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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number :
0-23008
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AMERICAN TELECASTING, INC.
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(Exact name of registrant as specified in its charter)
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Delaware 54-1486988
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5575 Tech Center Drive, Colorado Springs, CO 80919
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 260 - 5533
------------------------------------
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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As of August 12, 1998, 25,743,607 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.
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AMERICAN TELECASTING, INC.
INDEX
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Page
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1997 and June 30, 1998..................................................3
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1998
and the Six Months Ended June 30, 1997 and 1998......................................4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1998..............................................5
Notes to Condensed Consolidated Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................12
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.......................................................................22
Items 2-3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.....................................23
Item 5. Other Information ......................................................................23
Item 6. Exhibits and Reports on Form 8-K........................................................24
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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December 31, June 30,
1997 1998
--------- ---------
(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 9,125 $ 9,438
Trade accounts receivable, net ......................................... 1,091 1,035
Notes receivable ....................................................... 351 368
Prepaid expenses and other current assets .............................. 2,722 2,280
--------- ---------
Total current assets ............................................. 13,289 13,121
Property and equipment, net ............................................... 60,166 52,994
Deferred license and leased license acquisition costs, net ................ 131,017 131,462
Cash available for asset purchases and debt repayment ..................... 31,658 --
Restricted escrowed funds ................................................. 6,395 6,473
Goodwill, net ............................................................. 14,296 13,864
Deferred financing costs, net ............................................. 4,294 3,187
Other assets, net ......................................................... 483 407
--------- ---------
Total assets ..................................................... $ 261,598 $ 221,508
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses ................................... $ 12,614 $ 12,157
Current portion of long-term obligations ................................ 3,284 2,065
Customer deposits ....................................................... 363 271
--------- ---------
Total current liabilities ................................... 16,261 14,493
Deferred income taxes ..................................................... 1,275 1,275
2004 Notes ................................................................ 156,897 142,929
2005 Notes ................................................................ 135,137 114,184
Other long-term obligations, net of current portion ....................... 1,252 916
--------- ---------
Total liabilities ................................................ 310,822 273,797
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Class A Common Stock, $.01 par value; 45,000,000 shares authorized;
25,743,607 shares issued and outstanding ............................... 257 257
Class B Common Stock, $.01 par value; 10,000,000 shares authorized;
no shares issued and outstanding ....................................... -- --
Additional paid-in capital ................................................ 189,413 189,413
Common Stock warrants outstanding ......................................... 10,129 10,129
Accumulated deficit ....................................................... (249,023) (252,088)
--------- ---------
Total stockholders' deficit .......................................... (49,224) (52,289)
--------- ---------
Total liabilities and stockholders' deficit ...................... $ 261,598 $ 221,508
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1998 1997 1998
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Revenues:
Service and other .................................... $ 15,358 $ 12,456 $ 31,118 $ 24,956
Installation ......................................... 281 166 541 379
------------ ------------ ------------ ------------
Total revenues .......................................... 15,639 12,622 31,659 25,335
Costs and Expenses:
Operating ............................................ 9,301 7,957 19,127 15,719
Marketing ............................................ 667 708 1,531 1,409
General and administrative ........................... 5,373 5,664 10,449 11,336
Depreciation and amortization ....................... 12,776 10,375 25,609 20,019
Total costs and expenses ................................ 28,117 24,704 56,716 48,483
------------ ------------ ------------ ------------
Loss from operations .................................... (12,478) (12,082) (25,057) (23,148)
Interest expense ........................................ (10,796) (10,301) (21,127) (21,276)
Interest income ......................................... 166 615 350 1,086
Gain on sale of wireless cable systems and assets ....... -- -- -- 3,219
Other income ............................................ 295 (39) 439 42
------------ ------------ ------------ ------------
Loss before income tax benefit (expense) ................ (22,813) (21,807) (45,395) (40,077)
Income tax benefit (expense) ............................ -- -- -- --
Loss before extraordinary item .......................... (22,813) (21,807) (45,395) (40,077)
Extraordinary gain on extinguishment of debt ............ -- 37,011 -- 37,011
============ ============ ============ ============
Net (loss) income ....................................... $ (22,813) $ 15,204 $ (45,395) $ (3,066)
============ ============ ============ ============
Basic and diluted net (loss)/income per share:
Loss per share before extraordinary gain on
extinguishment of debt ............................. $ (.89) $ (.85) $ (1.80) $ (1.56)
Income per share from extraordinary gain on
extinguishment of debt ............................. -- 1.44 -- 1.44
------------ ------------ ------------ ------------
Basic and diluted (loss)/income per share ............ $ (.89) $ .59 $ (1.80) $ (.12)
============ ============ ============ ============
Weighted average number of common
shares outstanding .................................. 25,743,607 25,743,607 25,168,157 25,743,607
============ ============ ============ ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
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SIX MONTHS ENDED
JUNE 30,
1997 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................... $(45,395) $ (3,066)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on bond tender offer ........................................ -- (37,011)
Depreciation and amortization .................................... 25,608 20,019
Amortization of debt discount and deferred financing costs ....... 19,874 21,191
Bond appreciation rights and warrants ............................ 485 (246)
Minority interest income ......................................... (127) (45)
Gain on disposition of wireless cable systems and assets ......... -- (3,219)
Other ............................................................ 133 203
Changes in operating assets and liabilities ...................... 419 (362)
-------- --------
Net cash provided by (used in) operating activities ........... 997 (2,536)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................ (4,726) (9,133)
Additions to deferred license and leased license
acquisition costs ................................................ (1,184) (3,234)
Proceeds from disposition of wireless cable systems and assets ..... 55 4,377
Release of cash available for asset purchases and debt repayment ... -- 31,658
Increase in restricted escrowed funds .............................. -- (79)
Net cash used in acquisitions ...................................... (1,293) (2,122)
-------- --------
Net cash (used in) provided by investing activities ............ (7,148) 21,467
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities ................................. 6,155 --
Principal payments on revolving credit facilities .................. (2,950) --
Increase in deferred financing costs ............................... (1,285) --
Contributions by minority interest holder .......................... 462 --
Cash used in bond tender offer ..................................... -- (17,593)
Principal payments on notes payable ................................ (1,409) (407)
Principal payments on capital lease obligations .................... (521) (618)
-------- --------
Net cash provided by (used in) financing activities ............. 452 (18,618)
-------- --------
Net (decrease) increase in cash and cash equivalents ............... (5,699) 313
Cash and cash equivalents, beginning of period ..................... 18,476 9,125
-------- --------
Cash and cash equivalents, end of period ........................... $ 12,777 $ 9,438
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS DESCRIPTION
History and Organization
American Telecasting, Inc. ("ATI") owns and operates a network
of wireless cable television systems providing subscription television
service. ATI and its subsidiaries are collectively referred to herein
as the "Company." As of June 30, 1998, the Company owned and operated
33 wireless cable systems located throughout the United States (the
"Developed Markets"). The Company also has significant wireless cable
(microwave) frequency interests in 19 other U.S. markets (the
"Undeveloped Markets").
Risks and Other Important Factors
The Company has experienced negative cash flow from operations
in each year since its inception. Although certain of the Company's
more established systems currently generate positive cash flow from
operations, the sale of five operating systems to BellSouth Wireless in
August 1997 (see "BellSouth Transaction") has resulted in a decline in
operating cash flow. The Company's business strategy to decrease analog
video subscribers is also expected to result in a decline in revenue
and operating cash flow. Internet access service and two-way broadband
data and telephony demonstrations are in the early stages of marketing
and development. The increased costs to introduce these digital
services is negatively impacting the Company's operating cash flow.
This negative trend is expected to continue for the foreseeable future.
Unless and until sufficient cash flow is generated from operations, the
Company will be required to utilize its current capital resources or
sell assets, to satisfy its working capital and capital expenditure
needs. Under current capital market and capital structure conditions,
the Company does not expect to be able to raise significant capital by
issuing equity securities or additional debt. If the Company's capital
resources are not sufficient to finance its operations, either for the
remainder of 1998 or thereafter, the Company will be required, at a
minimum, to curtail its operations and development plans, which
curtailment could involve, among other things, further reductions in
the Company's workforce, closing certain operating businesses or
discontinuing certain activities.
Cash interest payments on the 2004 Notes and the 2005 Notes
will commence on December 15, 1999 and February 15, 2001, respectively.
The aggregate interest payments on the 2004 Notes and the 2005 Notes
are approximately $12.1 million, $24.2 million and $47.1 million in
1999, 2000, and 2001, respectively. The Company does not presently
expect to be able to make cash interest payments. Without new
investments in the Company, or a capital restructuring, it is unlikely
the Company's resources will be sufficient to meet its obligations
through 1999.
BellSouth Transaction
On March 18, 1997, the Company entered into a definitive
agreement (the "BellSouth Agreement") with BellSouth Corporation and
BellSouth Wireless which provides for the sale of all of the Company's
Florida and Louisville, Kentucky wireless cable assets (the
"Southeastern Assets") to BellSouth Wireless (the "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 Naples, Sebring and Miami, Florida.
On August 12, 1997, the Company completed the first closing of
the BellSouth Transaction, which involved transferring to BellSouth
Wireless the Company's operating systems and channel rights in the
Florida markets of Orlando, Jacksonville, Ft. Myers and Daytona Beach,
along with the Louisville, Kentucky market and certain rights in Miami,
Florida. The proceeds received and related gain recorded by the Company
from
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the first closing totaled approximately $54 million and $35.9 million,
respectively. Of such proceeds, $7 million was placed in escrow for a
period of twelve months to satisfy any indemnification obligations of
the Company. As of June 30, 1998, the balance of escrow funds was
approximately $6.4 million. This balance, plus accrued interest of
approximately $200,000, was released to the Company on August 12, 1998.
In March 1998, the Company closed on additional channels in the Ft.
Myers and Jacksonville, Florida markets for cash consideration of
approximately $2.9 million which is reflected as a gain in the
accompanying Condensed Consolidated Statements of Operations.
On July 15, 1998, the Company completed an additional closing
of the BellSouth Transaction, which transferred to BellSouth Wireless
the Company's wireless operating system and channel rights in Lakeland,
Florida. As of the date of closing, the Lakeland wireless operating
system served approximately 8,200 subscribers. The proceeds received by
the Company were approximately $12.0 million, of which $2.1 million was
placed in escrow. On August 12, 1998, the Company closed on additional
channels in the Lakeland, Florida market for cash consideration of
approximately $5.0 million. In addition, the Company also received
approximately $165,000, which represents a portion of the escrow from
the initial Lakeland closing which occurred on July 15, 1998. Under the
terms of the BellSouth Agreement, additional closings are possible
through August 1999. The BellSouth Agreement contains customary
conditions for each closing, including the satisfaction of all
applicable regulatory requirements. There can be no assurance that all
conditions will be satisfied or that further sales of assets to
BellSouth Wireless will be consummated.
In conjunction with the BellSouth Transaction, the Company
agreed to sell its hardwire cable television system in Lakeland,
Florida. In February 1998, this system was sold to Time Warner
Entertainment - Advance Newhouse Partnership for approximately $1.5
million. A gain on the disposition of approximately $300,000 is
reflected in the accompanying Condensed Consolidated Statements of
Operations. As of the date of closing, the Lakeland hardwire cable
television system served approximately 2,300 subscribers.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Operating results for the three-month and six-month periods ended June
30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
Cash and Cash Equivalents
The Company considers all short-term investments with original
maturities of 90 days or less to be cash equivalents. As of June 30,
1998, 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.
Cash Available for Asset Purchases and Debt Repayment and Restricted
Escrow Funds
Cash available for asset purchases and debt repayments
represented the net available proceeds as of December 31, 1997,
received from the BellSouth closing that occurred on August 12, 1997.
These funds were restricted pursuant to the Indentures (as defined
herein). As a result of certain waivers granted in connection
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with the Company's recent Tender Offer (more fully described in Note
3), the remaining proceeds received from the BellSouth closings
occurring before May 7, 1998 are no longer restricted by the
Indentures.
Restricted escrowed funds represents amounts placed in escrow
at the closing which are approximately $6.4 million. The escrowed funds
were released to the Company on August 12, 1998.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share is computed by
dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.
Options and warrants to purchase shares of common stock were not
included in the computation of net income (loss) per share as the
effect would not be dilutive. As a result, the basic and diluted loss
per share amounts are identical.
Recently Adopted Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information."
On January 1, 1998, the Company adopted SFAS No. 130.
SFAS No. 130 requires "comprehensive income," to be reported
in the financial statements and/or notes thereto. Since the Company
does not have any components of "other comprehensive income," reported
net income is the same as "total comprehensive income" for the three
months and six months ended June 30, 1997 and 1998.
SFAS No. 131 requires an entity to disclose financial and
descriptive information about its reportable operating segments. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is not
required for interim financial reporting purposes during 1998. The
Company is in the process of assessing the additional disclosures, if
any, required by SFAS No. 131. However, such adoption will not impact
the Company's results of operations or financial position, since it
relates only to disclosures.
3. DEBT
Long-term debt at June 30, 1998 consisted of the following (in
thousands):
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2004 Notes...................................... $ 142,929
2005 Notes...................................... 114,184
Notes payable................................... 1,651
Capital leases.................................. 630
----------
Total....................................... 259,394
Less current portion........................ 2,065
----------
Long-term debt.............................. $ 257,329
==========
</TABLE>
On February 26, 1997, the Company entered into a twelve-month
$17.0 million credit facility (the "Credit Facility") with a bank. At
closing of the Credit Facility, the Company also delivered 4,500 bond
appreciation rights ("BARs") and an option to exercise 141,667
exchangeable debt warrants or 141,667 equity warrants. Concurrent with
the closing of the BellSouth Transaction, the Credit Facility was
repaid and the exchangeable debt warrants were redeemed. The Credit
Facility has been terminated.
The BARs remain outstanding as of June 30, 1998. 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
change in the value of the BARs is reflected as interest expense in the
accompanying financial statements. The BARs are exercisable after the
earlier of June 15, 1999 or the occurrence of an Event of Default under
the
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2004 Notes. The payment due upon exercise of each BAR is equal to the
market price of each 2004 Note on the closing date less $290. The net
value of the BARs is payable to holders of the BARs in cash. As of June
30, 1998, the Company had no accrued liability associated with the BARs
as the market price of the 2004 Notes was below $290.
Bond Tender Offer
On April 9, 1998, the Company offered $17.5 million (the
"Tender Offer") for a portion of its outstanding 2004 Notes and a
portion of its outstanding 2005 Notes at a cash price of $255 per
$1,000 principal amount at maturity of the 2004 Notes purchased and
$225 per $1,000 principal amount at maturity of the 2005 Notes
purchased (collectively the "Notes").
On May 13, 1998, the Company purchased approximately $30.2
million aggregate principal amount at maturity of 2004 Notes
(approximate accreted value of $25.3 million) and approximately $43.5
million aggregate principal amount at maturity of 2005 Notes
(approximate accreted value of $30.6 million). The Company recognized
an extraordinary gain of approximately $37.0 million upon the early
extinguishment of the Notes.
In conjunction with and as a condition of the Tender Offer,
the Company also received on April 28, 1998, the consent of holders of
the majority of the outstanding Notes to (i) waivers (the "Waivers") of
certain asset disposition covenants in the Indentures (the
"Indentures") relating to the Notes with respect to proceeds previously
received from certain asset dispositions, and (ii) amendments (the
"Amendments") of the Indentures regarding treatment of future proceeds
from certain asset dispositions pursuant to the BellSouth Transaction.
The Waivers and Amendments became operative May 7, 1998, the date on
which the Notes were accepted for purchase by the Company.
The Waivers and Amendments relate to provisions of the
Indentures (the "Asset Disposition Covenants") which require that
certain Net Available Proceeds (as defined in the related Indenture)
from asset sales by the Company that were not used by the Company
within 270 days following receipt to acquire certain new assets or to
retire certain indebtedness be used to make a pro rata offer to
purchase outstanding Notes at a purchase price equal to 100% of the
accreted value thereof.
The Waivers approved by the noteholders waived the application
of the Asset Disposition Covenants in the case of any and all net
proceeds previously received by the Company from dispositions completed
prior to the Tender Offer, including pursuant to the BellSouth
Transaction.
The Amendments amend the Asset Disposition Covenants in the
case of any and all Net Available Proceeds received by the Company from
(i) dispositions under the BellSouth Agreement that close after May 7,
1998, which could be up to $46.2 million in proceeds depending on the
total number of channel leases and licenses ultimately delivered by the
Company to BellSouth, and (ii) the approximately $6.4 million in
proceeds that were received from an escrow account that was established
under the BellSouth Agreement in connection with a disposition
completed prior to the date of the Tender Offer.
Pursuant to the Amendments, no later than 30 days after the
aggregate amount of Net Available Proceeds first equals or is greater
than $10 million, the Company is obligated to utilize 57% of the amount
of such Net Available Proceeds to make an offer (the "Initial Offer")
to purchase the outstanding Notes, at a purchase price in cash equal to
the greater of (i) $280.50 per $1,000 principal amount at maturity in
the case of the 2004 Notes and $247.50 per $1,000 principal amount at
maturity in the case of the 2005 Notes or (ii) the market value of the
Notes as determined on the date preceding the date of the commencement
of the required offer by Donaldson, Lufkin & Jenrette Securities
Corporation, the financial advisor to the Company. In addition, any and
all financial advisor, legal and other costs and fees incurred by the
Company in connection with completing or facilitating any future
BellSouth dispositions, escrow proceeds or any required offer shall be
deemed to be reduce the amount of Net Available Proceeds. If the
aggregate principal amount of Notes tendered
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by holders thereof pursuant to a required offer exceeds the amount of
the 57% of the net available proceeds to be used for the purchase of
the Notes, the Notes shall be selected for purchase on a pro rata
basis.
The Company's recent transaction with BellSouth Wireless
involving the sale of the Company's operating system in Lakeland,
Florida, the closing on additional channels in Lakeland, Florida and
the release of the restricted escrowed funds from the first closing of
the BellSouth Transaction have provided cash to the Company of
approximately $21.6 million. Because the combination of these funds,
net of financial advisor, legal, and other costs, exceeds $10 million,
the Company will be obligated, no later than September 11, 1998 to use
57% of these Net Available Proceeds to make the Initial Offer to
purchase outstanding notes.
Upon completion of the Initial Offer, the amount of Net
Available Proceeds shall be reset at zero. Thereafter, at such time the
amount of Net Available Proceeds from subsequent asset dispositions to
BellSouth Wireless is greater than $5 million, the Company shall be
obligated to utilize 57% of the amount of such Net Available Proceeds
to make a subsequent required offer, subject to the same terms and
conditions set forth above applicable to the Initial Offer.
The 43% of the Net Available Proceeds not to be utilized for a
required offer to purchase, as well as the amount of the 57% of Net
Available Proceeds to be used to purchase Notes pursuant to a required
offer that is in excess of the amount required to purchase the Notes
tendered by holders thereof, (the "Unencumbered Net Available
Proceeds") shall not be subject to any such tender obligation and shall
be freely available for use by the Company as it deems appropriate. The
Amendments do not restrict the Company from using Unencumbered Net
Available Proceeds for the purchase or other retirement of Notes on
such terms as it determines to be appropriate.
The Amendments do not apply to net proceeds that may be
received from dispositions of assets that the Company may undertake
other than pursuant to the BellSouth Agreement, and with respect to
such proceeds the Asset Disposition Covenants remain in effect.
4. COMMITMENTS AND CONTINGENCIES
Litigation
In February 1994, a complaint was filed by Fresno Telsat, Inc.
("FTI") 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 alleged damages
against the Company of approximately $220 million and that all
defendants, including the Company, participated in a conspiracy to
misappropriate corporate opportunities belonging to FTI. A trial began
on February 2, 1998. On March 12, 1998, the jury returned a verdict.
The verdict essentially concluded that the defendants Hostetler and
Holmes engaged in no wrongful conduct as alleged by the plaintiff.
Because the plaintiff's claims against the Company had to be resolved
by the Court, rather than the jury, that verdict did not constitute a
conclusive determination in favor of the Company. Pursuant to a
settlement between the parties, on July 10, 1998, the complaint against
the Company and Mr. Holmes was dismissed with prejudice, thereby
resolving all disputes between FTI and the Company and Mr. Holmes. The
litigation continues as to Mr. Hostetler.
On or about December 24, 1997, Peter Mehas, Fresno County
Superintendent of Schools, filed an action against Fresno MMDS
Associates (the "Fresno Partnership"), the Company and others entitled
Peter Mehas, Fresno County Superintendent of Schools v. Fresno Telsat
Inc., an Indiana corporation, et al., in the Superior Court of the
State of California, Fresno County. The complaint alleges that a
channel lease agreement between the Fresno Partnership and the Fresno
County school system has expired. The Plaintiff seeks a judicial
declaration that the lease has expired and that the defendants,
including the Company, hold no right, title or interest in the channel
capacity which is the subject of the lease. The trial is scheduled to
begin September 28, 1998. The parties are conducting discovery. The
Company believes that both it and the Fresno Partnership possess valid
defenses to the action.
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The Company is occasionally a party to other 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.
Executive and Key Employee Retention Program
Effective July 1, 1998, the Board of Directors approved a
Retention and Achievement Incentive Program ("Executive Program") for
its five executive officers. Under the Executive Program, the executive
officers of the Company are each eligible to receive cash retention
payments of $40,000-$50,000 if such individuals remain in the Company's
employment through June 30, 1999 or if the employment of such
individuals with the Company is terminated by the Company without cause
before June 30, 1999. The maximum aggregate retention payments payable
under the Executive Program are approximately $240,000. In addition,
the Executive Program also provides for the payment of achievement
incentives to these executives if the average closing price of the
Company's Class A Common Stock is $2.00 per share or higher for the
average of the last 20 trading days of June 1999. One-half of the
achievement incentives are payable if such average closing price is
$2.00 per share, and the full achievement incentives are payable if
such average closing price per share is $3.00 per share or higher. If
achievement incentives are payable, then the first 40% of such
incentives are payable by the Company in cash, and the remaining 60%
may be paid in cash or Class A Common Stock, or a combination thereof,
at the discretion of the Company. Appropriate adjustments in the
achievement incentives will be made to give effect to changes in the
Class A Common Stock resulting from subdivisions, consolidations or
reclassifications of the Class A Common Stock, the payment of dividends
or other distributions by the Company (other than in the ordinary
course of business), mergers, consolidations, combinations or similar
transactions or other relevant changes in the capital of the Company.
The maximum aggregate achievement payments payable under the Executive
Program are approximately $900,000. The Executive Program is evidenced
by agreements between the Company and each executive officer. Amounts
payable under the Executive Program are independent of any obligations
of the Company, including severance payments under employment
agreements or other bonus programs. No amounts have been paid by the
Company under the Executive Program.
The Board of Directors also approved, effective July 1, 1998,
a Retention Program ("Key Employee Program") for key employees (other
than executive officers) as designated by the Chief Executive Officer.
Under the Key Employee Program, approximately 20 key employees selected
to date are each eligible to receive cash retention payments of
$12,500-$40,000 if such individuals remain in the Company's employment
through June 30, 1999 or if the employment of such individuals with the
Company is terminated by the Company without cause before June 30,
1999. The maximum aggregate retention payments presently payable under
the Key Employee Program are approximately $520,000. In addition, the
Key Employee Program offers severance benefits ranging from three to
nine months of base salary to certain of the key employees, in the
event that their employment with the Company is terminated without
cause on or before December 31, 1999. The maximum aggregate termination
payments presently payable under the Key Employee Program are
approximately $570,000. The Key Employee Program is evidenced by
agreements between the Company and each key employee. No amounts have
been paid by the Company under the Key Employee Program.
No retention, achievement incentives or termination payments
are payable to any executive officer or key employee who voluntarily
terminates employment with the Company or whose employment is
terminated by the Company for cause.
5. SUBSEQUENT EVENT
On July 10, 1998, the Company purchased from FTI the remaining
35% partnership interest in Fresno MMDS Associates for cash
consideration of $1.5 million plus contingent cash consideration of up
to $255,000. The Company assumed no liabilities of the partnership.
Through two of its subsidiaries the Company is now the 100% owner of
Fresno MMDS Associates.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All statements contained herein that are not historical facts,
including but not limited to, statements regarding the Company's plans
for future development and operation of its business, are based on
current expectations. These statements are forward-looking in nature
and involve a number of risks and uncertainties. Actual results may
differ materially. Among the factors that could cause actual results to
differ materially are the following: a lack of sufficient capital to
finance the Company's business plan on terms satisfactory to the
Company; pricing pressures which could affect demand for the Company's
service; changes in labor, equipment and capital costs; the Company's
inability to develop and implement new services such as high-speed
Internet access, two-way multi-media services and digital video; 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.
INTRODUCTION
Since inception, the Company has focused principally on
developing analog wireless cable systems to provide multiple channel
television programming similar to that offered by franchise cable
companies. The Company's strategy is, in part, to maximize operating
cash flow from its analog video operations, while continuing to explore
the development of digital wireless services, such as high-speed
Internet access, two-way multimedia services (i.e. Internet and
telephony) and digital video. During 1997, the Company launched an
asymmetrical high-speed Internet access service in its Colorado
Springs, Colorado market branded as "WantWEB." WantWEB was launched in
Denver, Colorado and Portland, Oregon in February 1998. The Company's
Internet strategy is to initially launch commercial operations in a
small number of markets in order to evaluate the long-term viability
and financial returns of the business. As part of this evaluation, the
Company is adding subscribers at a limited, measured pace in its
Colorado and Oregon systems, and may deploy a similar service in
Seattle, Washington later in 1998, but only if sufficient capital
resources become available to the Company.
While the Company has begun planning and testing the digital
wireless services described above, it has introduced high-speed
Internet access service only on a limited basis and has not
commercially introduced two-way multi-media or digital video services.
The Company's ability to introduce these services on a broad 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 and increased competition for the renewal of channel lease
agreements), the availability of appropriate transmission and reception
equipment on satisfactory terms, the expertise of the Company's
management, and the Company's ability to obtain the necessary
regulatory changes and approvals in a timely fashion. There is also
uncertainty regarding the degree of subscriber demand for these
services, especially at pricing levels at which the Company can achieve
an attractive return on investment. Moreover, the Company expects that
the market for any such services will be extremely competitive.
During the second quarter of 1998, the Company took certain
actions aimed at further reducing its costs and conserving its capital.
Such measures included a reduction in the size of the Company's
workforce of about 15% and decreases in capital expenditures and
discretionary expenses. The Company has intentionally curtailed growth
in its analog video business by not investing the capital resources
necessary to replace all those subscribers who chose to stop receiving
the Company's service ("Subscriber Churn"). The Company's analog video
strategy is based upon several factors, including the limited capital
resources available to maintain the Company's business at current
levels and management's belief that the most attractive returns on
investment are likely to be based on digital technologies. In an effort
to minimize customer growth
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and investment in new customer additions, the Company significantly
increased installation rates charged to new video subscribers during
the second quarter. These price increases are expected to substantially
reduce, or nearly eliminate, video subscriber additions. The Company's
business strategy regarding analog video subscribers is expected to
result in a further decline in subscribers, revenue and operating cash
flow. This negative trend is expected to continue for the foreseeable
future until the Company is able to successfully introduce and market
alternative digital services. Moreover, at this time, the Company does
not generally intend to further develop any of its Undeveloped Markets
using analog video technology. Unless and until sufficient cash flow is
generated from operations, the Company will be required to utilize its
current capital resources or sell assets to satisfy its working capital
and capital expenditure needs.
Multi-Media Services
During 1998, the Company initiated technical demonstration
trials in Eugene, Oregon and Seattle, Washington, using its wireless
spectrum to deliver two-way multi-media (i.e. Internet and telephony)
services by asynchronous transfer mode technology. The trials will
utilize a transceiver and network interface unit ("gateway") located at
the subscriber's premises. The transceiver will receive and send
information to the transmission tower. The gateway will separate the
information streams into voice and data channels. The Company's plan in
conducting these trials is to demonstrate the commercial viability of
the services by confirming the reliability of the technologies
involved, especially for providing broadband wireless bundled services,
including voice and high-speed Internet. The equipment being used by
the Company is not yet available in commercial quantities.
While the Company intends to continue its development efforts
with respect to offering a full complement of multi-media services, the
commercial introduction of such services in any of the Company's
markets would involve substantial capital expenditures, which the
Company is not able to make at this time. The Company's ability to
commence delivery of multi-media services is also dependent upon, among
other things, commercial availability of appropriate transmission and
reception equipment on satisfactory terms and certain regulatory
approvals and changes, especially with respect to routine two-way
licensing of the radio spectrum used by the Company.
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 and multi-media 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, likely
accompanied by some type of capital restructuring of the Company. 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. However,
the Company is continually involved in discussions regarding possible
strategic partner investments.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF FUNDS
The Company has experienced negative cash flow from operations
in each year since inception. Although certain of the Company's more
established systems currently generate positive cash flow from
operations, the sale of five operating systems to BellSouth Wireless in
August 1997 has resulted in a decline in operating cash flow. The
Company's business strategy to decrease analog video subscribers is
also expected to result in a decline in revenue and operating cash
flow. Internet access service and two-way broadband data and telephony
demonstrations are in the early stage of marketing and development. The
increased costs to introduce these digital services is negatively
impacting the Company's operating cash flow. This negative trend is
expected to continue for the foreseeable future. Unless and until
sufficient cash flow is
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generated from operations, the Company will be required to utilize its
current capital resources or sell assets to satisfy its working capital
and capital expenditure needs.
The Company's principal capital expenditure requirements for
the remainder of 1998 are expected to relate to the trials of two-way
broadband data and telephony services, the purchase of new channels
previously committed by the Company, the installation of analog video
equipment in new subscribers' premises, and the purchase of
transmission equipment for new channels. The Company intends to finance
these expenditures from existing cash and investment balances, from
additional closings under the BellSouth Agreement, if such closings
occur, or from other asset sales. Without such closings or sales, the
Company will be required, at a minimum, to further curtail its planned
capital expenditures.
The commercial introduction of additional digital services,
such as two-way multi-media services and digital video, would require
substantial capital expenditures, which the Company is not in a
position to make at this time. While the Company may use a portion of
the proceeds from the BellSouth Transaction to acquire assets for the
development of digital services, such proceeds will not be sufficient
to fully implement its digital strategy. The Company is pursuing
strategic relationships or transactions with telecommunications and
software companies to facilitate access to additional capital, among
other things. The Company's ability to fully implement its business
strategy will depend, among other things, 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. Except for the BellSouth Transaction, the Company has not reached
any agreements or understandings with respect to such relationships or
transactions and there can be no assurance that any such agreements or
understandings will be reached.
The Company is experiencing increased programming expenses
beyond the normal annual escalations because of renewals of programming
contracts on less favorable terms and as a result of the Company's
declining subscriber base and the growth of digital video services by
competitors. These cost increases place additional pressure on the
Company's ability to generate positive cash flow from operations.
In addition, with the advent of the high-speed Internet access
business and the development of other digital technologies, the Company
is experiencing increased competition for the renewal of channel lease
agreements. As a result, the Company could lose channels or incur
higher costs to retain its existing channels. Furthermore, certain of
the Company's channel lease agreements permit only analog technologies.
Thus, the deployment of digital services may require renegotiation of
these channel leases, which could also result in increased operating
costs.
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 Naples, Sebring and
Miami, Florida.
On August 12, 1997, the Company completed the first closing of
the BellSouth Transaction, which involved transferring to BellSouth
Wireless the Company's operating systems and channel rights in the
Florida markets of Orlando, Jacksonville, Ft. Myers and Daytona Beach,
along with the Louisville, Kentucky market and certain rights in Miami,
Florida. The proceeds received and related gain recorded by the Company
from the first closing totaled approximately $54 million and $35.9
million, respectively. Of such proceeds, $7 million was placed in
escrow for a period of twelve months to satisfy any indemnification
obligations of the Company. As of June 30, 1998, the balance of escrow
funds was approximately $6.4 million. This balance, plus accrued
interest of approximately $200,000, was released to the Company on
August 12, 1998. In March 1998, the Company closed on additional
channels in the Ft. Myers and Jacksonville, Florida markets for cash
consideration of approximately $2.9 million which is reflected as a
gain in the accompanying Condensed Consolidated Statements of
Operations.
On July 15, 1998, the Company completed an additional closing
of the BellSouth Transaction, which transferred to BellSouth Wireless
the Company's wireless operating system and channel rights in Lakeland,
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Florida. As of the date of closing, the Lakeland wireless operating
system served approximately 8,200 subscribers. The proceeds received by
the Company were approximately $12.0 million, of which $2.1 million was
placed in escrow. On August 12, 1998, the Company closed on additional
channels in the Lakeland, Florida market for cash consideration of
approximately $5.0 million. In addition, the Company also received
approximately $165,000, which represents a portion of the escrow from
the initial Lakeland closing, which occurred on July 15, 1998. Under
the terms of the BellSouth Agreement, additional closings are possible
through August 1999. The BellSouth Agreement contains customary
conditions for each closing, including the satisfaction of all
applicable regulatory requirements. There can be no assurance that all
conditions will be satisfied or that further sales of assets to
BellSouth Wireless will be consummated.
In conjunction with the BellSouth Transaction, the Company
agreed to sell its hardwire cable television system in Lakeland,
Florida. In February 1998, this system was sold to Time Warner
Entertainment - Advance Newhouse Partnership for approximately $1.5
million. A gain on the disposition of approximately $300,000 is
reflected in the accompanying Condensed Consolidated Statements of
Operations. As of the date of closing, the Lakeland hardwire cable
television system served approximately 2,300 subscribers.
Executive and Key Employee Retention Program
Effective July 1, 1998, the Board of Directors approved a
Retention and Achievement Incentive Program ("Executive Program") for
its five executive officers. Under the Executive Program, the executive
officers of the Company are each eligible to receive cash retention
payments of $40,000-$50,000 if such individuals remain in the Company's
employment through June 30, 1999 or if the employment of such
individuals with the Company is terminated by the Company without cause
before June 30, 1999. The maximum aggregate retention payments payable
under the Executive Program are approximately $240,000. In addition,
the Executive Program also provides for the payment of achievement
incentives to these executives if the average closing price of the
Company's Class A Common Stock is $2.00 per share or higher for the
average of the last 20 trading days of June 1999. One-half of the
achievement incentives are payable if such average closing price is
$2.00 per share, and the full achievement incentives are payable if
such average closing price per share is $3.00 per share or higher. If
achievement incentives are payable, then the first 40% of such
incentives are payable by the Company in cash, and the remaining 60%
may be paid in cash or Class A Common Stock, or a combination thereof,
at the discretion of the Company. Appropriate adjustments in the
achievement incentives will be made to give effect to changes in the
Class A Common Stock resulting from subdivisions, consolidations or
reclassifications of the Class A Common Stock, the payment of dividends
or other distributions by the Company (other than in the ordinary
course of business), mergers, consolidations, combinations or similar
transactions or other relevant changes in the capital of the Company.
The maximum aggregate achievement payments payable under the Executive
Program are approximately $900,000. The Executive Program is evidenced
by agreements between the Company and each executive officer. Amounts
payable under the Executive Program are independent of any obligations
of the Company, including severance payments under employment
agreements or other bonus programs. No amounts have been paid by the
Company under the Executive Program.
The Board of Directors also approved, effective July 1, 1998,
a Retention Program ("Key Employee Program") for key employees (other
than executive officers) as designated by the Chief Executive Officer.
Under the Key Employee Program, approximately 20 key employees selected
to date are each eligible to receive cash retention payments of
$12,500-$40,000 if such individuals remain in the Company's employment
through June 30, 1999 or if the employment of such individuals with the
Company is terminated by the Company without cause before June 30,
1999. The maximum aggregate retention payments presently payable under
the Key Employee Program are approximately $520,000. In addition, the
Key Employee Program offers severance benefits ranging from three to
nine months of base salary to certain of the key employees, in the
event that their employment with the Company is terminated without
cause on or before December 31, 1999. The maximum aggregate termination
payments presently payable under the Key Employee Program are
approximately $570,000. Key Employee Program is evidenced by agreements
between the Company and each key employee. No amounts have been paid by
the Company under the Key Employee Program.
No retention, achievement incentives or termination payments
are payable to any executive officer or key employee who voluntarily
terminates employment with the Company or whose employment is
terminated by the Company for cause.
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OTHER LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS AND LIMITATIONS
On April 9, 1998, the Company tendered an offer (the "Tender
Offer") for a portion of its outstanding 2004 Notes and a portion of
its outstanding 2005 Notes at a cash price of $255 per $1,000 principal
amount at maturity of the 2004 Notes purchased and $225 per $1,000
principal amount at maturity of the 2005 Notes purchased (collectively
the "Notes"). The maximum aggregate amount of cash available for the
purchase of Notes pursuant to the offer was $17.5 million.
On May 13, 1998, the Company purchased approximately $30.2
million aggregate principal amount at maturity of 2004 Notes
(approximate accreted value $25.3 million) and approximately $43.5
million aggregate principal amount at maturity of 2005 Notes
(approximate accreted value of $30.6 million). The Company recognized
an extraordinary gain of approximately $37.0 million upon early
extinguishment of the Notes.
In conjunction with and as a condition of the Tender Offer,
the Company also received on April 28, 1998, the consent of holders of
the majority of the outstanding Notes to (i) waivers (the "Waivers") of
certain asset disposition covenants in the Indentures (the
"Indentures") relating to the Notes with respect to proceeds previously
received from certain asset dispositions, and (ii) amendments (the
"Amendments") of the Indentures regarding treatment of future proceeds
from certain asset dispositions pursuant to the BellSouth Transaction.
The Waivers and Amendments became operative May 7, 1998, the date on
which the Notes were accepted for purchase by the Company.
The Waivers and Amendments relate to provisions of the
Indentures (the "Asset Disposition Covenants") which require that
certain Net Available Proceeds (as defined in the related Indenture)
from asset sales by the Company that were not used by the Company
within 270 days following receipt to acquire certain new assets or to
retire certain indebtedness be used to make a pro rata offer to
purchase outstanding Notes at a purchase price equal to 100% of the
accreted value thereof.
The Waivers approved by the noteholders waived the application
of the Asset Disposition Covenants in the case of any and all net
proceeds previously received by the Company from dispositions completed
prior to the Tender Offer, including pursuant to the BellSouth
Transaction.
The Amendments amend the Asset Disposition Covenants in the
case of any and all Net Available Proceeds received by the Company from
(i) dispositions under the BellSouth Agreement that close after May 7,
1998, which could be up to $46.2 million in proceeds depending on the
total number of channel leases and licenses ultimately delivered by the
Company to BellSouth, and (ii) the approximately $6.4 million in
proceeds that were received from an escrow account that was established
under the BellSouth Agreement in connection with a disposition
completed prior to the date of the Tender Offer.
Pursuant to the Amendments, no later than 30 days after the
aggregate amount of Net Available Proceeds first equals or is greater
than $10 million, the Company is obligated to utilize 57% of the amount
of such Net Available Proceeds to make an offer (the "Initial Offer")
to purchase the outstanding Notes, at a purchase price in cash equal to
the greater of (i) $280.50 per $1,000 principal amount at maturity in
the case of the 2004 Notes and $247.50 per $1,000 principal amount at
maturity in the case of the 2005 Notes and (ii) the market value of the
Notes as determined on the date preceding the date of the commencement
of the required offer by Donaldson, Lufkin & Jenrette Securities
Corporation, the financial advisor to the Company. In addition, any
and all financial advisor, legal and other costs and fees incurred by
the Company in connection with completing or facilitating any future
BellSouth dispositions, escrow proceeds or any required offer shall be
deemed to be reduce the amount of Net Available Proceeds. If the
aggregate principal amount of Notes tendered by holders thereof
pursuant to a required offer exceeds the amount of the 57% of the net
available proceeds to be used for the purchase of the Notes, the Notes
shall be selected for purchase on a pro rata basis.
The Company's recent transaction with BellSouth Wireless
involving the sale of the Company's operating system in Lakeland,
Florida, the closing on additional channels in Lakeland, Florida and
the release
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of the restricted escrowed funds from the first closing of the
BellSouth Transaction have provided cash to the Company of
approximately $21.6 million. Because the combination of these funds,
net of financial advisor, legal and other costs, exceeds $10 million,
the Company will be obligated, no later than September 11, 1998 or
earlier, to use 57 % of these Net Available Proceeds to make the
Initial Offer to purchase outstanding notes.
Upon completion of the Initial Offer, the amount of Net
Available Proceeds shall be reset at zero. Thereafter, at such time the
amount of Net Available Proceeds from subsequent asset dispositions to
BellSouth Wireless is greater than $5 million, the Company shall be
obligated to utilize 57% of the amount of such Net Available Proceeds
to make a subsequent required offer, subject to the same terms and
conditions set forth above applicable to the Initial Offer.
The 43% of the Net Available Proceeds not to be utilized for
such required offer to purchase, as well as the amount of the 57% of
Net Available Proceeds to be used to purchase Notes pursuant to such
required offer that is in excess of the amount required to purchase the
Notes tendered by holders thereof, (the "Unencumbered Net Available
Proceeds") shall not be subject to any such tender obligation and shall
be freely available for use by the Company as it deems appropriate. The
Amendments do not restrict the Company from using Unencumbered Net
Available Proceeds for the purchase or other retirement of Notes on
such terms as it determines to be appropriate.
The Amendments do not apply to net proceeds that may be
received from dispositions of assets that the Company may undertake
other than pursuant to the BellSouth Agreement, and with respect to
such proceeds the Asset Disposition Covenants remain in effect.
The Company's capital expenditures, exclusive of acquisitions
of wireless cable systems and additions to deferred license and leased
license acquisition costs, during the three months ended June 30, 1998
and 1997 were approximately $4.2 million and $4.7 million,
respectively. With the completion of the Tender Offer, the Company is
revising its business plan and expects to significantly curtail its
original plans on capital spending for the remainder of 1998.
Furthermore, if the Company does not consummate any additional
BellSouth closings, the Company may not have sufficient capital
resources to operate through the remainder of 1998 without a
substantial curtailment of its operations, which could include further
reductions in the Company's workforce, closing of certain operating
businesses, or discontinuing certain activities.
Cash interest payments on the 2004 Notes and the 2005 Notes
will commence on December 15, 1999 and February 15, 2001, respectively.
As a result of the Tender Offer, the revised aggregate interest
payments on the 2004 Notes and the 2005 Notes are approximately $12.1
million, $24.2 million and $47.1 million in 1999, 2000 and 2001,
respectively. The Company does not presently expect to be able to make
or sustain such cash interest payments. Without new investments in the
Company, it is unlikely the Company's resources will be sufficient to
meet its obligations through 1999. In this event the Company would
likely undertake a capital restructuring.
As a result of certain limitations contained in the Indentures
relating to the 2004 Notes and the 2005 Notes, the Company's total
borrowing capacity outside the 2004 Notes and the 2005 Notes is
currently limited to $17.5 million (approximately $2.2 million of which
had been utilized as of June 30, 1998). Although the Company had the
ability under the Indentures to borrow an additional $15.3 million as
of June 30, 1998, the Company does not presently intend to incur any
additional bank or other borrowings because of the probable high cost
of funds. Under current capital market conditions, the Company does not
expect to be able to raise significant capital by issuing equity
securities. However, if subsequent closings under the BellSouth
Agreement either do not occur or are insufficient to provide funds for
operations, the Company may be required to seek additional debt
financing. There can be no assurance that the Company would be able to
borrow additional funds on satisfactory terms or at all.
On July 10, 1998, the Company purchased from FTI the remaining
35% partnership interest in Fresno MMDS Associates for cash
consideration of $1.5 million plus contingent consideration of up to
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$225,000. The Company assumed no liabilities of the partnership.
Through two of its subsidiaries the Company is now the 100% owner of
Fresno MMDS Associates.
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 the Company's history of net losses, the Company currently
has a negative tangible net worth, and total liabilities exceeded total
assets as of June 30, 1998.
During the early part of 1997, the Company was notified by
Nasdaq that the Company no longer met the net tangible asset
requirements for continued listing on the Nasdaq National Market. The
Company submitted a proposal to Nasdaq to achieve compliance, which
proposal was denied. Upon appeal by the Company, a temporary exception
was granted by Nasdaq. Prior to the expiration of the temporary
exception, the Company submitted a request to Nasdaq to move the
listing of the Company's Class A Common Stock from the Nasdaq National
Market to the Nasdaq SmallCap Market due to the Company's assessment of
its inability to achieve compliance with the National Market
requirements within the time allowed. Effective October 17, 1997, the
Class A Common Stock began trading on the Nasdaq SmallCap Market.
In February 1998, Nasdaq informed the Company that it was not
in compliance with the new net tangible asset/market capitalization/net
income requirements for continued listing on the Nasdaq SmallCap
Market, which require all listed companies to have net tangible assets
of at least $2 million, a market capitalization of at least $35
million, or net income of at least $500,000 for two of the last three
years. The new maintenance criteria became effective on February 23,
1998. By letter dated February 26, 1998, Nasdaq informed the Company
that the Company's Class A Common Stock was scheduled for delisting,
effective as of the close of business on March 16, 1998. The Company
requested a temporary exception under Nasdaq rules by appealing the
delisting. The appeal has the effect of staying the delisting until
completion of the appeal process. The Company made a written submission
to Nasdaq on March 27, 1998, to support its request for continued
listing.
By letter dated July 20, 1998, the Company was informed that a
Nasdaq Listing Qualifications Panel had determined not to grant the
Company's request for an exception to the net tangible assets/market
capitalization/net income and bid price requirements for continued
listing on Nasdaq SmallCap Market.
Nasdaq procedures permit the Company to appeal this decision
to a new Listing Qualification Panel. The appeal to a new Listing
Qualification Panel stays the delisting action until there has been a
final determination by the new panel. The request for appeal was filed
with the Nasdaq Stock Market, Inc. on July 23, 1998.
Compliance with the new net assets/market capitalization/net
income requirements will require the Company's Class A Stock to trade
consistently at prices greater than $1-3/8 per share, which is above
the current trading price of the stock.
The Company is unable to predict whether the appeal will be
successful. If the appeal is unsuccessful, the Class A Common Stock
will be removed from the listing on the Nasdaq SmallCap Market and it
would likely be more difficult to buy or sell the Company's Class A
Common Stock or to obtain timely and accurate quotations to buy or
sell. In addition, the delisting process 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
consequences.
Many computer systems in use today were designed and developed
using two digits, rather than four, to specify the year. As a result,
such systems will recognize the year 2000 as "00." This could cause
many computer applications to fail completely or to create erroneous
results unless corrective measures are taken. The Company utilizes
software and related computer technologies essential to its operations,
including its
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accounting and subscriber management (including customer invoicing)
systems, that will be affected by the Year 2000 issue. Currently, the
Company is in the process of converting to new, Year 2000 compliant,
accounting systems. The estimated cost of this conversion is
approximately $800,000. The Company intends for its subscriber
management systems to be Year 2000 compliant and is evaluating what
actions it should take. The Company is negotiating a potential
programming change with its current subscriber management system
vendor. The expense associated with this process cannot presently be
determined. Alternatively, the company may implement a new subscriber
management system that is Year 2000 compliant. The expected cost of
such conversion is currently estimated at $1.5 million to $3.0 million.
Any failure or delay by the Company in resolving its Year 2000 issues
much beyond early 1999 could have a material adverse effect on the
Company's business, financial condition and results of operations.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 Compared to Three Months Ended June
30, 1997
Service revenues decreased $2.9 million, or 18.9%, for the
three months ended June 30, 1998 to $12.5 million, as compared to $15.4
million during the same period of 1997. This decrease resulted
primarily from the loss of revenues from the markets sold to BellSouth
Wireless on August 12, 1997 and from an overall decline in analog video
subscribers, partially offset by subscription rate increases in certain
markets. The five operating markets sold in the first closing of the
BellSouth Transaction in August 1997 accounted for total revenue,
operating expenses and EBITDA (as defined herein) of $2.1 million, $1.7
million, and $440,000 for the three months ended June 30, 1997. The
number of subscribers to the Company's wireless cable systems decreased
to 130,000 at June 30, 1998, compared to 138,900 at December 31, 1997
and 169,000 at June 30, 1997 (which included approximately 23,000
subscribers in the five operating systems sold to BellSouth Wireless in
August 1997). Internet access revenues were negligible in the second
quarter of 1998.
On a "same system" basis (comparing systems that were
operational for all of each of the three month periods ended June 30,
1998 and 1997), service revenues decreased approximately $779,000, or
6.1%, to $12.0 million, as compared to $12.8 million for the
three-month period ended June 30, 1997. Same systems during these
periods totaled 33 systems. Revenue from Internet operations are
excluded from the analysis because these operations were launched in
the second quarter of 1997. Revenues from the Orlando, Jacksonville,
Daytona Beach and Ft. Myers, Florida and Louisville, Kentucky were
omitted from same system revenues for both periods as these systems
were sold by the Company during the third quarter of 1997. Similarly,
the revenues from the Company's Lakeland, Florida, hardwire cable
television system were omitted from both periods because the system was
sold during the first quarter of 1998. The average number of
subscribers in these same systems decreased approximately 9.2% for the
three months ended June 30, 1998, as compared to the same period of
1997. The Company anticipates the average number of subscribers to
decline further during the remainder of 1998.
Installation revenues for the three months ended June 30, 1998
totaled $166,000, compared to $281,000 during the same period of 1997.
The decrease in installation revenues of approximately $115,000, or
40.9%, was the net result of the operations of five systems sold in the
initial BellSouth Transaction and fewer subscriber installations. The
number of installations completed during the three months ended June
30, 1998 decreased approximately 29.4% as compared to the same period
during 1997. Installation rates vary widely by system based upon
competitive conditions.
Operating expenses, principally programming, site costs and
other direct expenses, aggregated $8.0 million (or 63.0% of total
revenues) during the three months ended June 30, 1998, compared to $9.3
million (or 59.0% of total revenues) during the same period of 1997.
The decrease of approximately $1.3 million was primarily attributable
to the operations of the five systems sold in the BellSouth
Transaction.
General and administrative expenses were $5.7 million
(approximately 44.9% of revenue) for the three months ended June 30,
1998, compared to $5.3 million (approximately 34.4% of revenue) for the
19
<PAGE> 20
1997 period. General and administrative expenses increased principally
because of consulting expenses in 1998 associated with advanced
technology trials being conducted by the Company in Eugene, Oregon and
Seattle, Washington.
The Company's loss before interest, taxes, depreciation and
amortization was $1.7 million for the three months ended June 30, 1998,
as compared to earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $298,000 during the same period of 1997. The
decline in EBITDA is predominantly because of decreased revenues,
expenses associated with multi-media technical demonstrations, and
operating costs associated with launches of WantWEB service in new
markets as discussed above.
Depreciation and amortization expenses decreased approximately
$2.4 million to $10.4 million for the quarter ended June 30, 1998
compared to $12.8 million for the first quarter of 1997. The decrease
is because of the Company having a smaller depreciable asset base as a
result of its sale of assets in conjunction with the BellSouth
Transaction.
Interest expense decreased $495,000 during the quarter ended
June 30, 1998 to $10.3 million, as compared to $10.8 million during the
same period of 1997. The decrease in interest expense primarily
resulted from interest charges of approximately $675,000 incurred in
the second quarter of 1997 relating to a credit facility which was
terminated in August 1997. This decrease was offset by an increase in
non-cash interest charges associated with the Company's 2004 Notes and
2005 Notes.
Interest income increased approximately $450,000 compared to
the second quarter of 1997 primarily because of increased cash balances
available for investment. The increased cash levels were the result of
asset sales to BellSouth Wireless.
The Company recognized an extraordinary gain of $37.0 million
in conjunction with its Tender Offer for a portion of its outstanding
2004 and 2005 Notes.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30,
1997
Service revenues decreased $6.2 million, or 19.8%, for the six
months ended June 30, 1998 to $25.0 million, as compared to $31.1
million during the same period of 1997. This decrease resulted
primarily from the loss of revenues from the markets sold to BellSouth
Wireless on August 12, 1997 and from an overall decline in analog video
subscribers, offset partially by subscription rate increases in certain
markets. The five operating markets sold in the first closing of the
BellSouth Transaction accounted for total revenue, operating expenses
and EBITDA of $4.3 million, $3.5 million, and $828,000 for the six
months ended June 30, 1997.
On a "same system" basis (comparing systems that were
operational for all of each of the six-month periods ended June 30,
1998 and 1997), service revenues decreased $1.8 million, or 7.1%, to
$24.1 million, as compared to $25.9 million for the six-month period
ended June 30, 1997. Same systems during these periods totaled 33
systems. Revenue from Internet operations are excluded from the
analysis because these operations were launched in the second quarter
of 1997. Revenues from the Orlando, Jacksonville, Daytona Beach and Ft.
Myers, Florida and Louisville, Kentucky systems were omitted from same
system revenues for both periods as these systems were sold by the
Company during the third quarter of 1997. Similarly, the revenues from
the Company's Lakeland, Florida hardwire cable television system were
omitted from both periods because the system was sold during the first
quarter of 1998. The average number of subscribers in these same
systems decreased approximately 9.3% for the six months ended June 30,
1998, as compared to the same period of 1997. The Company anticipates
the average number of subscribers to decline further during the
remainder of 1998.
Installation revenues for the six months ended June 30, 1998
totaled $379,000, compared to $541,000 during the same period of 1997.
The decrease in installation revenues of $162,000, or 29.9%,
20
<PAGE> 21
was the net result of the operations of the five systems sold in the
initial BellSouth Transaction and fewer subscriber installations as a
portion of normal customer churn was not replaced. The decrease in
installation revenues was partially offset by increased installation
rates company-wide for the six-month period ending June 30, 1998, as
compared to installation rates during the same period of 1997. The
number of installations completed during the six months ended June 30,
1998 decreased approximately 33.7% as compared to the same period
during 1997. Installation rates vary widely by system based upon
competitive conditions.
Operating expenses, principally programming, site costs and
other direct expenses, aggregated $15.7 million (or 62.0% of total
revenues) during the six months ended June 30, 1998, compared to $19.1
million (or 60.4% of total revenues) during the same period of 1997.
The decrease of approximately $3.4 million was primarily attributable
to the operations of the five systems sold in the BellSouth Transaction
offset by increased programming rates for basic and premium
programming, and increased channel lease costs due to annual rate
increases.
General and administrative expenses totaled $11.3 million (or
44.7% of total revenues) for the six months ended June 30, 1998,
compared to $10.4 million (or 33% of total revenues) for the same
period of 1997. This increase of approximately $887,000 is primarily
because of consulting expenses in 1998 associated with advanced
technology trials being conducted by the Company in Eugene, Oregon and
Seattle, Washington.
The Company's loss before interest, taxes, depreciation and
amortization was $3.1 million during the six-month period ended June
30, 1998, compared to EBITDA of $552,000 for the same period of 1997.
The decline in EBITDA is primarily because of decreased revenues,
expenses associated with multimedia technical demonstrations, the sale
of systems in the BellSouth Transaction and additional operating costs
associated with launches of WantWEB service in new markets as discussed
above.
Depreciation and amortization expenses decreased approximately
$5.6 million to $20.0 million for the six months ended June 30, 1998
compared to $25.6 million for the same period of 1997. The decrease is
a result of the Company's smaller depreciable asset base from the sale
of systems in the BellSouth Transaction.
Interest expense increased $149,000 during the six months
ended June 30, 1998 to $21.3 million, as compared to $21.1 million
during the same period of 1997. The increase in interest expense
primarily resulted from an increase in non-cash interest charges
associated with the Company's 2004 Notes and 2005 Notes. These
increased costs were partially offset by lower debt borrowings as a
credit facility was terminated in August 1997.
The Company consummated an additional closing in conjunction
with the BellSouth Transaction resulting in the majority of its $3.2
million gain on sale of wireless cable systems and assets for the
period ended June 30, 1998.
Interest income increased approximately $735,000 compared to
the six months ending June 30, 1997 primarily because of increased cash
balances available for investment. The increased cash levels were the
result of asset sales to BellSouth Wireless.
The Company recognized an extraordinary gain of $37.0 million
in conjunction with its Tender Offer for a portion of its outstanding
2004 and 2005 Notes.
21
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, on or about February 17,
1994, Fresno Telsat, Inc. ("FTI"), the former 35% general partner of
Fresno MMDS Associates ("the Fresno Partnership") which operates the
Fresno, Merced and Visalia wireless cable systems (65% owned by the
Company), 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 approximately 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 in March 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 Senior Vice President of the Company in
September 1997. The Complaint alleged that, while Mr. Hostetler was a
director and employee of FTI, he 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 alleged that Mr. Holmes engaged in a misappropriation of
corporate opportunities belonging to FTI. The Complaint further alleged
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.
A trial began on February 2, 1998. On March 12, 1998, the jury
returned a verdict. The verdict essentially concluded that the
defendants Hostetler and Holmes engaged in no wrongful conduct as
alleged by the plaintiff. Because the plaintiff's claims against the
Company had to be resolved by the Court, rather than the jury, that
verdict did not constitute a conclusive determination in favor of the
Company. Pursuant to a settlement between the parties, on July 10,
1998, the complaint against the Company and Mr. Holmes was dismissed
with prejudice, thereby resolving all disputes between FTI and the
Company and Mr. Holmes. The litigation continues as to Mr. Hostetler.
On or about December 24, 1997, Peter Mehas, Fresno County
Superintendent of Schools, filed an action against the Fresno
Partnership, the Company and others entitled Peter Mehas, Fresno County
Superintendent of Schools vs. Fresno Telsat Inc., an Indiana
corporation, et al., in the Superior Court of the State of California,
Fresno County. The complaint alleges that a channel lease agreement
between the Fresno Partnership and the Fresno County school system has
expired. The Plaintiff seeks a judicial declaration that the lease has
expired and that the defendants, including the Company, hold no right,
title or interest in the channel capacity which is the subject of the
lease. Trial is scheduled to begin September 28, 1998. The parties are
conducting discovery. The Company believes that both it and the Fresno
Partnership possess valid defenses to the action.
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.
22
<PAGE> 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of stockholders of American
Telecasting, Inc. was held on April 23, 1998.
b) At the annual meeting of stockholders, the reelection
of Donald R. DePriest, Richard F. Seney, Robert D.
Hostetler, Mitchell R. Hauser, James S. Quarforth and
Carl A. Rosberg as directors to serve until the 1999
annual meeting of stockholders was considered.
c) Other matters voted upon at the meeting included
ratification of the appointment of Arthur Andersen
LLP as independent public accountants for the Company
for 1998.
d) The director-nominees were elected and all proposals
were approved. The voting results were as follows.
<TABLE>
<CAPTION>
Votes Votes Broker
Proposal Votes For Against Withheld Abstained Non-Votes
---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Election as director:
Donald R. DePriest 22,431,988 -- 97,672 -- --
Richard F. Seney 22,462,475 -- 67,185 -- --
Robert D. Hostetler 22,457,775 -- 71,885 -- --
Mitchell R. Hauser 22,205,075 -- 324,585 -- --
James S. Quarforth 22,205,075 -- 324,585 -- --
Carl A. Rosberg 22,202,575 -- 327,085 -- --
Ratification of the
appointment of Arthur
Andersen LLP as
independent public
accountants for the
Company for 1997 22,341,811 40,866 -- 146,983 --
</TABLE>
ITEM 5. OTHER INFORMATION
Two-way Authorization
In March 1997, the Company, in consortium with several other
wireless cable operators and entities, filed a petition for rule making
with the Federal Communications Commissions ("FCC") for two-way use of
its spectrum. In October 1997, the FCC issued a notice of proposed rule
making to authorize two-way use of Multi-point distribution System
("MDS") and Instructional Television Fixed Service ("ITFS") channels.
The initial comment period closed in January 1998. The period for reply
comments closed in February 1998. Another public comment period was
opened by the FCC in June 1998 and closed in July 1998. The Company now
anticipates the FCC will issue formal rules for two-way use of MDS and
ITFS spectrum, as well as rules expediting the process to grant two-way
licenses, during the third quarter of 1998. Assuming these rules are
issued by the FCC, the Company will begin applying for two-way licenses
in selected markets during subsequent filing windows established by the
FCC. The Company estimates the earliest it could have a two-way license
granted is the third quarter of 1999. There can be no assurance
regarding if and when the FCC will issue formal rules for two-way use
of MDS and ITFS spectrum or regarding the ability of the Company to
obtain a license under such rules.
The two-way licensing process will require substantial
frequency engineering studies and negotiations with other MDS and ITFS
license holders in markets adjacent to that of a two-way license
application. These studies and negotiations are expected to
significantly increase the implementation costs of two-way digital
services. The process may likely involve channel swapping among
licensees within individual markets. Without a strategic partner, the
Company will not have the capital resources necessary to fund these
costs and implement its digital strategy.
23
<PAGE> 24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
10.1 Retention and Achievement Incentive Agreement with Robert D. Hostetler
10.2 Retention and Achievement Incentive Agreement with David K. Sentman
10.3 Retention and Achievement Incentive Agreement with Terry J. Holmes
10.4 Retention and Achievement Incentive Agreement with Nasser Sharabianlou
10.5 Retention and Achievement Incentive Agreement with Bryan H. Scott
10.6 Key Employee Retention Agreement
27. Financial Data Schedule (filed only electronically with the SEC).
</TABLE>
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during
the quarter ended June 30, 1998:
(i) Current Report on Form 8-K dated April 9, 1998 to
report, under Item 5, that the Company is commencing
a tender offer for a portion of its outstanding
Senior Discount Notes due 2004 and a portion of its
outstanding Senior Discount Notes due 2005;
(ii) Amendment to Current Report on Form 8-K dated April
9, 1998 filed April 24, 1998 to report, under Item 5,
the Company has amended its solicitation of consents
made in conjunction with the tender offer to propose
amendments to the indentures which would permit the
Company to retain or use a portion of the net
proceeds received by it under an Asset Purchase
Agreement without regard to the 270 day reinvestment
period provided for in the indentures;
(iii) Amendment to Current Report on Form 8-K dated April
9, 1998 filed April 29, 1998 to report, under Item 5,
the Company had received consents from the holders of
a majority of its outstanding 2004 Notes and 2005
Notes in connection with its solicitation of consents
in connection with the tender offer to amend and
waive certain provisions of the indentures;
(iv) Amendment to Current Report on Form 8-K dated April
9, 1998 filed May 11, 1998 to report, under Item 5,
the Company had announced that approximately $95.3
million aggregate principal amount at maturity of its
outstanding 2004 Notes and approximately $137.3
million aggregate principal amount at maturity of its
outstanding 2005 Notes had been tendered pursuant to
the offer; and
(v) Amendment to Current Report on Form 8-K dated April
9, 1998 filed May 15, 1998 to report, under Item 5,
the Company announced that after applying proration
procedures necessary to limit aggregate offer
consideration to $17.5 million, it had purchased
approximately $30.2 million aggregate principal
amount at maturity of 2004 Notes and approximately
$43.5 million aggregate principal amount at maturity
of 2005 Notes.
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TELECASTING, INC.
Date: August 14, 1998 By: /s/ David K. Sentman
------------------------------- -----------------------------
David K. Sentman
Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
Date: August 14, 1998 By: /s/ Fred C. Pattin Jr.
------------------------------- -----------------------------
Fred C. Pattin Jr.
Controller
(Principal Accounting Officer)
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
10.1 Retention and Achievement Incentive Agreement with Robert D. Hostetler
10.2 Retention and Achievement Incentive Agreement with David K. Sentman
10.3 Retention and Achievement Incentive Agreement with Terry J. Holmes
10.4 Retention and Achievement Incentive Agreement with Nasser Sharabianlou
10.5 Retention and Achievement Incentive Agreement with Bryan H. Scott
10.6 Key Employee Retention Agreement
27. Financial Data Schedule (filed only electronically with the SEC).
</TABLE>
<PAGE> 1
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
THIS RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT dated as of July 1,
1998 by and between American Telecasting, Inc. (the "Company") and Robert D.
Hostetler, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives to remain employed by the Company by
providing for certain benefits; and
WHEREAS, the Company wishes to compensate the Employee for the
achievement of certain significant strategic objectives:
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
<PAGE> 2
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
Page 2 of 6
(b) "Closing Period" shall mean the last twenty (20) days
during the month of June, 1999 on which trading
occurs on the national securities exchange or other
trading system on which the Common Stock is
principally traded (the "Exchange").
(c) "Common Stock" means the Common Stock, par value
$0.01 per share, of the Company.
(d) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) consecutive months.
(e) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the in the Employee's base
and other compensation as in effect on the
date hereof or as the same may be increased
from time to time during the term of this
Agreement; or
(ii) the relocation of the Employee's current
principal place of employment to a location
that is more than 25 miles from the
Employee's current principal place of
employment or requiring the Employee to be
based anywhere other than such principal
place of employment (or permitted relocation
thereof) except for required travel on the
Company's business to an extent
substantially consistent with the Employee's
present business travel obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $50,000 (the "Retention Incentive"):
<PAGE> 3
RETENTION AND ACHIEVEMENT AGREEMENT
Page 3 of 6
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999;
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
3. Achievement Incentive.
(a) As soon as practicable following June 30, 1999, the
Employee shall be entitled to receive the amount
determined under paragraph (c) below (the
"Achievement Incentive"), provided that:
(i) the Employee is employed by the Company on
June 30, 1999 or his employment has been
terminated prior to such date by the Company
other than for Cause or by the Employee
following a Material Employment Change or by
reason of the Employee's death or
Disability; and
(ii) the average closing price of the Common
Stock on the Exchange during the Closing
Period is at least $2.00 per share.
(b) If (i) the average closing price of the Common Stock
on the Exchange during the Closing Period is less
than $2.00 per share or (ii) the Employee's
employment is terminated prior to June 30, 1999 by
the Company for Cause or by the Employee other than
(A) following a Material Employment Change or (B) on
account of the Employee's death or Disability, no
Achievement Incentive shall be paid to the Employee.
<PAGE> 4
RETENTION AND ACHIEVEMENT AGREEMENT
Page 4 of 6
(c) If an Achievement Incentive becomes payable in
accordance with paragraph (a) above, the amount of
such Achievement Incentive shall be equal to the sum
of (i) $125,000 plus (ii) the product of (A) $125,000
multiplied by (B) a fraction, the numerator of which
is the excess, if any, of the average closing price
of the Common Stock on the Exchange during the
Closing Period over $2.00, and the denominator of
which is $3.00 (provided, however, that in no event
shall such fraction exceed 1).
(d) If an Achievement Incentive becomes payable to the
Employee, then (i) the first 40% of such Achievement
Incentive shall be paid in cash and (ii) the
remaining 60% of such Achievement Incentive shall be
paid in cash, Common stock or a combination thereof,
as determined in the sole discretion of the Company.
(e) Appropriate adjustments in the dollar amounts set
forth in Sections 3(a)(ii), 3(b)(i) and 3(c)(ii)(B)
shall be made by the Company to give effect to
changes in the Common Stock resulting from
subdivisions, consolidations or reclassifications of
the Common Stock, the payment of dividends or other
distributions by the Company (other than dividends or
other distributions determined by the Company to be
in the ordinary course), mergers, consolidations,
combinations or similar transactions or other
relevant changes in the capital of the Company.
4. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract.
<PAGE> 5
RETENTION AND ACHIEVEMENT AGREEMENT
Page 5 of 6
5. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meather & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
17215 Colonial Park Dr.
Monument, CO 80132
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
<PAGE> 6
RETENTION AND ACHIEVEMENT AGREEMENT
Page 6 of 6
7. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Richard F. Seney
--------------------------------------
By: Richard F. Seney
Title: Vice Chairman of the Board
Employee: /s/ Robert D. Hostetler
--------------------------------------
Robert D. Hostetler
<PAGE> 1
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
THIS RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT dated as of July 1,
1998 by and between American Telecasting, Inc. (the "Company") and David K.
Sentman, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives to remain employed by the Company by
providing for certain benefits; and
WHEREAS, the Company wishes to compensate the Employee for the
achievement of certain significant strategic objectives:
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
<PAGE> 2
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
Page 2 of 6
(b) "Closing Period" shall mean the last twenty (20) days
during the month of June, 1999 on which trading
occurs on the national securities exchange or other
trading system on which the Common Stock is
principally traded (the "Exchange").
(c) "Common Stock" means the Common Stock, par value
$0.01 per share, of the Company.
(d) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) consecutive months.
(e) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the in the Employee's base
and other compensation as in effect on the
date hereof or as the same may be increased
from time to time during the term of this
Agreement; or
(ii) the relocation of the Employee's current
principal place of employment to a location
that is more than 25 miles from the
Employee's current principal place of
employment or requiring the Employee to be
based anywhere other than such principal
place of employment (or permitted relocation
thereof) except for required travel on the
Company's business to an extent
substantially consistent with the Employee's
present business travel obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $50,000 (the "Retention Incentive"):
<PAGE> 3
RETENTION AND ACHIEVEMENT AGREEMENT
Page 3 of 6
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999;
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
3. Achievement Incentive.
(a) As soon as practicable following June 30, 1999, the
Employee shall be entitled to receive the amount
determined under paragraph (c) below (the
"Achievement Incentive"), provided that:
(i) the Employee is employed by the Company on
June 30, 1999 or his employment has been
terminated prior to such date by the Company
other than for Cause or by the Employee
following a Material Employment Change or by
reason of the Employee's death or
Disability; and
(ii) the average closing price of the Common
Stock on the Exchange during the Closing
Period is at least $2.00 per share.
(b) If (i) the average closing price of the Common Stock
on the Exchange during the Closing Period is less
than $2.00 per share or (ii) the Employee's
employment is terminated prior to June 30, 1999 by
the Company for Cause or by the Employee other than
(A) following a Material Employment Change or (B) on
account of the Employee's death or Disability, no
Achievement Incentive shall be paid to the Employee.
<PAGE> 4
RETENTION AND ACHIEVEMENT AGREEMENT
Page 4 of 6
(c) If an Achievement Incentive becomes payable in
accordance with paragraph (a) above, the amount of
such Achievement Incentive shall be equal to the sum
of (i) $99,655 plus (ii) the product of (A) $99,655
multiplied by (B) a fraction, the numerator of which
is the excess, if any, of the average closing price
of the Common Stock on the Exchange during the
Closing Period over $2.00, and the denominator of
which is $3.00 (provided, however, that in no event
shall such fraction exceed 1).
(d) If an Achievement Incentive becomes payable to the
Employee, then (i) the first 40% of such Achievement
Incentive shall be paid in cash and (ii) the
remaining 60% of such Achievement Incentive shall be
paid in cash, Common stock or a combination thereof,
as determined in the sole discretion of the Company.
(e) Appropriate adjustments in the dollar amounts set
forth in Sections 3(a)(ii), 3(b)(i) and 3(c)(ii)(B)
shall be made by the Company to give effect to
changes in the Common Stock resulting from
subdivisions, consolidations or reclassifications of
the Common Stock, the payment of dividends or other
distributions by the Company (other than dividends or
other distributions determined by the Company to be
in the ordinary course), mergers, consolidations,
combinations or similar transactions or other
relevant changes in the capital of the Company.
4. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract.
<PAGE> 5
RETENTION AND ACHIEVEMENT AGREEMENT
Page 5 of 6
5. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meather & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
17505 Minglewood Trail
Monument, CO 80132
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
<PAGE> 6
RETENTION AND ACHIEVEMENT AGREEMENT
Page 6 of 6
7. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Robert D. Hostetler
--------------------------------------
By: Robert D. Hostetler
Title: President and CEO
Employee: /s/ David K. Sentman
--------------------------------------
David K. Sentman
<PAGE> 1
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
THIS RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT dated as of July 1,
1998 by and between American Telecasting, Inc. (the "Company") and Terry J.
Holmes, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives to remain employed by the Company by
providing for certain benefits; and
WHEREAS, the Company wishes to compensate the Employee for the
achievement of certain significant strategic objectives:
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
<PAGE> 2
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
Page 2 of 6
(b) "Closing Period" shall mean the last twenty (20) days
during the month of June, 1999 on which trading
occurs on the national securities exchange or other
trading system on which the Common Stock is
principally traded (the "Exchange").
(c) "Common Stock" means the Common Stock, par value
$0.01 per share, of the Company.
(d) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) consecutive months.
(e) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the in the Employee's base
and other compensation as in effect on the
date hereof or as the same may be increased
from time to time during the term of this
Agreement; or
(ii) the relocation of the Employee's current
principal place of employment to a location
that is more than 25 miles from the
Employee's current principal place of
employment or requiring the Employee to be
based anywhere other than such principal
place of employment (or permitted relocation
thereof) except for required travel on the
Company's business to an extent
substantially consistent with the Employee's
present business travel obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $50,000 (the "Retention Incentive"):
<PAGE> 3
RETENTION AND ACHIEVEMENT AGREEMENT
Page 3 of 6
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999;
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
3. Achievement Incentive.
(a) As soon as practicable following June 30, 1999, the
Employee shall be entitled to receive the amount
determined under paragraph (c) below (the
"Achievement Incentive"), provided that:
(i) the Employee is employed by the Company on
June 30, 1999 or his employment has been
terminated prior to such date by the Company
other than for Cause or by the Employee
following a Material Employment Change or by
reason of the Employee's death or
Disability; and
(ii) the average closing price of the Common
Stock on the Exchange during the Closing
Period is at least $2.00 per share.
(b) If (i) the average closing price of the Common Stock
on the Exchange during the Closing Period is less
than $2.00 per share or (ii) the Employee's
employment is terminated prior to June 30, 1999 by
the Company for Cause or by the Employee other than
(A) following a Material Employment Change or (B) on
account of the Employee's death or Disability, no
Achievement Incentive shall be paid to the Employee.
<PAGE> 4
RETENTION AND ACHIEVEMENT AGREEMENT
Page 4 of 6
(c) If an Achievement Incentive becomes payable in
accordance with paragraph (a) above, the amount of
such Achievement Incentive shall be equal to the sum
of (i) $88,983 plus (ii) the product of (A) $88,983
multiplied by (B) a fraction, the numerator of which
is the excess, if any, of the average closing price
of the Common Stock on the Exchange during the
Closing Period over $2.00, and the denominator of
which is $3.00 (provided, however, that in no event
shall such fraction exceed 1).
(d) If an Achievement Incentive becomes payable to the
Employee, then (i) the first 40% of such Achievement
Incentive shall be paid in cash and (ii) the
remaining 60% of such Achievement Incentive shall be
paid in cash, Common stock or a combination thereof,
as determined in the sole discretion of the Company.
(e) Appropriate adjustments in the dollar amounts set
forth in Sections 3(a)(ii), 3(b)(i) and 3(c)(ii)(B)
shall be made by the Company to give effect to
changes in the Common Stock resulting from
subdivisions, consolidations or reclassifications of
the Common Stock, the payment of dividends or other
distributions by the Company (other than dividends or
other distributions determined by the Company to be
in the ordinary course), mergers, consolidations,
combinations or similar transactions or other
relevant changes in the capital of the Company.
4. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract.
<PAGE> 5
RETENTION AND ACHIEVEMENT AGREEMENT
Page 5 of 6
5. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meather & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
720 W. Caribou Dr.
Monument, CO 80132
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
<PAGE> 6
RETENTION AND ACHIEVEMENT AGREEMENT
Page 6 of 6
7. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Robert D. Hostetler
--------------------------------------
By: Robert D. Hostetler
Title: President and CEO
Employee: /s/ Terry J. Holmes
--------------------------------------
Terry J. Holmes
<PAGE> 1
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
THIS RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT dated as of July 1,
1998 by and between American Telecasting, Inc. (the "Company") and Nasser
Sharabianlou, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives to remain employed by the Company by
providing for certain benefits; and
WHEREAS, the Company wishes to compensate the Employee for the
achievement of certain significant strategic objectives:
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
<PAGE> 2
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
Page 2 of 6
(b) "Closing Period" shall mean the last twenty (20) days
during the month of June, 1999 on which trading
occurs on the national securities exchange or other
trading system on which the Common Stock is
principally traded (the "Exchange").
(c) "Common Stock" means the Common Stock, par value
$0.01 per share, of the Company.
(d) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) consecutive months.
(e) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the in the Employee's base
and other compensation as in effect on the
date hereof or as the same may be increased
from time to time during the term of this
Agreement; or
(ii) the relocation of the Employee's current
principal place of employment to a location
that is more than 25 miles from the
Employee's current principal place of
employment or requiring the Employee to be
based anywhere other than such principal
place of employment (or permitted relocation
thereof) except for required travel on the
Company's business to an extent
substantially consistent with the Employee's
present business travel obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $50,000 (the "Retention Incentive"):
<PAGE> 3
RETENTION AND ACHIEVEMENT AGREEMENT
Page 3 of 6
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999;
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
3. Achievement Incentive.
(a) As soon as practicable following June 30, 1999, the
Employee shall be entitled to receive the amount
determined under paragraph (c) below (the
"Achievement Incentive"), provided that:
(i) the Employee is employed by the Company on
June 30, 1999 or his employment has been
terminated prior to such date by the Company
other than for Cause or by the Employee
following a Material Employment Change or by
reason of the Employee's death or
Disability; and
(ii) the average closing price of the Common
Stock on the Exchange during the Closing
Period is at least $2.00 per share.
(b) If (i) the average closing price of the Common Stock
on the Exchange during the Closing Period is less
than $2.00 per share or (ii) the Employee's
employment is terminated prior to June 30, 1999 by
the Company for Cause or by the Employee other than
(A) following a Material Employment Change or (B) on
account of the Employee's death or Disability, no
Achievement Incentive shall be paid to the Employee.
<PAGE> 4
RETENTION AND ACHIEVEMENT AGREEMENT
Page 4 of 6
(c) If an Achievement Incentive becomes payable in
accordance with paragraph (a) above, the amount of
such Achievement Incentive shall be equal to the sum
of (i) $99,655 plus (ii) the product of (A) $99,655
multiplied by (B) a fraction, the numerator of which
is the excess, if any, of the average closing price
of the Common Stock on the Exchange during the
Closing Period over $2.00, and the denominator of
which is $3.00 (provided, however, that in no event
shall such fraction exceed 1).
(d) If an Achievement Incentive becomes payable to the
Employee, then (i) the first 40% of such Achievement
Incentive shall be paid in cash and (ii) the
remaining 60% of such Achievement Incentive shall be
paid in cash, Common stock or a combination thereof,
as determined in the sole discretion of the Company.
(e) Appropriate adjustments in the dollar amounts set
forth in Sections 3(a)(ii), 3(b)(i) and 3(c)(ii)(B)
shall be made by the Company to give effect to
changes in the Common Stock resulting from
subdivisions, consolidations or reclassifications of
the Common Stock, the payment of dividends or other
distributions by the Company (other than dividends or
other distributions determined by the Company to be
in the ordinary course), mergers, consolidations,
combinations or similar transactions or other
relevant changes in the capital of the Company.
4. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract.
<PAGE> 5
RETENTION AND ACHIEVEMENT AGREEMENT
Page 5 of 6
5. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meather & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
17505 Minglewood Trail
Monument, CO 80132
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
<PAGE> 6
RETENTION AND ACHIEVEMENT AGREEMENT
Page 6 of 6
7. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Robert D. Hostetler
--------------------------------------
By: Robert D. Hostetler
Title: President and CEO
Employee: /s/ Nasser Sharabianlou
--------------------------------------
Nasser Sharabianlou
<PAGE> 1
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
THIS RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT dated as of July 1,
1998 by and between American Telecasting, Inc. (the "Company") and Bryan H.
Scott, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives to remain employed by the Company by
providing for certain benefits; and
WHEREAS, the Company wishes to compensate the Employee for the
achievement of certain significant strategic objectives:
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
<PAGE> 2
RETENTION AND ACHIEVEMENT INCENTIVE AGREEMENT
Page 2 of 6
(b) "Closing Period" shall mean the last twenty (20) days
during the month of June, 1999 on which trading
occurs on the national securities exchange or other
trading system on which the Common Stock is
principally traded (the "Exchange").
(c) "Common Stock" means the Common Stock, par value
$0.01 per share, of the Company.
(d) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) consecutive months.
(e) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the in the Employee's base
and other compensation as in effect on the
date hereof or as the same may be increased
from time to time during the term of this
Agreement; or
(ii) the relocation of the Employee's current
principal place of employment to a location
that is more than 25 miles from the
Employee's current principal place of
employment or requiring the Employee to be
based anywhere other than such principal
place of employment (or permitted relocation
thereof) except for required travel on the
Company's business to an extent
substantially consistent with the Employee's
present business travel obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $50,000 (the "Retention Incentive"):
<PAGE> 3
RETENTION AND ACHIEVEMENT AGREEMENT
Page 3 of 6
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999;
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
3. Achievement Incentive.
(a) As soon as practicable following June 30, 1999, the
Employee shall be entitled to receive the amount
determined under paragraph (c) below (the
"Achievement Incentive"), provided that:
(i) the Employee is employed by the Company on
June 30, 1999 or his employment has been
terminated prior to such date by the Company
other than for Cause or by the Employee
following a Material Employment Change or by
reason of the Employee's death or
Disability; and
(ii) the average closing price of the Common
Stock on the Exchange during the Closing
Period is at least $2.00 per share.
(b) If (i) the average closing price of the Common Stock
on the Exchange during the Closing Period is less
than $2.00 per share or (ii) the Employee's
employment is terminated prior to June 30, 1999 by
the Company for Cause or by the Employee other than
(A) following a Material Employment Change or (B) on
account of the Employee's death or Disability, no
Achievement Incentive shall be paid to the Employee.
<PAGE> 4
RETENTION AND ACHIEVEMENT AGREEMENT
Page 4 of 6
(c) If an Achievement Incentive becomes payable in
accordance with paragraph (a) above, the amount of
such Achievement Incentive shall be equal to the sum
of (i) $58,440 plus (ii) the product of (A) $58,440
multiplied by (B) a fraction, the numerator of which
is the excess, if any, of the average closing price
of the Common Stock on the Exchange during the
Closing Period over $2.00, and the denominator of
which is $3.00 (provided, however, that in no event
shall such fraction exceed 1).
(d) If an Achievement Incentive becomes payable to the
Employee, then (i) the first 40% of such Achievement
Incentive shall be paid in cash and (ii) the
remaining 60% of such Achievement Incentive shall be
paid in cash, Common stock or a combination thereof,
as determined in the sole discretion of the Company.
(e) Appropriate adjustments in the dollar amounts set
forth in Sections 3(a)(ii), 3(b)(i) and 3(c)(ii)(B)
shall be made by the Company to give effect to
changes in the Common Stock resulting from
subdivisions, consolidations or reclassifications of
the Common Stock, the payment of dividends or other
distributions by the Company (other than dividends or
other distributions determined by the Company to be
in the ordinary course), mergers, consolidations,
combinations or similar transactions or other
relevant changes in the capital of the Company.
4. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract.
<PAGE> 5
RETENTION AND ACHIEVEMENT AGREEMENT
Page 5 of 6
5. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meather & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
4893 Shadow Ridge Rd.
Castle Rock, CO 80104
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
<PAGE> 6
RETENTION AND ACHIEVEMENT AGREEMENT
Page 6 of 6
7. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
8. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Robert D. Hostetler
--------------------------------------
By: Robert D. Hostetler
Title: President and CEO
Employee: /s/ Bryan H. Scott
--------------------------------------
Bryan H. Scott
<PAGE> 1
Exhibit 10.6
American Telecasting, Inc. and Subsidiaries
Key Employee Retention Program
Effective July 1, 1998, the Company initiated a Retention Program for key
employees (other than executive officers). The terms of the program are
incorporated in the agreement included with this exhibit.
<PAGE> 2
RETENTION AGREEMENT
THIS RETENTION AGREEMENT dated as of __________ by and between American
Telecasting, Inc. (the "Company") and ______________, (the "Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key persons to remain employed by the Company by
providing for certain benefits;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree to the following:
1. Definitions. The capitalized terms used herein shall have the
meanings ascribed to them below.
(a) "Cause" shall mean (A) the willful and continued
failure by the Employee substantially to perform the
Employee's duties with the Company (other than any
such failure resulting from the Employee's incapacity
due to physical or mental illness) as determined by
the Board of Directors of the Company (the "Board"),
after a demand for substantial performance is
delivered to the Employee by the Company, which
demand specifically identifies the manner in which
the Company believes that the Employee has not
substantially performed the Employee's duties or (B)
the willful engaging by the Employee in misconduct
which is demonstrably and materially injurious to the
Company, momentarily or otherwise. Notwithstanding
the foregoing, the Employee's employment shall not be
deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee
by the Company a copy of a Notice of Termination
authorized by the Board stating that in the good
faith opinion of the Board the Employee is guilty of
conduct set forth in clauses (A) or (B) above and
specifying the particulars there of in detail.
(b) "Disability" shall be deemed the reason for the
termination by the Company of the Employee's
employment, if, as a result of the Employee's
incapacity due to physical or mental illness, the
Employee shall have been absent from the full-time
performance of the Employee's duties with the Company
for a period of six (6) or more consecutive months.
1
<PAGE> 3
Retention Agreement
Name
Page 2
(c) "Material Employment Change" shall mean any of the
following:
(i) a reduction in the Employee's base or other
compensation as in effect on the date hereof
or as the same may be increased from time to
time during the term of this Agreement; or
(ii) the relocation of the Employee's principal
place of employment to a location that
increases the Employee's one-way commuting
distance from his primary residence to such
principal place of employment by more than
25 miles - or the Company's requiring the
Employee to be based anywhere other than
such principal place of employment (or
permitted relocation thereof) except for
required travel on the Company's business to
an extent substantially consistent with the
Employee's present business travel
obligations.
2. Retention Incentive.
(a) Upon the earliest to occur of the following dates and
events while the Employee is employed by the Company,
the Employee shall be entitled to receive a lump sum
cash payment of $__________ (the "Retention
Incentive"):
(i) the termination of the Employee's employment
by the Company other than for Cause;
(ii) the termination of the Employee's employment
by the Employee following the occurrence of
a Material Employment Change;
(iii) June 30, 1999; or
(iv) the death or Disability of the Employee.
(b) If the Employee's employment is terminated prior to
June 30, 1999 by the Company for Cause or by the
Employee other than (i) following a Material
Employment Change or (ii) on account of the
Employee's death or Disability, no Retention
Incentive shall be paid to the Employee.
2
<PAGE> 4
Retention Agreement
Name
Page 3
(c) In addition to the Retention Incentive, if the
Employee's employment with the Company terminates
under circumstances enumerated in Item
(2)(a)(i)-(iii) above on or before December 31, 1999,
then the Employee shall be entitled to receive an
additional lump sum cash payment equivalent to _____
months of compensation at the highest base rate of
salary in effect at the Company for the Employee
between the date of this Agreement and December 31,
1999.
3. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish
the Employee's existing rights or rights (or rights which
would accrue solely as a result of the passage of time) under
any employee benefit plan or employment agreement or other
contract, plan or arrangement nor shall any amounts payable
hereunder be considered in determining the amount of benefits
payable to the Employee under any such plan, agreement or
contract. If no employment agreement or other contract, plan
or arrangement by the Company is in effect with respect to the
Employee, then any amounts payable under this Agreement during
its duration, in the event of a termination of employment of
the Employee with the Company, shall constitute the Company's
entire termination of employment benefit to the Employee,
other than accrued wages and paid time off, expense account
reimbursements and amounts due under the Company's employee
benefit plans or under applicable laws.
4. Successor to the Company.
(a) This Agreement shall be binding on the Company's
successors and assigns.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Employee's personal and legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Employee should die while any
amounts are still payable to the Employee hereunder,
all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
Agreement to the Employee's personal representative,
devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
5. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid as follows:
3
<PAGE> 5
Retention Agreement
Name
Page 4
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: Chairman of the Board
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
Name
Address
or such other address as either party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
6. Amendment Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by
the Employee and the Company. No waiver by either party hereto
at any time of any breach of the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
7. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforce
ability of any other provision of this Agreement, which shall
remain in full force and effect.
4
<PAGE> 6
Retention Agreement
Name
Page 5
8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same
instrument.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Robert D. Hostetler
--------------------------------------
By: Robert D. Hostetler
Title: President and CEO
--------------------------------------
Employee: Name
5
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,438
<SECURITIES> 0
<RECEIVABLES> 1,035
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,121
<PP&E> 52,994
<DEPRECIATION> 0
<TOTAL-ASSETS> 221,508
<CURRENT-LIABILITIES> 14,493
<BONDS> 257,113
0
0
<COMMON> 189,670
<OTHER-SE> (241,959)
<TOTAL-LIABILITY-AND-EQUITY> 221,508
<SALES> 0
<TOTAL-REVENUES> 12,622
<CGS> 0
<TOTAL-COSTS> 24,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,301
<INCOME-PRETAX> (21,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 37,011
<CHANGES> 0
<NET-INCOME> 15,204
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
