appropriate questions of
the stockholders.
Approval of the appointment of Arthur Andersen LLP as independent
auditors requires the affirmative vote of the holders of a majority of the
shares of Class A Common Stock present in person or represented by proxy at the
Annual Meeting. If the appointment is not approved, the Board of Directors will
select other independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THIS APPOINTMENT (ITEM NO. 3 ON THE ENCLOSED PROXY CARD).
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's 1998 Annual Meeting of Stockholders, consistent with
rules and regulations of the SEC. Proposals of stockholders intended to be
presented at the Company's 1998 Annual Meeting should be received by the
President of the Company at the above address no later than November 27, 1997,
in order to be included in the Company's Proxy Statement and form of Proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors is not aware of any matters to come before the
meeting other than the election of directors, the proposal to approve the
Amendment and the proposal to approve the appointment of Arthur Andersen LLP as
the Company's independent auditors for the succeeding year. If any other matter
should come before the meeting, the persons named in the enclosed proxy card
will have discretionary authority to vote all proxies with respect thereto in
accordance with their judgment.
Please sign and return promptly the enclosed proxy card in the envelope
provided. The signing of a Proxy will not prevent your attending the meeting
and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT D. HOSTETLER
President and Chief Executive Officer
Dated: March ___, 1997
25
<PAGE> 28
- --------------------------------------------------------------------------------
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMERICAN TELECASTING,
INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 24, 1997.
The undersigned hereby appoint(s) Robert D. Hostetler, Richard F. Seney and
each of them, as proxies to represent and vote the shares held by the
undersigned at the Annual Meeting of Stockholders of American Telecasting, Inc.
(the "Company") to be held April 24, 1997, or at any adjournments thereof as
follows:
DIRECTORS RECOMMEND: A vote FOR election of directors (proposal 1), a vote FOR
the proposed amendment to the Company's Restated
Certificate of Incorporation (proposal 2), a vote FOR the
appointment of Arthur Andersen LLP as independent auditors
(proposal 3) all of which have been proposed by the Board
of Directors.
1. ELECTION OF DIRECTORS: [ ] For all nominees [ ] Withhold all
nominees
<TABLE>
<S> <C> <C>
(1) Donald R. DePriest (2) Richard F. Seney (3) Robert D. Hostetler
(4) William J. Blake (5) Mitchell R. Hauser (6) James S. Quarforth
</TABLE>
INSTRUCTION:To withhold authority to vote for any individual nominee place an
"X" in this box [ ] and strike a line through the nominee's name
listed above.
2. APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION: The approval
of an amendment to the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock
from 40,000,000 to 55,000,000, consisting of 45,000,000 shares of Class A
Common Stock and 10,000,000 shares of Class B Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
<PAGE> 29
- --------------------------------------------------------------------------------
3. APPOINTMENT OF INDEPENDENT AUDITORS: The appointment of Arthur Andersen LLP
as independent auditors of the Company for the fiscal year ending
December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
* Note: If any other matters properly come before the meeting or any adjournment
thereof, this proxy will be voted according to the judgment of the
persons named above as proxies.
All of the above matters are more particularly described in the Company's Proxy
Statement dated March 27, 1997, relating to such annual meeting to be held on
April 24, 1997, receipt of which is hereby acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THE PROXY
WILL BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND 3 AND IN
THE PROXY'S DISCRETION ON ANY OTHER MATTERS TO COME BEFORE THE MEETING.
Dated __________________, 1997
------------------------------
SIGNATURE
------------------------------
SIGNATURE IF HELD JOINTLY
Signature(s) should correspond
with the name appearing on the
label hereon. When signing in
a fiduciary or representative
capacity, give full title as
such. Where more than one
owner, each should sign.
- --------------------------------------------------------------------------------
