<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
American Telecasting, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To the Stockholders of American Telecasting, Inc.:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of American
Telecasting, Inc. (the "Company"), will be held on Thursday, April 23, 1998, at
10:00 a.m., Mountain Time, at the Marriott Hotel, 5580 Tech Center Drive,
Colorado Springs, Colorado 80919, to consider and act upon the following
matters:
I. to elect six directors for the ensuing year;
II. to approve the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1998; and
III. to transact such other business as may properly come before the meeting.
In accordance with Delaware law, a list of the Company's stockholders
entitled to vote at the meeting will be available for examination at the
Company's headquarters for ten business days prior to the meeting, between the
hours of 9:00 a.m. and 5:00 p.m., Mountain Time, and at the meeting, during the
entire time thereof.
Accompanying this notice is a Proxy and Proxy Statement and a copy of the
Company's Annual Report for the year ended December 31, 1997. Whether or not you
expect to be present at the meeting, please sign and date the Proxy and return
it in the enclosed envelope provided for that purpose prior to the date of the
Annual Meeting. The Proxy may be revoked at any time prior to the time that it
is voted at the meeting. Only stockholders of record at the close of business on
March 6, 1998 will be entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT D. HOSTETLER
ROBERT D. HOSTETLER
President and Chief Executive
Officer
March 27, 1998
<PAGE> 3
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
---------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
---------------------
This Proxy Statement is being furnished to the stockholders of American
Telecasting, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company for the 1998 Annual Meeting of
Stockholders and any adjournments thereof (the "Annual Meeting"). The Annual
Meeting will be held on Thursday, April 23, 1998 at the Marriott Hotel, 5580
Tech Center Drive, Colorado Springs, Colorado 80919, at 10:00 a.m., Mountain
Time.
This Proxy Statement and the accompanying proxy card are being sent to
stockholders on or about March 30, 1998. The Annual Report of the Company for
the fiscal year ended December 31, 1997, is being mailed to stockholders with
this Proxy Statement and the accompanying proxy card.
VOTING
GENERAL
Only holders of record of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), as of the close of business on
March 6, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting. As of the Record Date, 25,743,607 shares of Class A Common Stock were
issued and outstanding. Each share of Class A Common Stock outstanding on the
record date is entitled to one vote on each matter submitted to the
stockholders.
The presence in person or by proxy of the holders of a majority of the
shares of Class A Common Stock issued and outstanding and entitled to vote at
the Annual Meeting is necessary to constitute a quorum at the meeting. The
affirmative vote of the holders of a plurality of the shares of Class A Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of Class A Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat is required for approval of all other items being
submitted to the stockholders for their consideration. Donald R. DePriest,
Chairman of the Board of the Company, controls directly or indirectly
approximately 19.1% of the Company's outstanding Class A Common Stock, including
the approximately 8.6% held of record by MCT Investors, L.P. ("MCT"). Mr.
DePriest has indicated his intention to vote FOR the election to the Board of
Directors of the individuals named as nominees herein, and FOR the appointment
of Arthur Andersen LLP as independent auditors of the Company.
An automated system administered by the Company's transfer agent will
tabulate the votes. Abstentions and proxies relating to "street name" shares for
which brokers have not received voting instructions from the beneficial owner
("Broker Non-Votes") will be counted to determine whether a quorum is present.
With respect to all matters submitted to the stockholders for their
consideration, abstentions will be counted as part of the total number of votes
cast on such proposals in determining whether the proposals have received the
requisite number of favorable votes, whereas Broker Non-Votes will not be
counted as part of the total number of votes cast on such proposals. Thus,
abstentions will have the same effect as votes against any given proposal,
<PAGE> 4
whereas Broker Non-Votes will have no effect in determining whether any given
proposal has been approved by the stockholders.
VOTING BY PROXY
With respect to the proposal regarding election of directors, stockholders
may (a) vote in favor of all nominees, (b) withhold their votes as to all
nominees, or (c) withhold their votes as to specific nominees by so indicating
in the appropriate space on the enclosed proxy card. With respect to all other
proposals being submitted to the stockholders for their consideration,
stockholders may (i) vote "for" such proposal, (ii) vote "against" such
proposal, or (iii) abstain from voting on such proposal. All properly executed
proxy cards delivered by stockholders and not revoked will be voted at the
Annual Meeting in accordance with the directions given. IF NO SPECIFIC
INSTRUCTIONS ARE GIVEN WITH REGARD TO THE MATTERS TO BE VOTED UPON, THE SHARES
REPRESENTED BY A SIGNED PROXY CARD WILL BE VOTED "FOR" THE ELECTION OF ALL
DIRECTORS, AND "FOR" THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS. Management knows of no other matters that may come before the meeting
for consideration by the stockholders. However, if any other matter properly
comes before the meeting, the persons named in the enclosed proxy card as
proxies will vote upon such matters in accordance with their judgment.
Stockholders who do not expect to attend the Annual Meeting in person are
urged to execute and return the enclosed proxy card promptly. Any stockholder
delivering a proxy has the power to revoke it at any time before it is voted by
giving written notice of revocation to the Secretary of the Company, by
executing and delivering to the Secretary a proxy card bearing a later date, or
by voting in person at the Annual Meeting. Any stockholder also may be
represented by another person at the Annual Meeting by executing a form of proxy
designating such person to act on the stockholder's behalf at the meeting.
In addition to soliciting proxies through the mail, the Company may solicit
proxies through its directors, officers and employees in person and by
telephone. Directors, officers and employees will receive no additional
compensation for such solicitation. The Company has retained Georgeson &
Company, Inc., a proxy solicitation firm, to assist in the solicitation of
proxies at a fee of approximately $7,500 plus reimbursement of out-of-pocket
costs. All expenses incurred in connection with the solicitation of proxies
(including the cost of preparing, assembling, printing and mailing this Proxy
Statement, the accompanying proxy card and any additional material which may be
furnished to stockholders) will be borne by the Company. Brokerage firms,
nominees, custodians and other fiduciaries may be requested to forward proxy
materials to the beneficial owners of shares held of record by them, and will be
reimbursed for their expenses incurred in connection therewith.
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<PAGE> 5
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Class A Common Stock at March 6, 1998 by (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Class A Common Stock, (ii) each director or nominee, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each such person
(alone or with family members) has sole voting and dispositive power of the
shares listed opposite such person's name. The address of MCT is 625 Slaters
Lane, Suite G-100, Alexandria, Virginia, 22314. The address of CFW
Communications Company ("CFW") is 401 Spring Lane, Suite 300, Waynesboro,
Virginia 22980.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP OF CLASS
---- -------------------- --------
<S> <C> <C>
MCT Investors, L.P.(1)...................................... 2,213,648 8.6%
CFW Communications Company(2)............................... 1,486,434 5.8%
James S. Quarforth(3)....................................... 5,570 *
Donald R. DePriest(4)....................................... 4,924,135 19.1%
Richard F. Seney(5)......................................... 117,250 *
Robert D. Hostetler(6)...................................... 502,975 1.9%
Carl A. Rosberg(7).......................................... 2,900 *
Mitchell R. Hauser.......................................... 2,418 *
David K. Sentman(8)......................................... 33,334 *
John B. Suranyi(9).......................................... 29,052 *
Terry J. Holmes(10)......................................... 36,650 *
Paul E. Beckelheimer(11).................................... 7,691 *
All current directors and executive officers as a group (10
persons).................................................. 5,661,975 21.9%
</TABLE>
- ---------------
* Less than one percent
(1) Consists solely of 2,213,648 shares which are held of record by MCT but
owned beneficially by Donald R. DePriest. Mr. DePriest is the Chairman of
the Board, President and sole stockholder of MedCom Development Corporation
("MedCom"), which is the sole general partner of MCT. Mr. DePriest has sole
voting and investment power with respect to these shares, which power is
exercised through MedCom and MCT. MCT disclaims beneficial ownership with
respect to these shares.
(2) Includes 74,322 shares owned by CFW Communications Foundation, a Virginia
non-stock corporation. Seven of nine directors of CFW are also directors of
CFW Communications Foundation.
(3) Includes 20 shares owned by Mr. Quarforth's minor children, of which Mr.
Quarforth disclaims beneficial ownership. Excludes 1,486,434 shares owned
beneficially by CFW, of which Mr. Quarforth disclaims beneficial ownership.
Mr. Quarforth is President and Chief Executive Officer of CFW.
(4) Includes 2,213,648 shares held of record by MCT over which Mr. DePriest has
sole voting and investment power, 41,058 shares held of record by MedCom
over which Mr. DePriest has sole voting and investment power, and 2,645,236
shares held directly by Mr. DePriest. See Note 1 above. Also includes
24,193 shares held of record by CD Partners ("CD Partners"), a general
partnership of which Mr. DePriest is a 50% partner, over which Mr. DePriest
has shared voting and investment power. Mr. DePriest disclaims beneficial
ownership over all shares held by MCT and CD Partners, except to the extent
of Mr. DePriest's pro rata interest in the profits and losses of MCT and CD
Partners, respectively.
(5) Excludes 2,213,648 shares held by MCT, of which Mr. Seney disclaims
beneficial ownership. Mr. Seney is Vice President and General Manager of
MedCom, the sole general partner of MCT.
(6) Includes the right to acquire 55,000 shares of Class A Common Stock within
60 days upon the exercise of outstanding stock options.
3
<PAGE> 6
(7) Excludes 1,486,434 shares owned beneficially by CFW, of which Mr. Rosberg
disclaims beneficial ownership. Mr. Rosberg is Senior Vice President and a
director of CFW.
(8) Includes the right to acquire 33,334 shares of Class A Common Stock within
60 days upon the exercise of outstanding stock options.
(9) Includes the right to acquire 28,334 shares of Class A Common Stock within
60 days upon the exercise of outstanding stock options.
(10) Includes the right to acquire 23,334 shares of Class A Common Stock within
60 days upon the exercise of outstanding stock options.
(11) Includes the right to acquire 7,500 shares of Class A Common Stock within
60 days upon the exercise of outstanding stock options.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Each director of the Company is elected to serve until the next annual
meeting of the stockholders or until his successor is duly elected and
qualified. The Board of Directors has nominated the six persons named below to
serve as directors until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. All nominees are currently members of
the Board.
Each of the nominees has consented to serve on the Board of Directors until
the next Annual Meeting of Stockholders or until his successor is duly elected
and qualified. If any of the nominees should be unable to serve for any reason
(which management has no reason to anticipate at this time), the Board of
Directors may designate a substitute nominee or nominees (in which case the
persons named as proxies in the enclosed proxy card will vote all valid proxy
cards for the election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate or candidates are
located, or by resolution provide for a lesser number of directors.
The affirmative vote of the holders of a plurality of the shares of Class A
Common Stock present in person or represented by proxy at the Annual Meeting is
required for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
NAMED HEREIN (ITEM NO. 1 ON THE ENCLOSED PROXY CARD).
The following table sets forth certain biographical information as of March
6, 1998 about each of the individuals nominated for election as a Director of
the Company. Information with respect to the number of shares of the Company's
Class A Common Stock beneficially owned by each of the nominees, directly or
indirectly, as of March 6, 1998, appears on page 3 of this Proxy Statement.
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ --------------- ------------------------------------------
<S> <C> <C>
Donald R. DePriest (58)........ December 1988 Chairman of the Board of Directors of the Company
since March 1990; President of the Company from
1988 through March 1990; Chairman of the Board of
Directors, President and sole stockholder of
MedCom, the sole general partner of MCT, an
investment partnership specializing in the
communications and health care industries and the
Company's largest stockholder; also a limited
partner of MCT; Chairman of the Board and
President of Boundary Healthcare Products
Corporation, a hospital products manufacturer,
from 1987 through its sale to Maxxim Medical, Inc.
("Maxxim") in December 1992; Director of Maxxim, a
publicly traded hospital products manufacturer,
since December 1992.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND AGE DIRECTOR SINCE: PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------ --------------- ------------------------------------------
<S> <C> <C>
Richard F. Seney (43).......... March 1990 Vice Chairman of the Board of Directors of the
Company since October 1993; Secretary of the
Company since 1988; Treasurer of the Company from
1988 to March 1994; Vice President and General
Manager of MedCom since 1987; limited partner of
MCT.
Robert D. Hostetler (56)....... March 1994 President and Chief Executive Officer of the
Company since January 1996; Vice
President -- Development of the Company from
January 1995 through December 1995; Director of
Mergers and Acquisitions of the Company from
December 1993 through December 1994; served as
director and/or officer of several entities
engaged in the business of constructing and
operating wireless cable television systems,
certain of which were acquired by the Company in
December 1993 (the "Choice TV Group") from 1988 to
1993.
Mitchell R. Hauser (38)........ October 1993 President and Chief Executive Officer of WJG
Maritel, a marine telecommunications company,
since July 1996; Associate of MCT Investors from
early 1994 through July 1996; Vice President of
Granite Capital, an investment manager, from
August 1990 to September 1993; limited partner of
MCT.
James R. Quarforth (43)........ January 1991 President, Chief Executive Officer and Director of
CFW, a publicly traded telecommunications company;
has served in various capacities with CFW since
1984, including Executive Vice
President -- Operations, Vice President --
Administration and Controller; currently a
Director of Virginia Financial Corporation, a
publicly traded bank.
Carl A. Rosberg (45)........... April 1994 Senior Vice President and Director of CFW; has
served in various capacities with CFW since 1988,
including Vice President -- Administration and
Senior Vice President -- Operations.
</TABLE>
5
<PAGE> 8
PENDING LITIGATION INVOLVING CERTAIN EXECUTIVE OFFICERS AND A DIRECTOR OF THE
COMPANY
On or about February 17, 1994, a complaint (the "Complaint") was filed by
Fresno Telsat, Inc. ("FTI"), the 35% general partner of Fresno MMDS Associates
(the "Fresno Partnership") which operates the Company's Fresno, Merced and
Visalia wireless cable systems, in the Superior Court of the State of California
for the County of Monterey against Robert D. Hostetler, Terry J. Holmes, the
Company, and certain other named and unnamed defendants. From 1989 through June
10, 1993, Mr. Hostetler was a member of the Board of Directors and President of
FTI. Mr. Hostetler and his wife currently own 28% of the outstanding capital
stock of FTI. Mr. Hostetler has been employed by the Company since December 10,
1993 and became a director of the Company on March 22, 1994. Mr. Hostetler
became President and Chief Executive Officer of the Company in January 1996.
From 1991 until June 1995, Mr. Holmes was General Manager of the Fresno
Partnership. He is currently Managing Director of the Fresno Partnership. Mr.
Holmes has been employed by the Company since June 1995, and became Vice
President -- Operations of the Company in January 1996. The Complaint alleges
that, while he was a director and employee of FTI, Mr. Hostetler engaged in
wrongful conduct, including misappropriation of corporate opportunity, fraud and
unfair competition by exploiting business opportunities that were the property
of FTI. The Complaint also alleges that Mr. Holmes engaged in a misappropriation
of corporate opportunities belonging to FTI. The Complaint further alleges that
all defendants, including the Company, participated in a conspiracy to
misappropriate corporate opportunities belonging to FTI and that the Company and
the unnamed defendants engaged in wrongful interference with fiduciary
relationship by intentionally causing Mr. Hostetler to breach his fiduciary duty
to FTI and causing Mr. Hostetler to wrongfully transfer FTI's corporate
opportunities to the Company.
On August 28, 1996, ATI filed a Cross-Complaint (the "Cross-Complaint")
against FTI and certain of its officers and directors (the "Cross-Defendants").
The Cross-Complaint alleges that the Cross-Defendants have engaged in a
violation of Section 26-1-8-401 of the Indiana Code, conversion, conspiracy, and
breach of trust by failing to acknowledge and record ATI's ownership of
approximately 7% of FTI's capital stock purchased by ATI from a former
shareholder of FTI, and continuing to represent that FTI qualifies for
Subchapter S status under the Internal Revenue Code. The Cross-Complaint seeks
specific performance of the transfer of shares to ATI, compensatory damages,
punitive damages, an injunction against any further actions by the
Cross-Defendants in breach of trust or with the effect of dissipating and
diverting the property and assets of FTI, and the appointment of a receiver to
handle the affairs of FTI during the pendency of the FTI proceeding.
On or about February 24, 1997, the Company and Mr. Holmes each filed a
motion for summary judgment seeking dismissal of the claims in the Complaint
relating to an alleged conspiracy to misappropriate corporate opportunities of
FTI. On or about March 5, 1997, FTI filed a motion for leave to amend the
Complaint to add allegations that ATI aided and abetted Mr. Hostetler's
misappropriation of corporate opportunity and that all defendants wrongfully
interfered with FTI's prospective business opportunities. On June 11, 1997, the
Court granted the Company's motion to dismiss the conspiracy claims against the
Company. Also on June 11, 1997, the Court (1) allowed FTI to amend its complaint
to assert a claim for unfair competition according to Section 17200 of the
California Business and Professions Code, and (2) refused to permit FTI to amend
the Complaint to allege against the Company either aiding and abetting or
tortious interference with prospective business opportunities. On July 23, 1997,
the Company filed a demurrer to dismiss the unfair competition claim against the
Company. On August 13, 1997, the Company filed a motion for judgment on the
claim for interference with fiduciary relationship. FTI stipulated to the
Company's demurrer and filed its Second Amended Complaint on or about September
15, 1997.
The 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 must be resolved by the Court, rather
than the jury, that verdict does not yet constitute a conclusive determination
in favor of the Company. The Court intends imminently to convene a conference to
address all remaining issues and enter judgment. On advice of counsel, the
Company believes that the Court will enter judgment for all three defendants,
including the Company, on all of the plaintiff's claims because the jury's
determination that neither Mr. Hostetler nor Mr. Holmes engaged in wrongful
conduct relating to any of the disputed issues or property eliminates any
6
<PAGE> 9
basis for the Court to conclude that that the Company wrongfully acquired any of
those properties, as alleged by the plaintiff. Although the plaintiff has a
right to appeal after judgment is entered, management believes, on the advice of
counsel, that the jury verdict and the anticipated determination and judgment by
the Court in favor of all three defendants will survive appeal. Thus, ultimately
this matter is not expected to have a material impact on the Company's business,
financial position or future results of operations. The Company's Cross-Claim
against FTI, filed on August 28, 1996, remains unresolved.
ORGANIZATION AND REMUNERATION OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee,
and an Executive Committee.
The Audit Committee oversees the audit of the Company's accounts through
independent accountants whom it recommends for selection by the Board of
Directors. The Audit Committee is also responsible for reviewing the adequacy of
the Company's system of internal accounting controls and the scope and results
of the Company's procedures for internal auditing. The Audit Committee is
authorized to direct and supervise such special investigations as it may deem
appropriate. The Audit Committee held three meetings during fiscal year 1997.
The current members of the Audit Committee are Mr. Quarforth, Mr. Rosberg and
Mr. Seney.
The Compensation Committee monitors and recommends the compensation to be
paid to management of the Company. The Compensation Committee's responsibilities
include formulating the Company's compensation philosophy, establishing the
policies, standards and objectives upon which compensation decisions are based,
and making recommendations to the Board of Directors regarding the cash
compensation to be paid to executive officers and other employees. The
Compensation Committee also makes recommendations to the Board of Directors
regarding option grants under the Company's stock option plan and reviews and
revises all of the Company's plans that are intended to qualify under Section
401 of the Internal Revenue Code. The Compensation Committee members communicate
with each other from time to time in person and by telephone and act on matters
by way of a formal meeting or by unanimous written consent. The Compensation
Committee held one meeting during fiscal year 1997. The current members of the
Compensation Committee are Mr. DePriest, Mr. Quarforth and Mr. Seney.
The Executive Committee has the authority to exercise all the powers and
authority of the Board of Directors in the management and business of the
Company during the interval between regular meetings of the Board of Directors,
subject to certain limitations imposed by law, the Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws, or by resolution
of the Board of Directors. The Executive Committee also has the power to
authorize the issuance of the Company's Common Stock. The Executive Committee
members communicate with each other from time to time by telephone or in person
and act on matters by means of a formal meeting or by unanimous written consent.
The Executive Committee did not meet during fiscal year 1997. The members of the
Executive Committee are Mr. DePriest, Mr. Hostetler, Mr. Quarforth and Mr.
Seney.
The Company's Board of Directors held five meetings during the fiscal year
ended December 31, 1997, and also acted from time to time by unanimous written
consent. Each director attended at least 75% of all meetings of the entire Board
and the committees on which he served.
Directors do not receive compensation for service on the Board of Directors
or any committee thereof but are reimbursed for their out-of-pocket expenses
incurred in connection with attending Board meetings. Directors, as such, do not
participate in any executive compensation plans.
7
<PAGE> 10
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the annual salary, bonus and other
compensation for each of the last three fiscal years awarded to or earned by the
Company's chief executive officer and the four other most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)(1) COMPENSATION
--------------------------- ---- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Robert D. Hostetler, President 1997 $210,790 $30,000(2) 30,000(3) $ 3,800(4)
and Chief Executive Officer 1996 190,000 60,000(5) 75,000(6) 71,416(7)(8)
1995 115,817 27,796(9) 45,000 70,467(10)(11)
David K. Sentman, 1997 $145,000 $55,000(12) 20,000(3) $ 4,750(4)
Senior Vice President and 1996 135,000 67,500(13) 20,000(6)(14) 14,709(8)(15)
Chief Financial Officer(16) 1995 65,000 15,600(17) 50,000 77,007(15)
Terry J. Holmes, 1997 $148,889 $50,000(18) 20,000(3) $11,017(4)
Senior Vice President(19) 1996 123,021 60,500(20) 20,000(6)(14) 5,760(8)(15)
1995 59,790 10,793(21) 30,000 -0-
John B. Suranyi, 1997 $131,125 $50,000(22) 20,000(3) $ 4,750(4)
Senior Vice President 1996 121,771 62,500(23) 30,000(6)(14) 4,750(8)
1995 89,497 10,292(24) 30,000 2,691(11)
Paul E. Beckelheimer, 1997 $ 85,996 $24,746(25) 13,000(3) $ 875(4)
Vice President 1996 75,833 15,000(26) 3,000(6) 1,808(8)
1995 59,833 4,500(27) 10,000 388(11)
</TABLE>
- ---------------
(1) The Company does not have any restricted stock, stock appreciation right or
long-term incentive plans.
(2) This amount represents a pro rata portion of Mr. Hostetler's bonus, which
was paid in August 1997, based upon his performance for the period from
January 1, 1996 through June 30, 1997. Mr. Hostetler's performance for the
remainder of 1997 will be reviewed in June 1998. See "Report of the Board
of Directors on Executive Compensation and Stock Option
Repricing -- Compensation of President and Chief Executive Officer."
(3) Does not include replacement options granted to the Named Executive Officer
in exchange for the cancellation of all outstanding options held by the
Named Executive Officer in connection with the Company's repricing of stock
options on October 30, 1997. See "Report of the Board of Directors on
Executive Compensation and Stock Option Repricing."
(4) Includes the following contributions made by the Company to the Company's
401(k) plan on behalf of the Named Executive Officers during 1997: Mr.
Hostetler -- $3,800, Mr. Sentman -- $4,750, Mr. Holmes -- $4,750, Mr.
Suranyi -- $4,750, Mr. Beckelheimer -- $875.
(5) This amount represents a pro rata portion of Mr. Hostetler's bonus, which
was paid in August 1997, based upon his performance for the period from
January 1, 1996 through June 30, 1997. See "Report of the Board of
Directors on Executive Compensation and Stock Option
Repricing -- Compensation of President and Chief Executive Officer."
(6) Does not include replacement options granted to the Named Executive Officer
in exchange for the cancellation of all outstanding options held by the
Named Executive Officer in connection with the Company's repricing of stock
options on December 17, 1996.
8
<PAGE> 11
(7) Includes $66,666 paid to Mr. Hostetler pursuant to a non-competition
provision contained in his original employment agreement with the Company.
See "Certain Relationships and Related Transactions".
(8) Includes the following contributions made by the Company to the Company's
401(k) plan on behalf of the Named Executive Officers during 1996: Mr.
Hostetler -- $4,750, Mr. Sentman -- $4,750, Mr. Holmes -- $2,543, Mr.
Suranyi -$4,750, and Mr. Beckelheimer -- $1,808.
(9) This amount was paid during 1996 based upon Mr. Hostetler's performance
during 1995.
(10) Includes $66,667 that was earned in 1995 pursuant to the non-competition
provisions of Mr. Hostetler's original employment agreement. However,
payment was actually received by Mr. Hostetler in 1996.
(11) Includes the following contributions made by the Company to the Company's
401(k) plan on behalf of the Named Executive Officers during 1995: Mr.
Hostetler -- $3,800, Mr. Suranyi -- $2,691, and Mr. Beckelheimer -- $388.
(12) This amount was paid during 1998 based upon Mr. Sentman's performance
during 1997.
(13) Of this amount, $45,000 was paid in 1997 based upon Mr. Sentman's
performance during 1996.
(14) 10,000 of such options were granted in 1997 based upon the Named Executive
Officer's performance during 1996.
(15) Includes relocation expenses paid by the Company on behalf of the Named
Executive Officer.
(16) Mr. Sentman joined the Company on July 1, 1995.
(17) This amount was paid during 1996 based upon Mr. Sentman's performance
during 1995.
(18) This amount was paid during 1998 based upon Mr. Holmes' performance during
1997.
(19) Mr. Holmes joined the Company on June 12, 1995.
(20) Of this amount, $38,000 was paid in 1997 based upon Mr. Holmes' performance
during 1996.
(21) This amount was paid during 1996 based upon Mr. Holmes' performance during
1995.
(22) This amount was paid during 1998 based upon Mr. Suranyi's performance
during 1997.
(23) Of this amount, $40,000 was paid in 1997 based upon Mr. Suranyi's
performance during 1996.
(24) This amount was paid during 1996 based upon Mr. Suranyi's performance
during 1995.
(25) This amount was paid during 1998 based upon Mr. Beckelheimer's performance
during 1997.
(26) This amount was paid during 1997 based upon Mr. Beckelheimer's performance
during 1996.
(27) This amount was paid during 1996 based upon Mr. Beckelheimer's performance
during 1995.
9
<PAGE> 12
STOCK OPTION GRANTS AND VALUES
The following table sets forth certain information regarding option grants
to the Named Executive Officers during 1997.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
NUMBER OF SECURITIES GRANTED TO EXERCISE OR FOR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE -------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
---- -------------------- ---------------- ----------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Hostetler......... 75,000(1) 9.8% $2.000 12/17/2003 $61,065 $142,308
Robert D. Hostetler......... 45,000(2) 5.9% 2.000 12/27/2003 36,639 85,385
Robert D. Hostetler......... 30,000(3) 3.9% 2.000 10/30/2005 20,406 46,294
David K. Sentman............ 10,000(4) -- 3.687 02/27/2005 15,010(5) 34,979(5)
David K. Sentman............ 10,000(5) 1.3% 2.000 03/15/2004 8,142 18,974
David K. Sentman............ 60,000(6) 7.9% 2.000 12/27/2003 48,852 113,846
David K. Sentman............ 20,000(3) 2.6% 2.000 10/30/2005 16,284 37,949
Terry J. Holmes............. 10,000(4) -- 3.687 02/27/2005 15,010(5) 34,979(5)
Terry J. Holmes............. 10,000(5) 1.3% 2.000 03/15/2004 8,142 18,974
Terry J. Holmes............. 40,000(6) 5.2% 2.000 12/27/2003 32,568 75,897
Terry J. Holmes............. 20,000(3) 2.6% 2.000 10/30/2005 16,284 37,949
John B. Suranyi............. 10,000(4) -- 3.687 02/27/2005 15,010(5) 34,979(5)
John B. Suranyi............. 10,000(5) 1.3% 2.000 03/15/2004 8,142 18,974
John B. Suranyi............. 50,000(6) 6.5% 2.000 12/27/2003 40,710 94,872
John B. Suranyi............. 20,000(3) 2.6% 2.000 10/30/2005 16,284 37,949
Paul E. Beckelheimer........ 3,000(4) -- 3.687 02/27/2005 4,503(5) 10,494(5)
Paul E. Beckelheimer........ 3,000(5) * 2.000 03/15/2004 2,443 5,692
Paul E. Beckelheimer........ 13,000(6) 1.7% 2.000 12/27/2003 -- --
Paul E. Beckelheimer........ 10,000(3) 1.3% 2.000 10/30/2005 8,142 18,974
</TABLE>
- ---------------
* less than one percent
(1) These options were granted to Mr. Hostetler on October 30, 1997 as
replacement options in return for cancellation of 75,000 options that were
granted to Mr. Hostetler on December 17, 1996 with an exercise price of
$6.875 per share. 37,500 of such replacement options vested on December 27,
1997, 18,750 vest on December 27, 1998, and 18,750 vest on December 27,
1999. See "Report of the Board of Directors on Executive Compensation and
Option Repricing."
(2) These options were granted to Mr. Hostetler on October 30, 1997 as
replacement options in return for cancellation of 45,000 options that were
granted to Mr. Hostetler on December 17, 1996 with an exercise price of
$6.875 per share. 22,500 of such replacement options vested on December 27,
1997, 11,250 vest on December 27, 1998, and 11,250 vest on December 27,
1999. See "Report of the Board of Directors on Executive Compensation and
Option Repricing."
(3) These options were granted on October 30, 1997 with an exercise price of
$2.000 per share. Such options vest in increments of 33 1/3% per year
beginning on October 30, 1998.
(4) These options were granted on February 27, 1997 with an exercise price of
$3.687 per share. All such options were canceled and replaced with new
options in connection with the Company's repricing of stock options on
October 30, 1997. See "Report of the Board of Directors on Executive
Compensation and Stock Option Repricing."
(5) These options were granted on October 30, 1997 as replacement options in
return for the cancellation of options that were granted on February 27,
1997 at an exercise price of $3.687. Such options vest in increments of
33 1/3% per year beginning on March 15, 1998.
(6) These options were granted on October 30, 1997 as replacement options in
return for cancellation of options that were granted on December 17, 1996
with an exercise price of $6.875 per share. 50% of such replacement options
were vested as of December 27, 1997, 25% vest on December 27, 1998, and 25%
vest on December 27, 1999. See "Report of the Board of Directors on
Executive Compensation and Option Repricing."
10
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES TABLE
The following table sets forth certain information with respect to option
exercises by the Named Executive Officers during 1997 and the value of options
owned by the Named Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END(#) AT FY-END($)
SHARES ------------- -------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Robert D. Hostetler.................... -0- $-0- 60,000/90,000 *
David K. Sentman....................... -0- -0- 30,000/60,000 *
Terry J. Holmes........................ -0- -0- 20,000/50,000 *
John B. Suranyi........................ -0- -0- 25,000/55,000 *
Paul E. Beckelheimer................... -0- -0- 6,500/19,500 *
</TABLE>
- ---------------
* All of the options held by such Named Executive Officers at December 31, 1997
had an exercise price of $2.000 per share. The closing price of the Company's
Common Stock on December 31, 1997, as quoted on the Nasdaq National Market,
was $1.25. Thus, none of the options held by such Named Executive Officers
were in-the-money at December 31, 1997.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Robert D. Hostetler, President
and Chief Executive Officer of the Company. Mr. Hostetler's employment agreement
establishes his annual base cash compensation for 1997 at $203,200. After
January 1, 1998, Mr. Hostetler's base salary may be increased by the Company in
its discretion. The agreement further provides that Mr. Hostetler is eligible to
receive an annual cash bonus pursuant to the Company's bonus plan for executive
officers. Mr. Hostetler is also eligible to participate in the Company's stock
option plan.
Mr. Hostetler's employment agreement expires on June 30, 1998, unless
earlier terminated. The agreement may be terminated by the Company with or
without cause at any time without prior notice, and by Mr. Hostetler at any time
upon 30 days' prior notice to the Company. The agreement provides that Mr.
Hostetler is entitled to receive severance payments equal to six months' base
salary in the event the agreement is terminated by the Company without cause.
Mr. Hostetler's employment agreement prohibits him from competing with the
Company during the period of his employment and for one year thereafter.
The Company also has an employment agreement with David K. Sentman, Senior
Vice President and Chief Financial Officer of the Company. The agreement
establishes Mr. Sentman's minimum base salary at $130,000, subject to increases
of 5% per year or such other increases as may be approved by the Company.
Pursuant to his employment agreement, Mr. Sentman is also eligible to receive a
cash bonus with respect to each calendar year of up to 40% of his base salary.
Upon commencement of his employment with the Company in August 1995, Mr. Sentman
was granted options to purchase 50,000 shares of Common Stock at an exercise
price of $12.75 per share and was reimbursed for certain relocation expenses
incurred in connection with the commencement of his employment. The Company also
provided a relocation loan to Mr. Sentman of up to $180,000, which loan was
repaid during 1996. Pursuant to his employment agreement, Mr. Sentman is
eligible to participate in all benefit programs established by the Company that
are generally applicable to executive officers.
Mr. Sentman's employment agreement expires on August 10, 1999, unless
earlier terminated. The agreement may be terminated by the Company with or
without cause at any time without prior notice, and by Mr. Sentman at any time
after August 10, 1997 upon 30 days' prior written notice to the Company. The
agreement provides that Mr. Sentman is entitled to receive severance payments
equal to one year's base salary
11
<PAGE> 14
plus accrued bonus in the event the agreement is terminated without cause, and
two year's base salary plus accrued bonus under certain circumstances following
a change in control of the Company. The agreement also prohibits Mr. Sentman
from competing with the Company for the term of his employment and for one year
thereafter.
The Company also has employment agreements with Terry J. Holmes and John B.
Suranyi, each a Senior Vice President of the Company. Each of the employment
agreements establishes an annual base salary of $131,500 and provides for base
salary increases of at least 5% per year. The agreements also provide that
Messrs. Holmes and Suranyi will be eligible to receive annual cash bonuses
pursuant to the Company's bonus plan for executive officers and to participate
in all benefit programs generally applicable to executive officers. The
agreements expire on April 30, 2000, unless earlier terminated. The agreements
are terminable by the Company with or without cause at any time and by the
employees upon 30 days' prior written notice to the Company. The agreements
provide that Messrs. Holmes and Suranyi are entitled to receive severance
payments equal to one year's base salary plus accrued bonus in the event the
agreements are terminated without cause or in the event of voluntary termination
following certain changes in employment conditions. The agreements also prohibit
Messrs. Holmes and Suranyi from competing with the Company for their respective
terms of employment and for one year thereafter.
12
<PAGE> 15
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION AND STOCK OPTION REPRICING
The Board of Directors makes this report on executive compensation pursuant
to Item 402 of Regulation S-K. Notwithstanding anything to the contrary set
forth in any of the Company's previous filings under the Securities Act of 1933,
as amended (the "Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that might incorporate future filings, including this Proxy
Statement in whole or in part, this report and the graph which follows this
report shall not be incorporated by reference into any such filings, and such
information shall be entitled to the benefits provided in Item 402(a)(9) of
Regulation S-K.
All compensation arrangements for the Company's executive management are
recommended by the Company's Compensation Committee (the "Committee") and
reviewed and approved by the Board of Directors. The Committee formulates the
Company's compensation philosophy and establishes the policies, standards and
objectives upon which the compensation decisions are based. Pursuant to these
policies and criteria, the Committee recommends to the Board of Directors the
cash compensation to be paid the Company's executive officers, including the
Chief Executive Officer. The Committee also recommends to the Board of Directors
the key employees to whom stock options should be granted under the Company's
1990 Stock Option Program, As Amended (the "Plan"), the number of shares covered
by each such grant, the exercise or purchase price per share, and the other
terms and provisions governing each grant of options under the Plan. The
Committee typically meets two or three times per year to review executive
management performance and compensation and to recommend bonuses and stock
option grants for employees of the Company. The Committee also meets on an
as-needed basis to recommend compensation for newly created or expanded
executive positions. All cash compensation arrangements and stock option grants
recommended by the Committee are subject to approval by the full Board of
Directors.
COMPENSATION PHILOSOPHY
The objectives of the Company's executive compensation policies are to
attract, retain and reward highly-skilled executive officers who contribute to
the Company's success, to align the financial interests of executive officers
with the performance of the Company, to strengthen the relationship between
executive pay and shareholder value, to motivate executive officers to achieve
the Company's business objectives and to reward individual performance. During
1997, the Company used base salary, executive officer cash bonuses, and stock
option grants under the Plan to achieve these objectives. The Board of Directors
believes that a substantial portion of the annual compensation of each executive
officer should be influenced by the performance of the Company, as well as the
individual contribution of each executive officer and the responsibility and
authority of each position relative to other positions within the Company. The
Board of Directors is also reviewing a number of alternatives to provide
retention incentives to certain executives in a distressed environment for the
Company.
Federal tax law establishes certain requirements in order for compensation
exceeding $1 million earned annually by the Named Executive Officers to be
deductible. Because the total compensation for executive officers of the Company
is significantly below the $1 million threshold, the Board of Directors has not
yet had to address the issues relative thereto.
BASE SALARY
The Company's base salary levels are usually recommended by the Committee
and approved by the Board of Directors annually for each executive officer. The
level of base compensation is intended to be competitive with other comparable
positions within the wireless cable and telecommunications industries. Base pay
is determined on a case by case basis in relation to the individual's
background, experience, accomplishments and market conditions. While the
Committee and the Board of Directors consider the low, midpoint and upper ranges
of base salaries published by compensation surveys in establishing base salaries
of each executive officer of the Company, the Company does not have a policy or
target of how each executive
13
<PAGE> 16
officer's base salary, or salaries of executive officers as a group, should
compare with the low, midpoint or upper ranges of compensation surveys.
CASH BONUSES
In addition to base pay, certain executive officers, including the
Company's President and Chief Executive Officer, are eligible to receive annual
or other cash bonuses. Cash bonuses are typically determined on the basis of a
combination of performance criteria including (a) annual personal performance
objectives, usually linked substantially to the performance of the Company, that
are established at the beginning of the year, (b) the Company's performance
compared to its business plan, (c) the Company's performance toward achieving
its strategic objectives, and (d) an overall subjective performance evaluation
taking into account such factors as the individual's relative contribution to
the Company.
For 1997 the Committee determined that executive officers should be
eligible to earn bonuses of up to 45% of base cash compensation based on their
performance and the performance of the Company. With the exception of Robert D.
Hostetler, the Company's President and Chief Executive Officer, the Committee
further determined that for the executive officers (1) approximately one-third
of the bonus should be determined objectively by measuring the performance of
each executive officer against pre-established operating performance targets,
(2) approximately one-third should be based upon personal performance objectives
and (3) approximately one-third should be based upon discretionary factors. The
Committee established executive performance targets for 1997 in four areas that
were determined by the Board of Directors to be critical to measuring the
Company's operating results: earnings before interest, taxes, depreciation and
amortization; free cash flow; number of customers; and customer churn levels.
STOCK OPTION GRANTS AND REPRICING
All executive officers and key employees of the Company are eligible to
participate in the Plan. The purpose of the Plan is to provide incentives to
management to maximize shareholder value by providing them with opportunities to
acquire shares of the Company's Class A Common Stock. Options are granted to
executive officers and key employees whom the Board of Directors determines to
be responsible for the future growth and success of the Company, based on
recommendations of the Committee. The Board believes that equity ownership by
executive officers provides incentives to build shareholder value and aligns the
interests of executive officers with the shareholders. Options are granted at
the market price of the Company's Class A Common Stock on the date of grant and,
consequently, have value only if the price of the Company's Class A Common Stock
increases over the exercise price for the period during which the options are
exercisable.
The Committee typically recommends that a stock option be granted under the
Plan upon hiring executive officers, subject to a vesting schedule. The size of
the initial grant is usually determined with reference to the seniority of the
executive officer, the contribution that the executive officer is expected to
make to the Company, and comparable equity compensation offered by other
companies in the cable or telecommunication industries.
After the initial stock option grant, the Committee recommends additional
grants under the Plan, typically on an annual basis. Such awards are based upon
performance criteria similar to those applicable to cash bonus payments and, for
approximately the past year, the need to motivate and retain key executives at a
time of substantial uncertainty and significant challenges for the Company. From
1996 to approximately mid-1997, the Company also based stock option grants upon
target levels of stock option compensation (using Black-Scholes valuation
estimates) over a five-year period as a multiple of annual base salaries. After
approximately mid-1997, the Committee determined that Black-Scholes valuation
estimates had become ineffective as a guide to determine future stock option
grants because of the depressed level of the market price for the Company's
Class A Common Stock, and the Committee thereafter has relied upon its judgment.
In recommending the size of periodic grants, the Committee also considers prior
option grants to the executive officer, regardless of whether the options have
been exercised, the executive's historical performance, the importance of the
executive to the Company and his or her expected future contributions.
Exceptions are made to the annual grants and typical vesting schedules when the
Board believes, based upon recommenda-
14
<PAGE> 17
tions of the Committee, that additional option grants or accelerated vesting
will match special circumstances of the Company or reward the contribution of an
executive officer or key employee.
Prior to December 17, 1996, the Named Executive Officers had been granted,
as part of their incentive compensation, options to purchase Class A Common
Stock of the Company at prices ranging from $11.75 to $15.00 per share (see "Ten
Year Option Repricings"). Subsequent to the grant of such options, the market
price of the Company's Class A Common Stock decreased significantly and the
Company's financial position weakened. The Board of Directors determined, based
upon a recommendation of the Committee, that it was in the best interests of the
Company to offer to reprice all outstanding stock options previously granted to
key employees (including the Named Executive Officers) under the Plan. In making
this determination, the Board of Directors considered that the exercise price of
the vast majority of the outstanding options made them of nominal value from the
viewpoint of the optionholder, considering the current market price of the Class
A Common Stock. The Board of Directors was concerned that the Company might, at
this critical point in its development, lose the benefit of a key incentive in
its compensation philosophy and, thereby, make it more difficult for the Company
to retain talented personnel. By bringing the exercise price of all outstanding
options more in line with current market conditions, the Board of Directors
believes that the Company's key employees will be more motivated to focus on
increasing shareholder value.
Thus, on December 17, 1996, the Company offered to each optionholder,
including the Named Executive Officers, the right to surrender his or her
outstanding options to the Company in exchange for the grant of replacement
options for a like number of shares of Class A Common Stock at an exercise price
of $6.875, the closing price of the Class A Common Stock on the Nasdaq National
Market on December 17, 1996. All employees (including the Named Executive
Officers) holding options with an exercise price above $6.875 per share
surrendered their outstanding options to the Company in exchange for replacement
grants.
At the time of the December 17, 1996 repricing, the Committee also
recommended to the Board of Directors that future stock options generally be
granted with three-year vesting schedules instead of the five-year vesting
schedules previously used by the Company in order to better reflect the dynamic
environment of the Company and the wireless industry, and that the options also
generally contain an acceleration of one-year vesting in the event of a change
in control of the Company.
Subsequent to the repricing of all outstanding options on December 17,
1996, the market price per share of the Company's Common Stock continued to
decrease. For the same reasons as earlier, on October 30, 1997, the Company
offered to each optionholder, including the Named Executive Officers, the right
to surrender his or her outstanding options to the Company in exchange for the
grant of replacement options for a like number of shares of Class A Common Stock
at an exercise price of $2.00 per share, the closing price of the Class A Common
Stock on the Nasdaq SmallCap Market on October 30, 1997. All employees
(including the Named Executive Officers) holding options with an exercise price
above $2.00 per share surrendered their outstanding options to the Company in
exchange for replacement grants.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
The Committee and the Board of Directors review the performance of the
Company's President and Chief Executive Officer at least annually. During 1996,
pursuant to his employment agreement, Mr. Hostetler received base cash
compensation of $190,000. Mr. Hostetler was also eligible to receive a bonus for
1996 to be calculated in the same manner as the bonuses for other executive
officers, approximately one-half based upon pre-established operating
performance objectives and approximately one-half based upon subjective factors.
In March 1997, the Board of Directors and Mr. Hostetler agreed that the final
determination of Mr. Hostetler's 1996 bonus would be deferred until his 1996
employment agreement was reviewed in July 1997.
In July 1997, the Company reviewed both Mr. Hostetler's performance and the
desirability of entering into another employment agreement with Mr. Hostetler.
The Company offered Mr. Hostetler, and Mr. Hostetler accepted, a new employment
agreement through June 30, 1998, at a base compensation of $203,200 per year,
and the base salary was made retroactive to January 1, 1997. The Company also
granted
15
<PAGE> 18
and paid Mr. Hostetler a cash bonus of $90,000 covering the period from January
1, 1996 through June 30, 1997. In considering the subjective portion of Mr.
Hostetler's bonus, the Committee evaluated Mr. Hostetler's 1996 performance in
the following areas: aligning the Company with one or more strategic partners in
order to provide access to additional technologies, products and capital;
improving the Company's liquidity through the sale of certain non-strategic
assets and additional equity; developing strategies for implementing wireless
digital video and non-video products; retaining certain key employees; and
improving the overall management and operating personnel of the Company. In
addition, the Committee considered the operating performance of the Company in
the first half of 1997 compared to pre-established goals and the contributions
by Mr. Hostetler in negotiating an agreement to sell certain assets of the
Company to BellSouth Corporation, developing a high-speed Internet access
business for launch, and planning the initiation of advanced technology trials.
In June 1998, the Committee intends to review Mr. Hostetler's base pay,
employment agreement and bonus for the second half of 1997 and the first half of
1998.
Mr. Hostetler was offered and accepted the opportunity to reprice his stock
options as of October 30, 1997, along with all other optionholders. Also on
October 30, 1997, the Committee recommended, and the Board of Directors
approved, the award of an additional stock option grant under the Plan to Mr.
Hostetler to purchase 30,000 additional shares of the Company's Class A Common
Stock at an exercise price of $2.00 per share, the closing price of the Class A
Common Stock on the Nasdaq SmallCap Market on such date. In making the award,
the Board of Directors and the Committee desired to grant additional incentives
to Mr. Hostetler to increase shareholder value.
In setting Mr. Hostetler's base salary, the Board of Directors and the
Committee has considered base compensation levels of other chief executive
officers in the cable and telecommunications industries, Mr. Hostetler's
executive experience and knowledge of the wireless cable industry, and his
expected future contribution to the Company. The Board of Directors believes
that Mr. Hostetler's base cash compensation level is in the middle of the
compensation range for similar positions in the wireless cable industry. Mr.
Hostetler also holds a substantial equity participation in the Company through
his ownership of Class A Common Stock and the stock option arrangements
described above. Thus, a portion of Mr. Hostetler's total compensation is linked
directly to the creation of shareholder value.
Respectfully submitted,
The Board of Directors
Donald R. DePriest
Richard F. Seney
James S. Quarforth
Carl A. Rosberg
Robert D. Hostetler
Mitchell R. Hauser
- ---------------
(1) In determining whether Mr. Hostetler's compensation was comparable to the
compensation of other chief executives, the Board of Directors limited its
comparison to other companies in the wireless cable industry, a relatively
small subset of the telecommunications industry. To date, the Board has
believed that such a comparison was more meaningful than a comparison
between its compensation levels and the compensation levels of much larger
and more highly capitalized companies comprising the telecommunications
industry as a whole. Because the wireless cable industry is a relatively new
industry, there is no established line of business or industry index. Thus,
for purposes of the Stock Performance Graph, the Company compared its stock
performance to the Telecommunications Index, which is comprised of companies
representing the telecommunications industry as a whole.
16
<PAGE> 19
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK AT PRICE NEW REMAINING
OPTIONS TIME OF AT TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
---- -------- ---------- ------------ -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Hostetler(1)........ 12/17/96 30,000 $6.875 $ 11.75 $6.875 6.17
Robert D. Hostetler........... 12/17/96 15,000 6.875 13.75 6.875 7.00
Robert D. Hostetler........... 12/17/96 75,000 6.875 14.375 6.875 7.00
Robert D. Hostetler........... 10/30/97 120,000 2.000 6.875 2.000 7.13
David K. Sentman(2)........... 12/17/96 50,000 6.875 12.75 6.875 6.50
David K. Sentman.............. 12/17/96 10,000 6.875 15.00 6.875 7.36
David K. Sentman.............. 10/30/97 10,000 2.000 3.687 2.000 7.33
David K. Sentman.............. 10/30/97 60,000 2.000 6.875 2.000 7.13
Terry J. Holmes(3)............ 12/17/96 15,000 6.875 13.75 6.875 6.50
Terry J. Holmes............... 12/17/96 15,000 6.875 13.75 6.875 7.00
Terry J. Holmes............... 12/17/96 10,000 6.875 15.00 6.875 7.36
Terry J. Holmes............... 10/30/97 10,000 2.000 3.687 2.000 7.33
Terry J. Holmes............... 10/30/97 40,000 2.000 6.875 2.000 7.13
John B. Suranyi(4)............ 12/17/96 15,000 6.875 13.75 6.875 6.50
John B. Suranyi............... 12/17/96 15,000 6.875 13.75 6.875 7.00
John B. Suranyi............... 12/17/96 20,000 6.875 15.00 6.875 7.36
John B. Suranyi............... 10/30/97 10,000 2.000 3.387 2.000 7.33
John B. Suranyi............... 10/30/97 50,000 2.000 6.875 2.000 7.13
Paul E. Beckelheimer(5)....... 12/17/96 10,000 6.875 13.75 6.875 7.00
Paul E. Beckelheimer.......... 10/30/97 3,000 2.000 6.875 2.000 7.13
Paul E. Beckelheimer.......... 10/30/97 10,000 2.000 6.875 2.000 7.13
Paul E. Beckelheimer.......... 10/30/97 3,000 2.000 3.687 2.000 7.33
</TABLE>
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(1) President and Chief Executive Officer
(2) Senior Vice President and Chief Financial Officer
(3) Senior Vice President
(4) Senior Vice President
(5) Vice President
17
<PAGE> 20
COMMON STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total shareholder return on its Class A Common Stock for the period
during which the Class A Common Stock has been registered under Section 12 of
the Exchange Act against the cumulative total return of the Nasdaq Total Return
(U.S.) Index (the "Nasdaq Index") and the cumulative total return of the Nasdaq
Telecommunications Index (the "Telecommunications Index") for the same period.
The graph assumes an investment of $100 on December 10, 1993 (the date on which
trading in the Common Stock commenced) in each of the Class A Common Stock and
the stocks comprising the Nasdaq Index and the Telecommunications Index, and
assumes reinvestment of dividends, if any. Effective October 17, 1997, trading
in the Class A Common Stock was transferred from the Nasdaq National Market to
the Nasdaq SmallCap Market.
PERCENTAGE CHANGE
<TABLE>
<CAPTION>
AMERICAN
MEASUREMENT PERIOD NASDAQ TELECOMMUNICATIONS TELECASTING,
(FISCAL YEAR COVERED) INDEX INDEX INC.
--------------------- ------ ------------------ ------------
<S> <C> <C> <C>
12/10/93 0.00 0.00 0.00
12/31/93 2.79 3.46 0.00
12/31/94 0.48 -13.65 -43.06
12/31/95 42.10 13.07 -19.44
12/31/96 74.77 15.60 -68.06
12/31/97 114.47 70.75 -93.06
</TABLE>
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
All compensation arrangements for the Company's executive management are
recommended by the Compensation Committee and reviewed and approved by the Board
of Directors. Messrs. DePriest, Seney, Quarforth, Rosberg, Hostetler and Hauser
are members of the Board of Directors. Mr. Hostetler is President and Chief
Executive Officer of the Company. Mr. Hostetler is a Manager on the Board of
Managers of the Fresno Partnership and, along with his wife, owns 28% of FTI,
which owns 35% of the Fresno Partnership. As of December 31, 1997, the Fresno
Partnership owed the Company approximately $8.5 million. See "Certain
Relationships and Related Transactions." Messrs. DePriest and Seney are both
officers of the Company, but do not receive any compensation from the Company
for their services as officers, except for reimbursement of out-of-pocket
expenses incurred in connection with certain activities on behalf of the
Company. No executive officer of the Company served as a director or member of
the compensation committee of another entity, one of whose executive officers
served as a director of the Company.
18
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Investment Agreement dated January 19, 1991, between CFW and
the Company, the Company provides certain advisory services to CFW in connection
with the development of wireless cable systems developed by CFW in the
Commonwealth of Virginia. In return, the Company is entitled to receive payments
equal to 10% of the earnings (as defined in the agreement) of each such wireless
cable system for a 15-year period after the system has achieved cumulative
pre-tax income. CFW currently operates wireless cable systems in Charlottesville
and other cities within the Shenandoah Valley, and maintains certain wireless
cable channel rights in Richmond and Lynchburg, Virginia. None of such systems
have yet achieved cumulative pre-tax income.
Robert D. Hostetler, President and Chief Executive Officer of the Company,
is a Manager on the Board of Managers of the Fresno Partnership and, along with
his wife, owns 28% of FTI, which owns 35% of the Fresno Partnership. The Fresno
Partnership operates the Company's Fresno, Visalia and Merced wireless cable
systems. As of December 31, 1997, the Fresno Partnership owed the Company
approximately $8.5 million.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, "Reporting Persons"), to
file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Reporting
persons also are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms that are filed with the SEC. Based solely on a review
of the copies of such reports furnished to the Company and representations that
no other reports were required, the Company believes that all Reporting Persons
complied with all Section 16(a) filing requirements for the fiscal year ended
December 31, 1997, with the following exceptions: (i) Carl A. Rosberg, a
director of the Company, filed a late Form 4 in January 1998, to report the sale
of Common Stock in November 1997, and (ii) James S. Quarforth, a director of the
Company, filed a Form 4 in January 1998, to report the sale of Common Stock in
December 1997, which form was returned by the SEC because it was considered
illegible, so the subsequent filing of such Form 4 in February 1998 is
considered late.
PROPOSAL NO. 2 - SELECTION OF INDEPENDENT AUDITORS
Since 1988, the firm of Arthur Andersen LLP, independent auditors, has
examined and reported on the financial statements of the Company. The Board of
Directors, upon recommendation of the Audit Committee, has appointed Arthur
Andersen LLP as independent auditors to examine and report on the financial
statements of the Company for the fiscal year ending December 31, 1998, subject
to stockholder approval.
During the year ended December 31, 1997, Arthur Andersen LLP provided the
Company with audit services, including examinations of and reporting on the
Company's consolidated financial statements, and certain accounting advisory
services. Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and will have the opportunity to make any statements they may
desire. They also will be available to respond to appropriate questions of the
stockholders.
Approval of the appointment of Arthur Andersen LLP as independent auditors
requires the affirmative vote of the holders of a majority of the shares of
Class A Common Stock present in person or represented by proxy at the Annual
Meeting. If the appointment is not approved, the Board of Directors will select
other independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS APPOINTMENT
(ITEM NO. 2 ON THE ENCLOSED PROXY CARD).
19
<PAGE> 22
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's 1999 Annual Meeting of Stockholders, consistent with
rules and regulations of the SEC. Proposals of stockholders intended to be
presented at the Company's 1999 Annual Meeting should be received by the
President of the Company at the above address no later than November 27, 1998,
in order to be included in the Company's Proxy Statement and form of Proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors is not aware of any matters to come before the
meeting other than the election of directors, and the proposal to approve the
appointment of Arthur Andersen LLP as the Company's independent auditors for the
succeeding year. If any other matter should come before the meeting, the persons
named in the enclosed proxy card will have discretionary authority to vote all
proxies with respect thereto in accordance with their judgment.
Please sign and return promptly the enclosed proxy card in the envelope
provided. The signing of a Proxy will not prevent your attending the meeting and
voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT D. HOSTETLER
ROBERT D. HOSTETLER
President and Chief Executive
Officer
Dated: March 27, 1998
20
<PAGE> 23
- --------------------------------------------------------------------------------
AMERICAN TELECASTING, INC.
5575 TECH CENTER DRIVE, SUITE 300
COLORADO SPRINGS, COLORADO 80919
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMERICAN TELECASTING,
INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 23, 1998.
The undersigned hereby appoint(s) Robert D. Hostetler, Richard F. Seney and
each of them, as proxies to represent and vote the shares held by the
undersigned at the Annual Meeting of Stockholders of American Telecasting, Inc.
(the "Company") to be held April 23, 1998, or at any adjournments thereof as
follows:
DIRECTORS RECOMMEND: A vote FOR election of directors (proposal 1), and a vote
FOR the appointment of Arthur Andersen LLP as independent
auditors (proposal 2), all of which have been proposed by
the Board of Directors.
1. ELECTION OF DIRECTORS: [ ] For all nominees [ ] Withold all nominees
<TABLE>
<S> <C> <C>
(1) Donald R. DePriest (2) Richard F. Seney (3) Robert D. Hostetler
(4) Carl A. Rosberg (5) Mitchell R. Hauser (6) James S. Quarforth
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee place an
"X" in this box [ ] and strike a line through the nominee's name
listed above.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
<PAGE> 24
- --------------------------------------------------------------------------------
2. APPOINTMENT OF INDEPENDENT AUDITORS: The appointment of Arthur Andersen LLP
as independent auditors of the Company for the fiscal year ending December
31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
* Note: If any other matters properly come before the meeting or any adjournment
thereof, this proxy will be voted according to the judgment of the
persons named above as proxies.
All of the above matters are more particularly described in the Company's Proxy
Statement dated March 27, 1998, relating to such annual meeting to be held on
April 23, 1998, receipt of which is hereby acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THE PROXY
WILL BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR AND "FOR" PROPOSAL 2 AND IN THE
PROXY'S DISCRETION ON ANY OTHER MATTERS TO COME BEFORE THE MEETING.
Dated , 1998
------------------
------------------------------
SIGNATURE
------------------------------
SIGNATURE IF HELD JOINTLY
Signature(s) should correspond
with the name appearing on the
label hereon. When signing in
a fiduciary or representative
capacity, give full title as
such. Where more than one
owner, each should sign.
- --------------------------------------------------------------------------------
