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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, 1999
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------------- ----------------------
Commission File Number :
0-23008
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AMERICAN TELECASTING, INC.
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(Exact name of registrant as specified in its charter)
Delaware 54-1486988
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization 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
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of August 10, 1999, 25,847,573 shares of the registrant's Common Stock, par
value $.01 per share, were outstanding.
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AMERICAN TELECASTING, INC.
INDEX
<TABLE>
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Page
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1999........................................................................3
Condensed Consolidated Statements of Operations -
Three months ended June 30, 1998 and 1999 and the Six months ended June 30, 1998 and 1999..................4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and 1999....................................................................5
Notes to Condensed Consolidated Financial Statements........................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................................................24
Item 2. Changes in Securities...............................................................................25
Item 3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.................................................26
Item 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K....................................................................27
</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, except per share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
----------- -----------
(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents ...................................... $ 11,155 $ 8,819
Trade accounts receivable, net ................................. 971 859
Prepaid expenses and other current assets ...................... 1,472 2,099
----------- -----------
Total current assets .................................... 13,598 11,777
Property and equipment, net ..................................... 28,349 20,803
Deferred license and leased license acquisition costs, net ...... 81,141 78,787
Cash available for debt repayment ............................... -- 1,523
Restricted escrowed funds ....................................... 1,828 1,865
Deferred financing costs, net ................................... 2,523 2,334
Other assets, net ............................................... 226 219
----------- -----------
Total assets ............................................ $ 127,665 $ 117,308
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses .......................... $ 11,338 $ 11,946
Current portion of long-term obligations ....................... 271 1,277
Subscriber deposits ............................................ 186 148
----------- -----------
Total current liabilities ............................... 11,795 13,371
2004 Notes ...................................................... 134,130 143,040
2005 Notes ...................................................... 105,383 113,376
Other long-term obligations, net of current portion ............. 527 3,692
----------- -----------
Total liabilities ....................................... 251,835 273,479
COMMITMENTS AND CONTINGENCIES (see Note 4)
STOCKHOLDERS' DEFICIT:
Class A Common Stock, $.01 par value; 45,000,000 shares
authorized; 25,743,607 and 25,847,573 shares issued and
outstanding, respectively ...................................... 257 259
Class B Common Stock, $.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding ................... -- --
Additional paid-in capital ...................................... 189,413 195,197
Deferred compensation ........................................... -- (153)
Common Stock warrants ........................................... 10,129 5,479
Accumulated deficit ............................................. (323,969) (356,953)
----------- -----------
Total stockholders' deficit ............................. (124,170) (156,171)
----------- -----------
Total liabilities and stockholders' deficit ............. $ 127,665 $ 117,308
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
3
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Service and other .......................... $ 12,456 $ 9,531 $ 24,956 $ 19,712
Installation ............................... 236 135 457 253
------------ ------------ ------------ ------------
Total revenues ............................... 12,692 9,666 25,413 19,965
Costs and expenses:
Operating .................................. 8,027 6,581 15,797 13,088
Marketing .................................. 708 85 1,409 191
General and administrative ................. 5,664 5,882 11,336 9,645
Noncash compensation expense ............... -- 657 -- 883
Depreciation and amortization .............. 10,375 6,177 20,019 11,421
------------ ------------ ------------ ------------
Total costs and expenses ..................... 24,774 19,382 48,483 35,228
------------ ------------ ------------ ------------
Loss from operations ......................... (12,082) (9,716) (23,148) (15,263)
Interest expense ............................. (10,301) (12,648) (21,276) (21,485)
Interest income .............................. 615 322 1,086 553
Gain on disposition of wireless cable systems
and assets .................................. -- 2,772 3,219 2,772
Other (expense) income, net .................. (39) 131 42 439
------------ ------------ ------------ ------------
Loss before extraordinary item ............... (21,807) (19,139) (40,077) (32,984)
Extraordinary gain on extinguishment of debt . 37,011 -- 37,011 --
------------ ------------ ------------ ------------
Net income (loss) ............................ $ 15,204 $ (19,139) $ (3,066) $ (32,984)
============ ============ ============ ============
Basic and diluted net income (loss) per share:
Loss per share before extraordinary gain on
extinguishment of debt ................... $ (.85) $ (.74) $ (1.56) $ (1.28)
Income per share from extraordinary gain on
Extinguishment of debt ................... 1.44 -- 1.44 --
------------ ------------ ------------ ------------
Net income (loss) per share ................ $ .59 $ (.74) $ (.12) $ (1.28)
============ ============ ============ ============
Weighted average number of shares outstanding 25,743,607 25,829,240 25,743,607 25,785,613
============ ============ ============ ============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
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AMERICAN TELECASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1998 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................... $ (3,066) $(32,984)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on bond tender offer ................................................ (37,011) --
Depreciation and amortization ............................................ 20,019 11,421
Amortization of debt discount and deferred financing costs ............... 21,191 17,094
Bond appreciation rights ................................................. (246) 3,500
Minority interest income ................................................. (45) (325)
Noncash compensation expense ............................................. -- 883
Gain on disposition of wireless cable systems and assets ................. (3,219) (2,772)
Other .................................................................... 203 (72)
Changes in operating assets and liabilities .............................. (362) 1,653
-------- --------
Net cash used in operating activities .................................. (2,536) (1,602)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........................................ (9,133) (1,363)
Additions to deferred license and leased license acquisition costs ......... (3,234) (401)
Proceeds from disposition of wireless cable systems and assets ............. 4,377 3,071
Decrease (increase) of cash available for asset purchases and debt
repayment............................................................... 31,658 (1,523)
Increase in restricted escrowed funds....................................... (79) --
Net cash used in acquisitions .............................................. (2,122) --
-------- --------
Net cash provided by (used in) investing activities .................... 21,467 (216)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under term loan for payment of bond appreciation rights ......... -- 3,500
Payment of bond appreciation rights ........................................ -- (3,500)
Cash used in bond tender offer ............................................ (17,593) --
Principal payments on notes payable ........................................ (407) (406)
Principal payments on capital lease obligations ............................ (618) (112)
-------- --------
Net cash used in financing activities ................................... (18,618) (518)
-------- --------
Net increase (decrease) in cash and cash equivalents ....................... 313 (2,336)
Cash and cash equivalents, beginning of period ............................. 9,125 11,155
-------- --------
Cash and cash equivalents, end of period ................................... $ 9,438 $ 8,819
======== ========
</TABLE>
Supplemental Disclosures of Cash Flow Information:
A note payable obligation of approximately $652,000 was incurred in the
second quarter of 1999 when the Company renewed its property and casualty
insurance for the policy year. The 1998 renewal of property and casualty
insurance was not financed.
Cash interest paid for the six months ending June 30, 1998 and June 30,
1999 were approximately $85,000 and $3.5 million, respectively.
See Accompanying Notes to Condensed Consolidated Financial Statements
5
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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 to residential and commercial subscribers. ATI and its
subsidiaries are collectively referred to herein as the "Company." As
of June 30, 1999, the Company owned and operated 32 wireless cable
systems located throughout the United States (the "Developed Markets").
The Company also has wireless cable (microwave) frequency interests in
21 other U.S. markets (the "Undeveloped Markets").
Pending Sprint Transaction
On April 26, 1999, the Company, DD Acquisition Corp.
("Acquisition"), a wholly owned subsidiary of Sprint Corporation, and
Sprint Corporation ("Sprint") entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which Acquisition would be
merged with and into ATI, with ATI being the surviving corporation of
such merger (the "Merger"), upon the terms and subject to the
conditions of the Merger Agreement. After the completion of the Merger,
the Company will be wholly owned by Sprint.
At the effective time of the Merger, each outstanding share of
the Company's Class A Common Stock will be converted into the right to
receive $6.50 in cash. In conjunction with the merger, ATI adopted the
Stockholder Rights Plan. Under the Stockholder Rights Plan, preferred
stock purchase rights were distributed as a dividend at the rate of one
right ("Right") for each share of Common Stock outstanding as of the
close of business on May 10, 1999. Each Right entitles the holder to
purchase from ATI, under certain conditions, one one-hundredth of a
share of Series A Junior Participating Preferred Stock of ATI at an
exercise price of $27. The Rights will expire on the earlier of the
completion of the Merger or April 30, 2009.
The Rights are not exercisable unless a person or group acquires,
or announces the intent to acquire, beneficial ownership of 15% or more
of outstanding Common Stock. Prior to the date upon which the rights
would become exercisable under the Stockholder Rights Plan, ATI's
outstanding stock certificates represent both the shares of Common
Stock and the Rights, and the Rights trade only with the shares of
Common Stock. Generally, if the Rights become exercisable because a
person or group acquiring beneficial ownership of 15% or more of ATI's
Common Stock, then each stockholder, other than the acquirer, is
entitled to purchase, for the exercise price, that number of shares of
Common Stock that, at the time of the transaction, will have a market
value of two times the exercise price of the Rights. In addition, if,
after the Rights become exercisable, the Company is acquired in a
Merger or other business combination, or 50% or more of its assets or
earning power are sold, each Right will entitle the holder to purchase,
at the exercise price of the Rights, that number of shares of common
stock of the acquiring company that, at the time of the transaction,
will have a market value of two times the exercise price of the Rights.
The consummation of the Merger is subject to certain conditions,
including approval by the stockholders of ATI, satisfaction of the
Hart-Scott-Rodino Antitrust Improvements Act waiting period and grant
of applications from the Federal Communications Commission ("FCC")
approving the transfer of control of FCC authorizations. On June 1,
1999, the Federal Trade Commission granted early termination of the
required waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act. On June 25, 1999, stockholders of the Company
approved the Company's proposed acquisition by Sprint Corporation.
Completion of the Merger remains subject to the grant of
applications from the FCC approving the transfer of control of FCC
authorizations. Applications for the necessary approvals for the
proposed transfer of control of the Company to Sprint have been filed
with the FCC and placed on public notice. One petition to deny certain
of those applications was filed and all responsive pleadings have been
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submitted. The FCC is in the process of reviewing those pleadings and
is expected to rule on the Petition and the applications. The Company
cannot predict when the FCC will issue its rulings.
Business Strategy
The Company's principal business strategy is to pursue
implementation of a Wireless Broadband Access ("WBA") capability that
it believes will eventually be the best use of the wireless cable
spectrum. The Company believes that market, technological and
regulatory developments are creating an opportunity for the current
wireless cable spectrum to be used to serve future customers with
fixed, two-way, high-speed data and telephony services. The Company is
not presently offering any WBA services. A key element of the Company's
principal business strategy has been to seek a relationship with a
strategic partner who would benefit from this direct broadband "last
mile" access and facilitate access to technology, markets,
infrastructure and capital.
The Company's ability to introduce WBA services on a commercial
basis to future customers depends on a number of factors, including the
completion of the pending Merger with Sprint, the success of the
Company's development efforts, competitive factors such as the
introduction of new technologies, 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 1999, the Company continued
operating its Developed Markets principally as an analog video
subscription television business and offering high-speed Internet
service in three existing markets. The Company is continuing to manage
its analog video business to maximize operating cash flow while
pursuing its WBA business strategy, in part, by not investing the
capital resources necessary to replace all subscribers who choose to
stop receiving the Company's service.
Going Concern and Other Financial Matters
The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability
to complete a strategic relationship such as the Merger with Sprint. If
the Merger does not occur, without additional funding or financing the
Company will not have the necessary unrestricted cash to meet its
current obligations as they come due and will run out of unrestricted
cash on or before December 31, 1999. In addition, the Company will
require significant additional capital to fully implement its business
strategy. To meet such capital requirements, the Company is dependent
upon consummating a strategic relationship such as the Merger with
Sprint, or securing other funding or financing.
Cash interest payments on the 2004 Notes and 2005 Notes are
required to commence on December 15, 1999 and February 15, 2001,
respectively. The aggregate interest payments on the 2004 Notes and the
2005 Notes are approximately $10.5 million, $21.0 million and $40.7
million in 1999, 2000 and 2001, respectively. If on September 30, 1999,
the initial termination date of the Merger Agreement, the only
condition to the closing of the Merger with Sprint remaining
unfulfilled is the receipt of any required approval by the FCC, then
Sprint will have the option to extend the termination date to December
31, 1999 by Sprint agreeing to loan to the Company up to $13 million in
cash for the purpose, among other things, of paying interest due in
December 1999 on the 2004 Notes. Interest would accrue on such loan at
a rate of 10%.
Antilles Transaction
On August 12, 1999, the Company completed the sale of its
wireless cable channel rights and operating assets in Billings,
Montana, Grand Island, Nebraska and Rapid City, South Dakota to
Antilles Wireless, L.L.C. for approximately $5.6 million in cash,
7
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of which $500,000 was placed in escrow for one year for satisfaction of
any indemnification obligations. As of June 30, 1999, these markets
represented approximately 142,000 estimated households in the service
area and served approximately 8,500 subscribers. For the six months
ended June 30, 1999, these systems generated revenues of approximately
$1.7 million.
AESCO Systems Transaction
On March 19, 1999, the Company entered into an agreement with
AESCO Systems, Inc. ("AESCO") to acquire wireless cable channels in
Portland, Oregon from AESCO for a fixed payment of $2.25 million plus a
deferred payment based upon the price received in any further transfer
of the channels within the next five years. In addition, the Company
paid $250,000 on March 19, 1999 as consideration for a no-shop
covenant. Payment of the $2.25 million fixed portion of the purchase
price to AESCO is contingent upon the Company's closing of sale
transactions of other wireless cable assets, other than the BellSouth
Transaction (as defined below), for cumulative cash consideration of $5
million or more, and the FCC's grant by final order of the assignment
application for the AESCO licenses. The agreement will terminate on
March 15, 2000 if the transaction has not been completed.
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. Closings have occurred
under this agreement during 1997, 1998 and 1999. The Company completed
the most recent closing on April 23, 1999 for cash consideration of
approximately $2.7 million for certain wireless cable channels in
Louisville, Kentucky. Approximately $2.6 million was recorded as a gain
in the second quarter of 1999. During July 1999, the Company received
approximately $1.9 million in escrow funds from the sale of the
Lakeland Wireless system completed in July 1998. Additional closings
may occur for the Naples, Sebring and Miami, Florida markets. The
Company estimates the total gross proceeds from such closings will not
exceed $8 million. There can be no assurance that all such closing
conditions will be satisfied or that further proceeds will be received
from BellSouth Wireless.
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 six-month period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999. 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,
1998.
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,
1999, 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.
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Restricted Escrowed Funds
Restricted escrowed funds as of June 30, 1999 and December 31,
1998 represent a twelve-month escrow related to the Lakeland Wireless
system sale, which occurred on July 15, 1998. These funds were released
to the Company in July 1999.
Cash available for Debt Repayment
Cash available for debt repayment represents 57% of the cash
proceeds received from the closing on the BellSouth Transaction
completed in April, 1999. During 1998 the Asset Disposition Covenants
of the 2004 Notes and 2005 Notes were amended for asset sales under the
BellSouth Agreement. Under the amended covenants, once the aggregate
cash proceeds from asset sales under the BellSouth Agreement equal or
exceed $5 million, the Company is obligated to utilize 57% of the cash
proceeds to make an offer to purchase the outstanding Notes.
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 loss per share as the effect would be antidilutive. As a
result, the basic and diluted income (loss) per share amounts are
identical.
Stock Option Plan
The Company follows variable plan accounting on certain options
repriced in April 1998 under its Stock Option Plan. Variable plan
accounting requires that the Company record compensation expense if the
market price of the Company's Common Stock exceeds the repriced
exercise price of certain of the options. For the six months ended June
30, 1999, the Company recorded compensation expense of approximately
$883,000 related to vested stock options and a deferred compensation
equity adjustment related to unvested stock options of approximately
$153,000. The amount of compensation expense and deferred compensation
was based upon the difference between the quoted value of the stock on
June 30, 1999, and the applicable exercise price of certain options
repriced in April 1998. If the price of the common stock in future
periods is greater than the price on June 30, 1999, the Company will
incur additional compensation expense and deferred compensation equity
adjustments related to these repriced options. Based upon the
transaction price of $6.50 per Common Share with Sprint and the
outstanding stock options as of June 30 1999, the Company estimates
that incremental compensation expense of approximately $472,000 could
be incurred, assuming the Company vests all remaining unvested options
as part of the Merger with Sprint.
Reclassifications
Certain amounts from the prior year's consolidated financial
statements have been reclassified to conform with the 1999
presentation.
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3. DEBT
Long-term debt at June 30, 1999 consisted of the following (in
thousands):
<TABLE>
<S> <C> <C>
2004 Notes......................................... $ 143,040
2005 Notes......................................... 113,376
Notes payable...................................... 3,963
Capital leases..................................... 143
Current accrued interest payable................... 863
---------
Total.......................................... 261,385
Less current portion........................... 1,277
---------
Long-term debt................................. $ 260,108
=========
</TABLE>
During 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"). During 1997, the Credit Facility was
repaid and terminated. The BARs were exercised in June, 1999, and the
Company paid to the holders of the BARs $3.5 million in cash. The $3.5
million was recorded as interest expense during the six months ended
June 30, 1999.
Pursuant to the Merger Agreement, Sprint loaned $3.5 million to
the Company to fund the payment of the BARs. Interest accrues on the
loan at a rate of 10% per annum, and the aggregate principal amount of
the loan, together with accrued interest thereon, will be due and
payable on the first anniversary of any termination of the Merger
Agreement; provided, that, if (i) the Company enters into an
acquisition agreement related to an alternative transaction and (ii)
the Merger Agreement is terminated by Sprint because ATI's Board
withdrew, modified or changed in a manner adverse to Sprint or
Acquisition its approval or recommendation of the Merger Agreement or
the Merger with Sprint or recommended such alternative transaction or
executed an agreement relating to such alternative transaction with a
person or entity other than Sprint, Acquisition or their affiliates,
then the entire principal amount of such loans, together with accrued
interest thereon, will be due and payable upon demand as of the date of
such termination. The loan made to ATI is secured by the outstanding
capital stock of a subsidiary of ATI which holds rights to use licenses
to provide wireless cable services.
The 2004 Notes are subject to redemption, at the Company's
option, on or after June 15, 1999 at the face amount plus a 7.25%
premium in 1999, reducing to 0% in 2002. The 2005 Notes are subject to
redemption, at the Company's option, on or after August 15, 2000 at the
face amount plus a 7.25% premium in 2000, reducing to 0% in 2003. In
any redemption, the Company must pay accrued but unpaid interest.
The Indentures also have provisions for a Change of Control. The
Merger with Sprint, if consummated, will constitute a Change of Control
as defined by the Indentures. With respect to the 2005 Notes, if the
Change of Control occurs prior to August 15, 2000, the Company may
elect to redeem all, but not less than all, of the 2005 notes at a
redemption price equal to 100% of the accreted value plus a
"Make-Whole-Premium" (the "Call Rights"). The Make-Whole Premium of a
2005 Note is the greater of (i) 1% of the outstanding accreted value of
the note, or (ii) the excess of (A) the present value of the remaining
interest, premium and principal payments due on the note as if it were
redeemed on August 15, 2000, computed using a discount rate equal to
the Treasury Rate plus 75 basis points, over (B) the outstanding
accreted value of the note.
The Change of Control will give each holder of the notes the
right to require the Company to purchase all or part of such holder's
notes. The purchase price is 101% of the Accreted Value of the notes on
any repurchase date prior to June 15, 1999 (with respect to the 2004
Notes) or August 15, 2000 (with respect to the 2005 Notes). If
purchased after these dates, the purchase price is 101% of the
principal amount at stated maturity.
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4. COMMITMENTS AND CONTINGENCIES
Litigation
The Company owns all the partnership interests in Fresno MMDS
Associates ("FMA"). On or about December 24, 1997, Peter Mehas, Fresno
County Superintendent of Schools, filed an action against FMA, the
Company and others in an action entitled Peter Mehas, Fresno County
Superintendent of Schools v. Fresno Telsat, Inc., an Indiana
Corporation, et al., Superior Court of the State of California, Fresno,
California. The complaint alleges that a channel lease agreement
between FMA 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
Company denies that the channel lease agreement has expired. The
parties have conducted discovery. The Company removed the case to
federal court in December 1998. Plaintiff filed a motion to remand the
case to state court. The motion was granted. A trial date of November
8, 1999 has been set.
On or about October 13, 1998, Bruce Merrill and Virginia Merrill,
as Trustees of the Merrill Revocable Trust dated as of August 20, 1982,
filed a lawsuit against the Company entitled Bruce Merrill and Virginia
Merrill, as Trustees of the Merrill Revocable Trust dated as of August
20, 1982 v. American Telecasting, Inc., in the United States District
Court for the District of Colorado. The complaint alleges that the
Company owes the plaintiffs $1,250,000 due on a note which matured on
September 15, 1998. The plaintiffs seek payment of $1,250,000 plus
attorney fees and interest. The Company has answered the complaint and
denied any liability. The parties have conducted discovery. A trial
preparation schedule has been ordered by the court. No trial date has
been set.
On or about July 2, 1999, Ridley M. Whitaker filed an action
against the Company and other defendants in an action entitled Ridley
M. Whitaker v. Fresno Telsat, Inc., James A. Simon, American
Telecasting, Inc., JAS Partners, Ltd., and Rosenthal, Judell & Uchima,
in the Supreme Court of the State of New York. On July 13,1999,
plaintiff served an amended complaint on the Company. On July 29, 1999,
the action was removed to the District Court for the Southern District
of New York on the basis of diversity jurisdiction. The complaint
alleges among other things that the Company was involved in a
conspiracy to prevent plaintiff from receiving legal fees for services
rendered to Fresno Telsat, Inc. in connection with a previous lawsuit
against the Company and other defendants. Plaintiff asks for not less
than $1.6 million in damages. On August 3, 1999, the Company moved to
dismiss the case for lack of personal jurisdiction.
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
certain of its executive officers providing for maximum aggregate
retention payments of approximately $320,000. This amount was fully
accrued as of June 30, 1999 and was paid on July 2, 1999.
The Executive Program also provided for the payment of
achievement incentives to certain of these executive officers if the
average closing price of the Company's Common Stock was $2.00 per share
or higher for the last 20 trading days of June 1999. The maximum
aggregate achievement payments that were payable under the Executive
Program were approximately $910,000. This amount was expensed in the
second quarter and was paid on July 2, 1999.
The Board of Directors also approved, effective July 1, 1998, a
Retention Program ("Key Employee Program") for key employees (other
than executive officers) providing for maximum aggregate retention
payments of approximately $280,000. This amount was fully accrued as of
June 30, 1999 and was paid on July 2, 1999.
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The Company implemented, effective as of June 1, 1999, an
additional Retention Program ("1999 Key Employee Retention Program")
for key employees, including certain executive officers. Under the 1999
Key Employee Retention Program, certain key employees will be eligible
to receive cash retention payments of $10,000 to $25,000 if such
persons remain in the Company's employment through June 30, 2000 or are
terminated other than for cause before June 30, 2000. The maximum
aggregate retention payments presently payable under the 1999 Key
Employee Retention Program are approximately $410,000. The 1999 Key
Employee Program is evidenced by agreements between the Company and
each key employee.
The Executive, Key Employee and the 1999 Key Employee Programs
also provide for severance benefits ranging from three to twelve months
of base salary in the event a participant in these programs is
terminated without cause on or before December 31, 1999. Amounts
payable under these programs are independent of any obligations of the
Company, including severance payments, under employment agreements or
other bonus programs. These programs are evidenced by agreements
between the Company and each employee.
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.
The Board of Directors of the Company has authorized cash
achievement bonuses payable upon the consummation of the Merger to Mr.
Hostetler, Mr. Sentman, Mr. Holmes and certain other officers and
employees to be selected by the board. The aggregate amount of payments
which may be made under this program is a maximum of $2.5 million,
which is based on the total transaction value of the Merger with
Sprint. The Company has not yet determined the extent to which the
anticipated payments to Messrs. Hostetler, Sentman and Holmes, or
others, constitute "excess parachute payments" within the meaning of
the Internal Revenue Code Section 280G. These costs will be fully
accrued and expensed, on or before the date the Merger is closed.
5. COMMON STOCK WARRANTS
In conjunction with the issuance of the 2005 Notes, the Company
issued 201,700 warrants (the "1995 Warrants") to purchase an aggregate
of 943,956 shares of ATI's Common Stock at an exercise price of $12.65
per share, subject to adjustment under certain circumstances. Warrant
holders may exercise the 1995 Warrants at any time prior to August 10,
2000. The 1995 Warrants will terminate and become void at the close of
business on August 10, 2000. Approximately $5.5 million of the proceeds
from the issuance of the 2005 Notes was allocated to the 1995 Warrants.
As of June 30, 1999, no 1995 Warrants had been exercised.
In conjunction with the issuance of the 2004 Notes, the Company
issued 915,000 warrants (the "1994 Warrants") to purchase an equal
number of shares of ATI's Common Stock. The 1994 Warrants were valued
at approximately $4.6 million and had an exercise price of $12.68 per
share. The 1994 Warrants expired at the close of business on June 23,
1999 and the approximately $4.6 million value of the expired warrants
was reclassified from common stock warrants to additional
paid-in-capital.
During the year ended December 31, 1997, the Company issued
warrants to purchase 40,000 shares of unregistered Class A Common Stock
of the Company in connection with an agreement to acquire wireless
cable channel rights and certain other subscription television assets.
The warrants have an exercise price of $2.50 per share and expire in
May 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All statements contained in this filing and elsewhere (such as in
reports, other filings with the Securities and Exchange Commission,
press releases, presentations and communications by the Company or its
management) that are not historical facts, including but not limited to
statements regarding the pending Merger and 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 known and unknown risks and uncertainties. Actual
results may differ materially. Among the factors that could cause
actual results, performance, achievements, plans and objectives to
differ materially are the following: a lack of sufficient capital to
finance the Company's business strategy 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 wireless
broadband access and high-speed Internet access; the Company's
inability to obtain the necessary authorizations from the Federal
Communications Commission for such new services; competitive factors,
such as the introduction of new technologies and competitors into the
wireless communications business; the failure to complete the Merger
with Sprint or otherwise to attract strategic partners; general
business and economic conditions; inexperience of management in
deploying a wireless broadband access business; and the other risk
factors described from time to time in the Company's reports filed with
the Securities and Exchange Commission. 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. The Company expressly disclaims any obligation or
undertaking to update or revise any forward-looking statements to
reflect any changes in events or circumstances or in the Company's
expectations or results. Statements regarding parties other than the
Company are based upon representations of such other parties.
INTRODUCTION
On April 26, 1999, the Company entered into the Merger Agreement
pursuant to which Acquisition would be merged with and into ATI, with
ATI being the surviving corporation of the Merger, upon the terms and
subject to the conditions of the Merger Agreement. After the completion
of the Merger, the Company will be wholly owned by Sprint.
At the effective time of the Merger, each outstanding share of
the Company's Class A Common Stock will be converted into the right to
receive $6.50 in cash. In conjunction with the merger, ATI adopted the
Stockholder Rights Plan. Under the Stockholder Rights Plan, preferred
stock purchase rights were distributed as a dividend at the rate of one
Right for each share of Common Stock outstanding as of the close of
business on May 10, 1999. Each Right entitles the holder to purchase
from ATI, under certain conditions, one one-hundredth of a share of
Series A Junior Participating Preferred Stock of ATI at an exercise
price of $27. The Rights will expire on the earlier of the completion
of the Merger or April 30, 2009.
The Rights are not exercisable unless a person or group acquires,
or announces the intent to acquire, beneficial ownership of 15% or more
of outstanding Common Stock. Prior to the date upon which the rights
would become exercisable under the Stockholder Rights Plan, ATI's
outstanding stock certificates represent both the shares of Common
Stock and the Rights, and the Rights trade only with the shares of
Common Stock. Generally, if the Rights become exercisable because a
person or group acquires beneficial ownership of 15% or more of ATI's
Common Stock, then each stockholder, other than the acquirer, is
entitled to purchase, for the exercise price, that number of shares of
Common Stock that, at the time of the transaction, will have a market
value of two times the exercise price of the Rights. In addition, if,
after the Rights become exercisable, the Company is acquired in a
Merger or other business combination, or 50% or more of its assets or
earning power are sold, each Right will entitle the holder to purchase,
at the exercise price of the Rights, that number of shares of common
stock of the acquiring company that, at the time of the transaction,
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will have a market value of two times the exercise price of the Rights.
The consummation of the Merger is subject to certain conditions,
including approval by the stockholders of ATI, satisfaction of the
Hart-Scott-Rodino Antitrust Improvements Act waiting period and grant
of applications from the FCC approving the transfer of control of FCC
authorizations. On June 1, 1999, the Federal Trade Commission granted
early termination of the required waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act. On June 25, 1999,
stockholders of the Company approved the Company's proposed acquisition
by Sprint Corporation at a special meeting of the stockholders.
Completion of the Merger remains subject to the grant of
applications from the FCC approving the transfer of control of FCC
authorizations. Applications for the necessary approvals for the
proposed transfer of control of the Company to Sprint have been filed
with the FCC and placed on public notice. One petition to deny certain
of those applications was filed and all responsive pleadings have been
submitted. The FCC is in the process of reviewing those pleadings and
is expected to rule on the Petition and the applications. The Company
cannot predict when the FCC will issue its rulings.
Business Strategy
The Company's principal business strategy is to pursue
implementation of a Wireless Broadband Access ("WBA") capability that
it believes will eventually be the best use of the wireless cable
spectrum. The Company believes that market, technological and
regulatory developments are creating an opportunity for the current
wireless cable spectrum to be used to serve future customers with
fixed, two-way, high-speed data and telephony services. The Company is
not presently offering any WBA services. A key element of the Company's
principal business strategy has been to seek a relationship with a
strategic partner who would benefit from this direct broadband "last
mile" access and facilitate access to technology, markets,
infrastructure and capital.
The Company's ability to introduce WBA services on a commercial
basis to future customers depends on a number of factors, including the
completion of the pending Merger with Sprint, the success of the
Company's development efforts, competitive factors such as the
introduction of new technologies, 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 1999, the Company continued
operating its Developed Markets principally as an analog video
subscription television business and offering high-speed Internet
service in three existing markets. The Company is continuing to manage
its analog video business to maximize operating cash flow while
pursuing its WBA business strategy, in part, by not investing the
capital resources necessary to replace all subscribers who choose to
stop receiving the Company's service. ("Subscriber Churn").
Wireless Broadband Access Strategy
The execution of the Company's WBA business strategy has two
principal elements. First, pursue the regulatory, technology and
strategic investment activities necessary to shift the Company's
existing analog video business to WBA services. Second, manage the
Company's existing analog video business to preserve limited cash
resources and afford the Company additional time to pursue development
of WBA services. As part of this second element, the Company has not
been increasing its analog video subscriber levels.
Regulatory developments have begun to benefit the WBA business
strategy. In September 1998, the FCC adopted rules that permit two-way
use of the wireless cable spectrum. However, the Company, along with
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other entities, petitioned the FCC to refine those rules to permit
simpler deployment of commercial operations. On July 29, 1999, the
FCC released a Report and Order on Reconsideration, responding to the
petitions for reconsideration of its 1998 two-way rules. Therein, the
FCC also made some additional modifications of its rules that it
believes will facilitate the provision of two-way services. The FCC is
expected to announce the initial filing window for two-way
applications.
Technology development is another component of the WBA business
strategy. There is presently no commercially available
point-to-multipoint equipment for both two-way data and telephony over
wireless cable spectrum. In 1997, the Company began working with
certain equipment vendors and system integrators to construct and test
broadband, two-way wireless technology to provide "last mile"
connectivity over wireless cable spectrum for both high-speed data and
telephony. As a part of this effort, the Company established technology
trials in Eugene, Oregon and Seattle, Washington and has been testing
various technologies. The technology trials are not presently intended
to become full commercial WBA operations. The Company believes that
point-to-multipoint equipment required for implementing its WBA
business strategy will not be commercially available until the first
quarter of 2000 at the earliest.
The final component of the WBA business strategy has been to
enter into a relationship with one or more strategic partners that
facilitates access to markets, technologies, products, capital and
infrastructure. The consummation of the Merger with Sprint would
achieve this third component.
The WBA business strategy has many risks and uncertainties,
including but not limited to, not receiving the necessary FCC
authorizations for two-way licenses upon terms acceptable to the
Company, not having access to two-way equipment for wireless cable
spectrum upon commercially acceptable terms, not having access to
sufficient channel capacity upon commercially acceptable terms to
operate the WBA business, not having sufficient capital resources to
implement a WBA business strategy, not having sufficient capital
resources to operate the current analog video subscription business or
to meet the Company's obligations under its high-yield notes and not
having the necessary management skill or human resources.
There is also uncertainty regarding the degree of subscriber
demand for WBA services, especially at pricing levels at which the
Company can achieve an attractive return on investment. There can be no
assurance that there will be sufficient subscriber demand for such
services to justify the cost of their introduction, or that the Company
will be successful in competing against existing or new competitors in
the market for such broadband services. The Company expects that the
market for any such services will be extremely competitive.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Funds
The Company currently estimates its remaining costs related to
the pending Merger with Sprint to be approximately $8.6 million. The
Company anticipates funding these costs from its existing unrestricted
cash and investment balances, proceeds from additional closings under
the BellSouth Agreement, if such closings occur, proceeds from other
potential asset sales, and, provided the Merger occurs, funding from
Sprint.
If the Merger is not completed, the trading price of the
Company's Common Stock could decline and costs incurred in connection
with the Merger would negatively impact results from operations. In
addition, costs incurred in connection with the Merger and a
transaction termination fee of $11 million, if payable, would adversely
affect the Company's financial condition. The consummation of the
Merger is subject to the satisfaction or waiver of a number of
conditions, several of which are beyond the control of the Company and
Sprint. In addition, the parties to the Merger Agreement may terminate
the Merger Agreement under certain circumstances. As a result, there
can be no assurance that the Merger will be completed on the terms set
forth in the Merger Agreement, if at all.
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The Company has outstanding 2004 Notes and 2005 Notes. Both the
2004 Notes and the 2005 Notes were issued pursuant to Indentures which
contain certain restrictive covenants and limitations. Among other
things, the Indentures limit the incurrence of additional debt, limit
the making of restricted payments (as defined) including the
declaration and/or payment of dividends, place limitations on certain
other payments by ATI's subsidiaries, prohibit ATI and its subsidiaries
from engaging in any business other than the transmission of video,
voice and data and related businesses and services, and place
limitations on liens, certain asset dispositions and merger/sale of
assets activity.
The Indentures prohibit the Company from merging unless certain
conditions are met. The conditions are (i) either (a) the Company will
be the surviving person, or (b) the merged entity is a United States
corporation and it expressly assumes by a supplemental indenture all
the obligations of the Company under the 2004 Notes and 2005 Notes and
the Indentures; (ii) immediately after giving effect to the merger on a
pro forma basis no default or event of default as described in the
Indentures shall have occurred and be continuing; and (iii) the
surviving entity, after giving effect to the merger on a pro forma
basis, is able to incur additional debt (other than Permitted Debt, as
defined in the Indentures) under the debt limitations in Section 1008,
and the consolidated net worth of the surviving entity is equal to or
greater than that of the Company immediately prior to the merger.
The 2004 Notes are subject to redemption, at the Company's
option, on or after June 15, 1999 at the face amount plus a 7.25%
premium in 1999, reducing to 0% in 2002. The 2005 Notes are subject to
redemption, at the Company's option, on or after August 15, 2000 at the
face amount plus a 7.25% premium in 2000, reducing to 0% in 2003. In
any redemption, the Company must pay accrued but unpaid interest.
The Indentures also have redemption provisions relating to a
Change of Control. The Merger with Sprint, if consummated, will
constitute a Change of Control as defined by the Indentures. With
respect to the 2005 Notes, if the Change of Control occurs prior to
August 15, 2000, the Company may elect to redeem all, but not less than
all, of the 2005 notes at a redemption price equal to 100% of the
accreted value plus a "Make-Whole-Premium" (the "Call Rights"). The
Make-Whole Premium of a 2005 Note is the greater of (i) 1% of the
outstanding accreted value of the note, or (ii) the excess of (A) the
present value of the remaining interest, premium and principal payments
due on the note as if it were redeemed on August 15, 2000, computed
using a discount rate equal to the Treasury Rate plus 75 basis points,
over (B) the outstanding accreted value of the note.
A Change of Control will give each holder of the notes the right
to require the Company to purchase all or part of such holder's notes.
The purchase price for the 2004 Notes is 101% of the principal amount
at stated maturity plus accrued interest. The purchase price for the
2005 Notes is 101% of the Accreted Value on any repurchase date prior
to August 15, 2000. If purchased after August 15, 2000, the repurchase
price is 101% of the principal amount at stated maturity.
In 1999, additional obligations for capital expenditures include
purchases of channels and equipment for construction of channels
pursuant to pre-existing commitments. Cash resources available to apply
to the Company's cash obligations include existing cash and investment
balances, proceeds from additional closings under the BellSouth
Agreement, if such closings occur, and proceeds, if any, from other
asset sales.
Cash interest payments on the 2004 Notes and 2005 Notes are
required to commence on December 15, 1999 and February 15, 2001,
respectively. The aggregate interest payments on the 2004 Notes and the
2005 Notes are approximately $10.5 million, $21.0 million and $40.7
million in 1999, 2000 and 2001, respectively. Pursuant to the Merger
Agreement, either ATI or Sprint may terminate the Merger Agreement if
on September 30, 1999 (or October 31, 1999 if the only condition to the
closing of the Merger remaining unfulfilled is the receipt of any
required approval by the FCC) (the "End Date"), the effective date of
the Merger has not occurred, provided however, that Sprint has the
option to extend the End Date to December 31, 1999 by delivering to the
Company on or prior to September 30, 1999 a notice by which Sprint
agrees to loan to the Company up to $13 million for the purpose, among
other things, of paying interest due in December 1999 on the 2004
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Notes. Interest would accrue on such loan at a rate of 10% per annum,
and the aggregate principal amount of such loan, together with accrued
interest thereon, would be due and payable on the first anniversary of
any termination of the Merger Agreement, provided, that, if (i) the
Merger Agreement is terminated in accordance with the terms of the
Merger Agreement (other than as a result of a breach of the Merger
Agreement by Sprint or Acquisition) and (ii) the Company enters into an
acquisition agreement related to an alternative transaction that would,
if consummated in accordance with its terms, provide to the Company or
the stockholders ATI a per share cash consideration equal to or greater
than 90% of the consideration that would have been received in the
Merger, then the entire principal amount of such loans, together with
accrued interest thereon, would be due and payable upon demand as of
the date of such termination. Any such loans made to the Company would
be secured by the outstanding capital stock of a subsidiary of ATI
which holds rights to use licenses to provide wireless cable services
to not less than 500,000 protected service area footprint households
with at least twenty multichannel multipoint distribution service and
multipoint distribution service stations and at least twenty
instructional television fixed service channels.
During 1997, the Company entered into a twelve-month $17.0
million credit facility with a bank. At closing of the Credit Facility,
the Company also delivered 4,500 BARs. During 1997, the Credit Facility
was repaid and terminated. The BARs were exercised on June 23, 1999,
and the Company paid to the holders of the BARs $3.5 million in cash.
Pursuant to the Merger Agreement, Sprint loaned $3.5 million to
the Company to fund the payment of the BARs. Interest accrues on the
loan at a rate of 10% per annum, and the aggregate principal amount of
the loan, together with accrued interest thereon, will be due and
payable on the first anniversary of any termination of the Merger
Agreement; provided, that, if (i) the Company enters into an
acquisition agreement related to an alternative transaction and (ii)
the Merger Agreement is terminated by Sprint because ATI's Board
withdrew, modified or changed in a manner adverse to Sprint or
Acquisition its approval or recommendation of the Merger Agreement or
the Merger with Sprint or recommended such alternative transaction or
executed an agreement relating to such alternative transaction with a
person or entity other than Sprint, Acquisition or their affiliates,
then the entire principal amount of such loans, together with accrued
interest thereon, will be due and payable upon demand as of the date of
such termination. The loan made to ATI is secured by the outstanding
capital stock of a subsidiary of ATI which holds rights to use licenses
to provide wireless cable services
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 $4.1 million of which
had been utilized as of June 30, 1999). Although the Company had the
ability under the Indentures to borrow an additional $13.4 million as
of June 30, 1999, the Company does not presently intend to incur any
additional bank or other borrowings other than the current and possible
additional loans from Sprint.
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 six operating systems to BellSouth Wireless
since August 1997, and the Company's strategy to not replace all
Subscriber Churn has resulted in a decline in revenue and operating
cash flow. The Company expects this decline in revenue and cash flow to
continue under the current wireless analog video operations. The
Company's high-speed Internet access business, technology trials in
Eugene, Oregon and Seattle, Washington, and activities associated with
the pending Merger with Sprint also have been and are expected to
continue to consume cash resources. Unless and until the Merger with
Sprint is completed, the Company expects to utilize its current capital
resources and the sale of assets to satisfy its working capital and
capital expenditure needs.
With the introduction of the high-speed Internet access business
and the development of a WBA business, the Company may experience
increased competition for the renewal of channel lease agreements. As a
result, the Company could lose channels or incur higher costs to renew
and retain its existing channels. Furthermore, certain of the Company's
channel lease agreements permit only analog technologies. Thus, the
deployment of businesses such as WBA and high-speed Internet access
that utilize digital technologies may require renegotiations of these
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channel leases, which could also result in increased operating costs.
Year 2000
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,
such as its accounting and subscriber management (including customer
invoicing) systems, headend equipment, Internet equipment, phone
systems and network hardware and software servers that will be affected
by the Year 2000 issue.
The Company continues to assess the impact of the Year 2000 on
its operations using internal staff. The Company is following a six
step process to evaluate its state of readiness for Year 2000
compliance -- awareness, inventory, assessment, remediation, testing
and risk management. To date, the Company has substantially completed
its inventory/assessment phase with some remediation and testing taking
place. The inventory/assessment phase includes the accounting software,
subscriber management systems, headend equipment, Internet equipment,
phone systems and network hardware and software servers. The Company
implemented new accounting software during 1998 and the software has
been certified as Year 2000 compliant by the vendor. The Company
presently intends to modify its principal subscriber management system
with a Year 2000 patch from the current vendor before the end of 1999.
The Company anticipates completing its testing and installation of this
patch in six of its 20 billing system locations by the end of August
1999. All other system locations will be tested and installed prior to
the end of 1999.
The Company believes that the likely worst case scenario would be
the failure of the Company's subscriber management system addressing
the Company's headend equipment, which sends the signals to the
addressable controller units, as well as the addressable controller
units themselves. The controller units communicate to the customer's
set-top box. The loss of the ability to transmit such signals would
result in the loss of customers and related revenues, among other
things.
It is possible that the Company will be adversely affected by
Year 2000 problems encountered by key customers and suppliers. The
Company's most significant suppliers are its providers of video
programming, and the Company is soliciting comments from its major
programmers regarding their Year 2000 compatibility. To date the
Company has received responses from all its programmers, and all have
responded favorably as to being prepared for Year 2000 issues.
The Company does not presently have a contingency plan in the
event its systems are not Year 2000 compliant. The Company will
routinely reassess its likely worst case scenario and possible
responses as new information becomes available and it intends to have
contingency plans in place. Such contingency plans could include using
back up systems that do not rely on computers. Although the Company's
remediation plan for Year 2000 is not yet completed, the Company is not
aware of any critical systems that cannot be made Year 2000 compliant.
The Company presently estimates that it will spend approximately
$1.0 million to remediate or replace existing accounting, subscriber
management, hardware and other systems over the course of this project.
These costs relate to the replacement of the existing accounting
software, modification of the principal subscriber management system,
and adaptation of the headend and addressable set-top controller
systems. The Company will refine its cost estimates as testing and
remediation proceeds and as additional information becomes available.
To date, the Company has spent approximately $850,000 in remediating
Year 2000 issues. The costs of the Company's Year 2000 project and the
timing are based on current estimates. These estimates include
assumptions about future events, including the timing and effectiveness
of third-party remediation plans and other factors. The Company gives
no assurance that these estimates will be achieved, and actual results
could differ materially from those currently expected.
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Executive and Key Employee Retention Program
Effective July 1, 1998, the Board of Directors approved a
Retention and Achievement Incentive Program ("Executive Program") for
certain of its executive officers providing for maximum aggregate
retention payments of approximately $320,000. This amount was fully
accrued as of June 30, 1999 and was paid on July 2, 1999.
The Executive Program also provided for the payment of
achievement incentives to certain of these executive officers if the
average closing price of the Company's Common Stock was $2.00 per share
or higher for the last 20 trading days of June 1999. The maximum
aggregate achievement payments that were payable under the Executive
Program were approximately $910,000. This amount was expensed in the
second quarter and was paid on July 2, 1999.
The Board of Directors also approved, effective July 1, 1998, a
Retention Program ("Key Employee Program") for key employees (other
than executive officers) providing for maximum aggregate retention
payments of approximately $280,000. This amount was fully accrued as of
June 30, 1999 and was paid on July 2, 1999.
The Company implemented, effective as of June 1, 1999, an
additional Retention Program ("1999 Key Employee Retention Program")
for key employees, including certain executive officers. Under the 1999
Key Employee Retention Program, certain key employees will be eligible
to receive cash retention payments of $10,000 to $25,000 if such
persons remain in the Company's employment through June 30, 2000 or are
terminated other than for cause before June 30, 2000. The maximum
aggregate retention payments presently payable under the 1999 Key
Employee Retention Program are approximately $410,000. The 1999 Key
Employee Program is evidenced by agreements between the Company and
each key employee.
The Executive, Key Employee and the 1999 Key Employee Programs
also provide for severance benefits ranging from three to twelve months
of base salary in the event a participant in these programs is
terminated without cause on or before December 31, 1999. Amounts
payable under these programs are independent of any obligations of the
Company, including severance payments, under employment agreements or
other bonus programs. These programs are evidenced by agreements
between the Company and each employee.
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.
The Board of Directors of the Company has authorized cash
achievement bonuses payable upon the consummation of the Merger to Mr.
Hostetler, Mr. Sentman, Mr. Holmes and certain other officers and
employees to be selected by the board. The aggregate amount of payments
which may be made under this program is a maximum of $2.5 million,
which is based on the total transaction value of the Merger with
Sprint. The Company has not yet determined the extent to which the
anticipated payments to Messrs. Hostetler, Sentman and Holmes, or
others, constitute "excess parachute payments" within the meaning of
the Internal Revenue Code Section 280G. These costs will be fully
accrued and expensed, on or before the date the Merger is closed.
OTHER LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS AND LIMITATIONS
Both the 2004 Notes and the 2005 Notes were issued pursuant to
Indentures which contain certain restrictive covenants and limitations.
Among other things, the Indentures limit the incurrence of additional
debt, limit the making of restricted payments (as defined) including
the declaration and/or payment of dividends, place limitations on
certain payments by the Company's subsidiaries, prohibit the Company
and its subsidiaries from engaging in any business other than the
19
<PAGE> 20
transmission of video, voice and data and related businesses and
services, and place limitations on liens, certain asset dispositions
and merger/sale of assets activity.
Pursuant to certain restrictive covenants in the Indentures
relating to the Company's 2004 Notes and 2005 Notes, Net Available
Proceeds (as defined in the Indentures) from Asset Dispositions (as
defined in the Indentures) from transactions other than BellSouth must
be applied within 270 days of such closing: (1) first, to prepay or
repay outstanding debt of the Company or any Restricted Subsidiary (as
defined in the Indentures) to the extent the terms of the governing
documents therefor require such prepayment (2) second, to the extent of
any such Net Available Proceeds remaining after application thereof
pursuant to item (1) above, to the acquisition of assets used in the
transmission of video, voice and data and related businesses and
services of the Company or a Restricted Subsidiary and (3) third, to
the extent of any such Net Available Proceeds remaining after the
application thereof pursuant to items (1) and (2) above, (i) first to
prepay or repay all outstanding debt of the Company or any Restricted
Subsidiary that prohibits purchases of the 2004 Notes or 2005 Notes and
(ii) then, to the extent of any remaining Net Available Proceeds, to
make an offer to purchase outstanding 2004 Notes and 2005 Notes at a
purchase price equal to 100% of the accreted value thereof to any
purchase date prior to maturity.
In May 1998, the Company received the consent of holders of the
majority of outstanding 2004 Notes and 2005 Notes to amendments (the
"Amendments") to certain provisions of the Indentures (the "Asset
Disposition Covenants") which require that certain Net Available
Proceeds 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 2004 Notes and 2005 Notes at a purchase price
equal to 100% of the accreted value thereof. The Amendments amended the
Asset Disposition Covenants in the case of any and all Net Available
Proceeds received by the Company from dispositions under the BellSouth
Agreement that closed after May 7, 1998.
Pursuant to the Amendments, no later than 30 days after the
aggregate 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 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 such notes.
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 2004 Notes and 2005 Notes
pursuant to such required offer that is in excess of the amount
required to purchase the 2004 Notes and 2005 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 2004 Notes and 2005 Notes on such
terms as it determines to be appropriate.
In March 1997, the Company entered into the BellSouth Agreement
with BellSouth Corporation and BellSouth Wireless which provides for
the sale of the Southeastern Assets to BellSouth Wireless. The
Southeastern Assets include operating wireless cable systems in
Orlando, Lakeland, Jacksonville, Daytona Beach and Ft. Myers, Florida
and Louisville, Kentucky and wireless cable channel rights in Naples,
Sebring and Miami, Florida. Closings have occurred under this agreement
during 1997, 1998 and 1999. The Company completed the most recent
closing on April 23, 1999 for cash consideration of approximately $2.7
million for certain wireless cable channels in Louisville, Kentucky.
Approximately $2.6 million was recorded as a gain in the second quarter
of 1999. During July 1999, the Company received approximately $1.9
million in escrow funds from the sale of the Lakeland Wireless system
completed in July 1998. Additional closings may occur for the Naples,
Sebring and Miami, Florida markets. The Company estimates the total
gross proceeds from such closings will not exceed $8 million. There can
be no assurance that all such closing conditions will be satisfied or
that further proceeds will be received from BellSouth Wireless.
20
<PAGE> 21
Since the last bond tender offer, the Company has received
approximately $4.6 million in aggregate proceeds from an additional
BellSouth closing and receipt of escrowed funds from a previous
BellSouth closing. Once the aggregate proceeds attributable to
BellSouth closings exceed $5 million, the Company will be required to
make a tender offer for a portion of its outstanding 2004 Notes and
2005 Notes in accordance with the amended Indentures.
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.
In March 1999, the Company entered into the AESCO agreement to
acquire wireless cable channels in Portland, Oregon from AESCO for a
fixed payment of $2.25 million plus a deferred payment based upon the
price received in any further transfer of the channels within the next
five years. In addition, the Company paid $250,000 on March 19, 1999 as
consideration for a no-shop covenant. Payment of the $2.25 million
fixed portion of the purchase price to AESCO is contingent upon the
Company's closing of sale transactions of other wireless cable assets
other than the BellSouth Transaction for cumulative cash consideration
of $5 million or more, and the FCC's grant by final order of the
assignment application for the AESCO licenses. The agreement will
terminate on March 15, 2000 if the transaction has not been completed.
In August 1999, the Company completed the sale of its wireless
cable channel rights and operating assets in Billings, Montana, Grand
Island, Nebraska and Rapid City, South Dakota to Antilles Wireless,
L.L.C. for approximately $5.6 million in cash. As of June 30, 1999,
these markets represented approximately 142,000 estimated households in
the service area and served approximately 8,500 subscribers. For the
six months ended June 30, 1999, these systems generated revenues of
approximately $1.7 million. At closing, the Company received the $5.6
million in cash less $500,000 which will be held in escrow for one year
for satisfaction of any indemnification obligations.
The Company's capital expenditures, exclusive of acquisitions of
wireless cable systems and additions to deferred license and leased
license acquisition costs, during the six months ended June 30, 1999
and 1998 were approximately $1.4 million and $9.1 million,
respectively.
21
<PAGE> 22
RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 Compared to Three Months Ended
June 30, 1998
Service revenues decreased $2.9 million, or 23.5%, for the three
months ended June 30, 1999 to $9.5 million, as compared to $12.5
million during the same period of 1998. The decrease in service
revenues was primarily attributable to the loss of approximately 24,000
subscribers as a result of the Company's business strategy to not
replace all of its Subscriber Churn. Approximately $649,000 of the
decrease is attributable to the sale of the Lakeland, Florida wireless
system to BellSouth Wireless in July of 1998. The number of subscribers
to the Company's wireless cable systems decreased to 97,400 at June 30,
1999, compared to 107,000 at December 31, 1998 and 130,000 at June 30,
1998 (which included approximately 8,400 subscribers in the Lakeland,
Florida operating system sold to BellSouth Wireless in July 1998).
Comparing the six month periods ended June 30, 1999 and June 30, 1998,
subscribers decreased approximately 25.1%. Internet access revenues
were negligible in the second quarters of 1998 and 1999.
On a "same system" basis (comparing systems that were operational
for all of each of the three-month periods ended June 30, 1999 and
1998), service revenues decreased approximately $2.2 million, or 19.1%,
to $9.3 million, as compared to $11.5 million for the three-month
period ended March 31, 1999. Same systems during these periods totaled
32 systems. The revenues from the Company's Lakeland, Florida, hardwire
and wireless cable television systems were omitted from both periods
because the systems were sold by the Company during the first and
second quarters, respectively. The ending number of subscribers in
these same systems decreased approximately 19.8% for the three months
ended June 30, 1999, as compared to the same period of 1998.
Installation revenues for the three months ended June 30, 1999
totaled $135,000, compared to $236,000 during the same period of 1998.
The decrease in installation revenues of approximately $101,000, or
42.8%, was primarily the net result of fewer subscriber installations
because a portion of Subscriber Churn was not replaced.
Operating expenses, principally programming, site costs and other
direct expenses, aggregated $6.6 million (or 68.1% of total revenues)
during the three months ended June 30, 1999, compared to $8.0 million
(or 63.2% of total revenues) during the same period of 1998. These
expenses decreased approximately $1.4 million because of the sale of
the Lakeland, Florida system, decreased subscriber levels, and a
reduction in the number of employees. Programming expense, as a percent
of service revenues, was 35.9% for the period ended June 30, 1999
compared to 35.1% for the period ended June 30, 1998.
Marketing and selling expenses totaled $85,000 (or 0.9% of total
revenues) during the three months ended June 30, 1999, compared to
$708,000 (or 5.6% of total revenues) during the same period of 1998.
The decrease of approximately $623,000 was attributable to the
Company's continued strategy to replace some, but not all of its
Subscriber Churn.
General and administrative expenses were $6.5 million
(approximately 67.6% of total revenues) for the three months ended June
30, 1999, compared to $5.7 million (approximately 44.6% of total
revenues) for the 1998 period. General and administrative expense
increased approximately $875,000 principally because of transaction
costs associated with the Sprint merger, additional salary expense from
the Executive and Key Employee Programs and noncash compensation
expense of the Company's stock option program. This increase was
offset, in part, by lower expenses in 1999 related to the technology
trials conducted by the Company in Eugene, Oregon and Seattle,
Washington.
The Company is following variable plan accounting on certain
options repriced in April 1998 which requires that the Company record
compensation expense if the quoted value of the stock exceeds the
repriced exercise price of the options. For the quarter ended June 30,
1999, the Company recorded compensation expense of approximately
$657,000 related to vested stock options.
22
<PAGE> 23
The Company's loss before interest, taxes, depreciation and
amortization was $3.5 million for the three months ended June 30, 1999,
as compared to a loss of $1.7 million during the same period of 1998.
Depreciation and amortization expenses decreased approximately
$4.2 million to $6.2 million for the quarter ended June 30, 1999
compared to $10.4 million for the first quarter of 1998. The decrease
reflects the effects of the Company's decreased depreciable asset base
resulting from an impairment adjustment of $52.4 million in the fourth
quarter of 1998.
Interest expense increased $2.4 million during the quarter ended
June 30, 1999 to $12.7 million, as compared to $10.3 million during the
same period of 1998. Interest expense increased principally because
outstanding BARs were exercised for $3.5 million during the quarter.
The Company recognized an extraordinary gain of $37.0 million in
conjunction with its Tender Offer for a portion of it's outstanding
2004 and 2005 Notes during the second quarter of 1998. There was no
similar transaction in the corresponding period for 1999.
Six Months Ended June 30, 1999 Compared to Six Months Ended
June 30, 1998
Service revenues decreased $5.2 million, or 21.0%, for the six
months ended June 30, 1999 to $19.7 million, as compared to $25.0
million during the same period of 1998. This decrease resulted
primarily from an overall decline in analog video subscribers as a
result of the Company's continued business strategy to not replace all
of its Subscriber Churn.
On a "same system" basis (comparing systems that were operational
for all of each of the six-month periods ended June 30, 1999 and 1998),
service revenues decreased $3.8 million, or 16.6%, to $19.1 million, as
compared to $22.9 million for the six-month period ended June 30, 1998.
Same systems during these periods totaled 32 systems. Revenues from the
Company's Lakeland, Florida hardwire and wireless cable television
systems were omitted from both periods because the systems were sold
during the first and second quarters of 1998, respectively. The average
number of subscribers in these same systems decreased approximately
18.6% for the six months ended June 30, 1999, as compared to the same
period of 1998. The Company anticipates the average number of
subscribers to decline further during the remainder of 1999 at a slower
rate.
Installation revenues for the six months ended June 30, 1999
totaled $253,000, compared to $379,000 during the same period of 1998.
The decrease in installation revenues of $126,000, or 33.2%, was the
net result of subscriber installations as a portion of normal
Subscriber Churn was not replaced.
Operating expenses, principally programming, site costs and other
direct expenses, aggregated $13.0 million (or 65.5% of total revenues)
during the six months ended June 30, 1999, compared to $15.7 million
(or 62.0% of total revenues) during the same period of 1998. The
decrease of approximately $2.6 million was primarily attributable to
the operations of the Lakeland Florida system sold to BellSouth
Wireless, decreased subscriber levels, and a reduction in the number of
employees.
Marketing and selling expenses totaled $191,000 (or 1.0% of total
revenues) during the six month period ended June 30, 1999, compared to
$1.4 million (or 5.6% of revenues) during the same period of 1998. The
decrease of approximately $1.2 million was attributable to the
Company's continued strategy to replace some, but not all of its
Subscriber Churn.
General and administrative expenses totaled $10.5 million (or
52.7% of total revenues) for the six months ended June 30, 1999,
compared to $11.3 million (or 44.7% of total revenues) for the same
period of 1998. This decrease of approximately $808,000 is primarily
because of consulting expenses in 1998 associated with advanced
technology trials being conducted by the Company in Eugene, Oregon and
23
<PAGE> 24
Seattle, Washington. This decrease was offset, in part, by an increase
in noncash compensation expense of the Company's stock option program.
The Company is following variable plan accounting on certain
options repriced in April 1998 which requires that the Company record
compensation expense if the quoted value of the stock exceeds the
repriced exercise price of the options. For the six months ended June
30, 1999, the Company recorded compensation expense of approximately
$883,000 related to vested stock options.
The Company's loss before interest, taxes, depreciation and
amortization was $3.8 million during the six-month period ended June
30, 1999, compared to loss before interest, taxes, depreciation and
amortization of $3.1 million for the same period of 1998.
Depreciation and amortization expenses decreased approximately
$8.6 million to $11.4 million for the six months ended June 30, 1999
compared to $20.0 million for the same period of 1998. The decrease
reflects the effects of the Company's decreased depreciable asset base
resulting from an impairment adjustment of $52.4 million in the fourth
quarter of 1998.
Interest expense increased $209,000 during the six months ended
June 30, 1999 to $21.5 million, as compared to $21.3 million during the
same period of 1998. The Company incurred additional interest expense
of $3.5 million associated with the exercise of BARs during the second
quarter of 1999. This additional expense was offset by lower
outstanding balances on the Company's 2004 Notes and 2005 Notes
resulting from two tender offer repurchases completed during the second
and fourth quarters of 1998.
The Company recognized an extraordinary gain of $37.0 million in
conjunction with its Tender Offer for a portion of it's outstanding
2004 and 2005 Notes during the second quarter of 1998. There was no
similar transaction in the corresponding period for 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company owns all the partnership interests in Fresno MMDS
Associates ("FMA"). On or about December 24, 1997, Peter Mehas, Fresno
County Superintendent of Schools, filed an action against FMA, the
Company and others in an action entitled Peter Mehas, Fresno County
Superintendent of Schools v. Fresno Telsat, Inc., an Indiana
Corporation, et al., Superior Court of the State of California, Fresno,
California. The complaint alleges that a channel lease agreement
between FMA 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
Company denies that the channel lease agreement has expired. The
parties have conducted discovery. The Company removed the case to
federal court in December 1998. Plaintiff filed a motion to remand the
case to state court. The motion was granted. A trial date of
November 8, 1999 has been set.
On or about October 13, 1998, Bruce Merrill and Virginia Merrill,
as Trustees of the Merrill Revocable Trust dated as of August 20, 1982,
filed a lawsuit against the Company entitled Bruce Merrill and Virginia
Merrill, as Trustees of the Merrill Revocable Trust dated as of August
20, 1982 v. American Telecasting, Inc., in the United States District
Court for the District of Colorado. The complaint alleges that the
Company owes the plaintiffs $1,250,000 due on a note which matured on
September 15, 1998. The plaintiffs seek payment of $1,250,000 plus
attorney fees and interest. The Company has answered the complaint and
denied any liability. The parties have conducted discovery. A trial
preparation schedule has been ordered by the court. No trial date has
been set.
On or about July 2, 1999, Ridley M. Whitaker filed an action
against the Company and other defendants in an action entitled Ridley
M. Whitaker v. Fresno Telsat, Inc., James A. Simon, American
24
<PAGE> 25
Telecasting, Inc., JAS Partners, Ltd., and Rosenthal, Judell & Uchima,
in the Supreme Court of the State of New York. On July 13, 1999,
plaintiff served an amended complaint on the Company. On July 29, 1999,
the action was removed to the District Court for the Southern District
of New York on the basis of diversity jurisdiction. The complaint
alleges among other things that the Company was involved in a
conspiracy to prevent plaintiff from receiving legal fees for services
rendered to Fresno Telsat, Inc. in connection with a previous lawsuit
against the Company and other defendants. Plaintiff asks for not less
than $1.6 million in damages. On August 3, 1999, the Company moved to
dismiss the case for lack of personal jurisdiction.
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.
ITEM 2. CHANGES IN SECURITIES
In conjunction with the Company's merger with Sprint, the Company
adopted the Stockholder Rights Plan. Under the Stockholder Rights Plan,
preferred stock purchase rights were distributed as a dividend at the
rate of one right (a "Right") for each share of Common Stock
outstanding as of the close of business on May 10, 1999. Each Right
entitles the holder to purchase from ATI one one-hundredth of a share
of Series A Junior Participating Preferred Stock of ATI at an exercise
price of $27. The Rights will expire on the earlier of April 30, 2009
or the completion of the Merger.
The Rights are not exercisable unless a person or group acquires,
or announces the intent to acquire, beneficial ownership of 15% or more
of outstanding Common Stock. The Rights are redeemable for $.001 per
Right at the option of the Board of Directors at any time prior to the
close of business on the tenth business day after the announcement that
a person or group has acquired, or intends to acquire, beneficial
ownership of 15% or more of outstanding Common Stock. Prior to the date
upon which the rights would become exercisable under the Stockholder
Rights Plan, ATI's outstanding stock certificates represent both the
shares of Common Stock and the Rights, and the Rights trade only with
the shares of Common Stock.
Generally, if the Rights become exercisable by virtue of a person
or group acquiring beneficial ownership of 15% or more of ATI's Common
Stock, then each stockholder, other than the acquirer, is entitled to
purchase, for the exercise price, that number of shares of Common Stock
that, at the time of the transaction, will have a market value of two
times the exercise price of the Rights. In addition, if, after the
Rights become exercisable, the Company is acquired in a Merger or other
business combination, or 50% or more of its assets or earning power are
sold, each Right will entitle the holder to purchase, at the exercise
price of the Rights, that number of shares of common stock of the
acquiring company that, at the time of the transaction, will have a
market value of two times the exercise price of the Rights.
The Stockholder Rights Plan contains provisions which permit
Sprint and Acquisition to acquire beneficial ownership of 15% or more
of the ATI's Common Stock; provided, that such shares are acquired
pursuant to the Merger and the transactions contemplated by the Voting
Agreements.
25
<PAGE> 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of American Telecasting, Inc.
was held on April 22, 1999. At the annual meeting of stockholders, the
reelection of director nominees and the ratification of the appointment
of Arthur Andersen LLP as independent public accountants for the
Company for 1999 were considered and approved. The voting results were
as follows:
<TABLE>
<CAPTION>
Votes
Proposal Votes For Against Abstained
-------------- ----------------- --------------------
<S> <C> <C> <C>
Election as director:
Donald R. DePriest 21,887,181 -- 320,288
Richard F. Seney 21,887,188 -- 320,282
Robert D. Hostetler 22,144,631 -- 62,838
Mitchell R. Hauser 22,089,721 -- 117,749
James S. Quarforth 22,089,596 -- 117,874
Carl A. Rosberg 22,089,596 -- 117,874
-------------- ----------------- --------------------
Ratification of the
appointment of Arthur
Andersen LLP as
independent public
accountants for the
Company for 1999 22,182,835 7,735 16,900
</TABLE>
A special meeting of stockholders of American Telecasting, Inc.
was held on June 25, 1999. At the special meeting of stockholders, the
authorization to proceed with the Merger was considered and approved.
The voting results were as follows:
<TABLE>
<CAPTION>
Votes
Votes For Against Abstained
-------------- ----------------- -----------------
<S> <C> <C> <C>
To approve and adopt the
Agreement and Plan of
Merger 19,146,924 2,293,718 23,290
</TABLE>
26
<PAGE> 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amendment to Employment agreement made as of
April 24, 1999 between the Company and Robert D.
Hostetler.
10.2 First Amendment to Employment Agreement made as of
April 24, 1999 between the Company and Terry J. Holmes.
10.3 Third Amendment to Employment Agreement made as of
April 24, 1999 between the Company and David K.
Sentman.
10.4 Employment Agreement dated April 24, 1999 between the
Company and Lee G. Haglund.
10.5 Agreement dated April 15, 1999 between certain
subsidiaries of the Company and Antilles Wireless,
L.L.C. to sell Antilles the wireless cable systems in
Billings, Montana, Grand Island, Nebraska, and Rapid
City, South Dakota.
10.6 Borrowing Agreement dated June 10, 1999 between the
Company and Sprint Corporation.
10.7 Stock Pledge Agreement dated June 10, 1999 between the
Company and Sprint Corporation.
10.8 Retention Incentive Agreement between the Company and
Lee G. Haglund dated June 1, 1999.
10.9 Retention Incentive Agreement between the Company and
Bryan H. Scott dated June 1, 1999.
10.10 Retention Incentive Agreement between the Company and
Nasser Sharabianlou dated June 1, 1999.
10.11 Retention Incentive Agreement between the Company and
Charles A. Spann dated June 1, 1999.
27 Financial Data Schedule (filed only electronically with
the SEC).
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the quarter
ended June 30, 1999:
(i) Current Report on Form 8-K dated April 6, 1999 to
report under Item 5, that the Company had entered into
an agreement with Antilles Wireless, L.L.C. to sell its
wireless cable channel rights and operating assets in
Billings, Montana, Grand Island, Nebraska, and Rapid
City, South Dakota;
(ii) Current Report on Form 8-K dated April 26, 1999 to
report under Item 5, that the Company, DD Acquisition,
Corp, a wholly owned subsidiary of Sprint and Sprint
Corporation entered into an Agreement and Plan of
Merger pursuant to which DD Acquisition would be merged
with and into the Company, with the Company being the
surviving corporation of such merger.
27
<PAGE> 28
(iii) Current Report on Form 8-K dated April 30, 1999 to
report under Item 5, that the Company's Board of
Directors authorized and declared a distribution of one
right for each share of Class A Common Stock.
outstanding as of the close of business on May 10,
1999.
(iv) Current Report on Form 8-K dated May 19, 1999 to report
under Item 5, that the Company's Board of Directors set
May 24, 1999 as the record date for the special meeting
of the Company stockholders to vote on the acquisition
of the Company by Sprint Corporation.
(v) Current Report on Form 8-K dated June 1, 1999 to report
under Item 5, that on June 1, 1999 the Company received
notification that the Federal Trade Commission had
granted early termination of the required waiting
period under the Hart-Scott-Rodino Antitrust
Improvements Act applicable to its pending acquisition
by Sprint Corporation.
(vi) Current Report on Form 8-K dated June 25, 1999 to
report under Item 5, that on June 25, 1999 at the
Company's special meeting of the stockholders, the
stockholders approved the proposed acquisition by
Sprint Corporation.
28
<PAGE> 29
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 13, 1999 By: /s/ David K. Sentman
---------------------------- -----------------------
David K. Sentman
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
Date: August 13, 1999 By: /s/ Fred C. Pattin Jr.
---------------------------- -------------------------
Fred C. Pattin Jr.
Controller
(Principal Accounting Officer)
29
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 First Amendment to Employment agreement made as of April 24, 1999
between the Company and Robert D. Hostetler.
10.2 First Amendment to Employment Agreement made as of April 24, 1999
between the Company and Terry J. Holmes.
10.3 Third Amendment to Employment Agreement made as of April 24, 1999
between the Company and David K. Sentman.
10.4 Employment Agreement dated April 24, 1999 between the Company and
Lee G. Haglund.
10.5 Agreement dated April 15, 1999 between certain subsidiaries of
the Company and Antilles Wireless, L.L.C. to sell Antilles the
wireless cable systems in Billings, Montana, Grand Island,
Nebraska, and Rapid City, South Dakota.
10.6 Borrowing Agreement dated June 10, 1999 between the Company and
Sprint Corporation.
10.7 Stock Pledge Agreement dated June 10, 1999 between the Company
and Sprint Corporation.
10.8 Retention Incentive Agreement between the Company and Lee G.
Haglund dated June 1, 1999.
10.9 Retention Incentive Agreement between the Company and Bryan H.
Scott dated June 1, 1999.
10.10 Retention Incentive Agreement between the Company and Nasser
Sharabianlou dated June 1, 1999.
10.11 Retention Incentive Agreement between the Company and Charles A.
Spann dated June 1, 1999.
27 Financial Data Schedule (filed only electronically with the SEC).
</TABLE>
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is made
as of the ____ day of __________, 1999, by and between American Telecasting,
Inc., a Delaware corporation (the "Company"), and Robert D. Hostetler
("Employee").
WHEREAS, the Company and the Employee have entered into an Employment
Agreement dated as of the 1st day of July, 1998 (the "Employment Agreement");
and
WHEREAS, the Company and the Employee wish to extend the term of the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. Section 2 of the Employment Agreement is hereby amended in its
entirety to read as follows:
2. Term of Agreement. The employment hereunder shall be for
the period which shall commence on July 1, 1998 (the
"Effective Date") and shall continue, unless earlier
terminated in accordance with the terms of Paragraph 4, until
the Expiration Date (the "Term of Employment"). The Expiration
Date shall be February 28, 2001, subject to annual extensions
as provided below. The Expiration Date shall be automatically
extended for additional one year periods unless, at least one
year before the then-effective Expiration Date, either the
Company or the Employee provides written notice to the other
that it intends to terminate this Agreement on the
then-effective Expiration Date.
2. Except as set forth herein, the Employment Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have properly and duly executed
this Amendment as of the date first written above.
AMERICAN TELECASTING, INC. EMPLOYEE
By:
--------------------------- -----------------------------
Richard F. Seney Robert D. Hostetler
Vice Chairman
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "Amendment") is made
as of the ____ day of __________, 1999, by and between American Telecasting,
Inc., a Delaware corporation (the "Company"), and Terry Holmes ("Employee").
WHEREAS, the Company and the Employee have entered into an Employment
Agreement dated as of the 28th day of April, 1997 (the "Employment Agreement");
and
WHEREAS, the Company and the Employee wish to extend the term of the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. Section 2 of the Employment Agreement is hereby amended in its
entirety to read as follows:
2. Term of Agreement. The term of this Agreement shall
commence on the date first written above (the "Effective
Date") and such term and the employment hereunder shall
continue, unless earlier terminated in accordance with the
terms of Paragraph 4, until the Expiration Date (the "Term of
Employment"). The Expiration Date shall be February 28, 2001,
subject to annual extensions as provided below. The Expiration
Date shall be automatically extended for additional one year
periods unless, at least one year before the then-effective
Expiration Date, either the Company or the Employee provides
written notice to the other that it intends to terminate this
Agreement on the then-effective Expiration Date.
2. Except as set forth herein, the Employment Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have properly and duly executed
this Amendment as of the date first written above.
AMERICAN TELECASTING, INC. EMPLOYEE
By:
--------------------------------------- ------------------------------
Robert D. Hostetler Terry Holmes
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.3
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement (the "Amendment") is made
as of the ____ day of __________, 1999, by and between American Telecasting,
Inc., a Delaware corporation (the "Company"), and David K. Sentman ("Employee").
WHEREAS, the Company and the Employee have entered into an Employment
Agreement dated as of the 10th day of August, 1995, as amended by First
Amendment to Employment Agreement dated as of September 9, 1997 and by Second
Amendment to Employment Agreement dated as of October 7, 1998 (collectively the
"Employment Agreement"); and
WHEREAS, the Company and the Employee wish to extend the term of the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. Section 2 of the Employment Agreement is hereby amended in its
entirety to read as follows:
2. Term of Agreement. The term of this Agreement shall
commence on the date first written above (the "Effective
Date") and such term and the employment hereunder shall
continue, unless earlier terminated in accordance with the
terms of Paragraph 4, until the Expiration Date (the "Term of
Employment"). The Expiration Date shall be February 28, 2001,
subject to annual extensions as provided below. The Expiration
Date shall be automatically extended for additional one year
periods unless, at least one year before the then-effective
Expiration Date, either the Company or the Employee provides
written notice to the other that it intends to terminate this
Agreement on the then-effective Expiration Date.
2. Except as set forth herein, the Employment Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have properly and duly executed
this Amendment as of the date first written above.
AMERICAN TELECASTING, INC. EMPLOYEE
By:
---------------------------------------- ------------------------------
Robert D. Hostetler David K. Sentman
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into, effective
as of the _______ day of __________, 1999, by and between American Telecasting,
Inc., ("ATI") a Delaware corporation, and Lee G. Haglund ("Employee").
W I T N E S S E T H:
WHEREAS, ATI and Employee wish to enter into an Employment Agreement to
reflect certain terms and conditions of ATI's employment of Employee.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the sufficiency of which is hereby acknowledged, the parties
hereby agree as follows:
1. Employment; Duties. ATI hereby agrees to employ Employee as a
Vice-President - Operations, or in any other executive capacity as ATI shall
determine is necessary or appropriate in connection with the operation of ATI,
and Employee hereby agrees to serve in such capacity. Employee's principal areas
of responsibility, subject to modification by ATI, shall be management of the
operations of certain ATI wireless cable television systems. Employee shall
perform such additional duties of a responsible nature and not inconsistent with
his position with ATI as shall be designated from time to time by ATI. Employee
agrees to use his best efforts to promote the interests of ATI and to devote his
full business time and energies to the business and affairs of ATI.
2. Term of Agreement. The term of this Agreement shall commence on the
date first written above (the "Effective Date") and such term and the employment
hereunder shall continue, unless earlier terminated in accordance with the terms
of Paragraph 4, until the Expiration Date (the "Term of Employment"). The
Expiration Date shall be _________, 2001, subject to annual extensions as
provided below. The Expiration Date shall be automatically extended for
additional one year periods unless, at least one year before the then-effective
Expiration Date, either the Company or the Employee provides written notice to
the other that it intends to terminate this Agreement on the then-effective
Expiration Date.
3. Compensation.
(a) Base Salary. As compensation for Employee's services rendered by
the Employee hereunder, ATI shall arrange to have Employee paid a base salary at
an annual rate equal to $102,500 per year ("Base Salary"), which shall be
increased by at least 5% at the beginning of each calendar year. The Base Salary
to be paid by ATI shall be payable to the Employee in accordance with ATI's
standard policies for management personnel.
<PAGE> 2
(b) Bonus. Employee shall be eligible to participate in the executive
bonus program established by the Compensation Committee of the Board of
Directors.
(c) Benefits. Employee shall be entitled to participate in all benefit
programs established by ATI and generally applicable to ATI's executive
employees. Employee shall be reimbursed for legitimate business expenses
incurred in the course of his employment with ATI pursuant to ATI policies as
established from time to time. Employee shall be provided with the use of, or an
allowance for, a car as determined by the Board of Directors.
4. Termination of Employment Relationship.
(a) Death or Incapacity. This Agreement shall terminate immediately
upon the death or incapacity of Employee.
(b) Termination by ATI. This Agreement may be terminated by ATI with or
without cause and, in such event, the Term of Employment shall terminate at the
termination date designated by ATI. For the purpose of this Agreement,
"Termination for Cause" or "Cause" shall include, but is not limited to, any
conduct involving dishonesty or moral turpitude or failure of the Employee to
devote full business time and energies to the business and affairs of ATI. ATI
may terminate Employee with or without Cause without prior notice.
(c) Termination by Employee. Employee may terminate this Agreement for
any reason and at any time upon giving thirty (30) days prior notice; provided,
however, that Employee's obligations under Paragraph 5 shall survive any
termination of this Agreement by Employee, by ATI or otherwise.
(d) Payment Upon Termination. If this Agreement is terminated by
Employee or by ATI for Cause prior to the completion of the Term of Employment,
the employee shall not be entitled to severance pay of any kind but shall be
entitled to all reasonable reimbursable expenses incurred by Employee and the
Base Salary earned by Employee prior to the date of termination, and all
obligations of ATI under Paragraph 3 hereof shall terminate upon the termination
date designated by ATI, except to the extent otherwise required by law. In the
event that Employee is terminated without Cause, ATI shall pay Employee, as
severance pay an amount equal to 12 months of Base Salary, to be paid in
accordance with ATI's standard policies for management personnel. In the event
Employee is terminated without Cause, Employee's group health insurance coverage
shall be continued, to the extent permitted by ATI's group health insurance plan
at that time, for a period of 12 months, or until Employee is eligible for
coverage under a different group health plan, whichever occurs first, and
Employee shall pay the portion of the premium allocable to other employees of
ATI generally, which allocable amount shall be deducted from payments made
pursuant to the prior sentence. If Employee is terminated without Cause after
the first calendar quarter of any year, Employee shall also be entitled to
receive, with respect to work performed in such calendar year, the bonus
described in Paragraph 3(b) which shall be pro-rated for the number of days in
the year worked by Employee. If Employee is terminated without Cause within the
first calendar quarter of any year, Employee will not be
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<PAGE> 3
entitled to receive such bonus with respect to work performed in such calendar
year.
Notwithstanding any other provision in this Agreement to the contrary,
in the event Employee terminates his employment following a Change in Employment
Conditions, as defined below, the Employee shall be entitled to receive all the
benefits he would have received under this Agreement if he had been terminated
without Cause. For purposes of this Agreement, a Change in Employment Conditions
shall be:
i) a change by ATI in the Employee's function to a new position that is
not an executive officer position with executive officer
responsibilities; and
ii) the Employee's principal place of employment is relocated to a
place located outside the State of Colorado.
5. Non-Competition Agreement. Employee acknowledges that his services
to be rendered hereunder have a unique value to ATI, for the loss of which ATI
cannot be adequately compensated by damages in an action at law. In view of the
unique value to ATI of the services of Employee, and because of the Confidential
Information to be obtained by or disclosed to Employee, and as a material
inducement to ATI to enter into this Employment Agreement and to pay to Employee
the compensation referred to in Paragraph 3 hereof, Employee covenants and
agrees that:
(a) While Employee is employed by ATI, and for a period of one (1) year
thereafter, the Employee will not, either personally, whether as principal,
partner, employee, agent, distributor, representative, stockholder or otherwise,
or with or through any other person or entity, operate or participate in the
wireless cable business or any other business which competes with ATI as of the
date of Employee's termination date (for purposes of Paragraph 5 hereof, ATI
shall be deemed to include all subsidiaries and joint ventures of ATI whether
now or hereafter affiliated with ATI) nor will Employee directly or indirectly
(i) solicit any person who has been a supplier or customer of ATI during the
period of one (1) year prior to the termination of employment, or (ii) solicit
or acquire wireless cable television channel licenses or leases of wireless
cable television channel licenses; provided, however, that during the period of
one (1) year following termination of his employment with ATI Employee may own
up to 1% of the stock of another company in the wireless cable business which is
traded on a national stock exchange or on the NASDAQ National Market System.
This non-competition clause shall apply in the geographic territory comprised of
the entire United States and any other geographic area in which ATI is engaged
in business.
(b) It is agreed that the Employee's services are unique, and that any
breach or threatened breach by the Employee of any provisions of this Paragraph
5 may not be remedied solely by damages. Accordingly, in the event of a breach
or threatened breach by the Employee of any of the provisions or this Paragraph
5, ATI shall be entitled to injunctive relief, restraining the Employee and any
business, firm, partnership, individual, corporation, or entity participating in
such breach or attempted breach, from engaging in any activity which would
constitute a
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<PAGE> 4
breach of this Paragraph 5. Nothing herein, however, shall be construed as
prohibiting ATI from pursuing any other remedies available at law or in equity
for such breach or threatened breach, including the recovery of damages.
(c) In the event Employee's employment by ATI is terminated for any
reason during the Term of Employment, the provisions of this Paragraph 5 shall
survive the termination of this Agreement and the termination of Employee's
employment. The provisions of this Paragraph 5 shall not otherwise survive.
6. Assignability. Neither party may assign its rights and obligations
under this Agreement without the prior written consent of the other party, which
consent may be withheld for any reason or for no reason; provided that (i) ATI
may assign its rights and obligations under this Agreement to any entity which
is the successor or assign of ATI's entire business, and (ii) in the event ATI
is reorganized or restructured, ATI may assign its rights and obligations under
this Agreement without restriction or limitation to any assignee which continues
to conduct substantially the same business as ATI and in which ATI controls,
directly or indirectly, 50% or more of the voting power. This Agreement is
binding upon and inures to the benefit of all successors and permitted assigns
of the parties.
7. Severability. In the event that any of the provisions of this
Agreement shall be held to be invalid or unenforceable, the remaining provisions
shall nevertheless continue to be valid and enforceable as though invalid or
unenforceable parts had not been included therein. Without limiting the
generality of the foregoing, in the event that any provision of Paragraph 5
relating to time period and/or areas of restriction shall be declared by a court
of competent jurisdiction to exceed the maximum time period or area(s) such
court deems enforceable, said time period and/or area(s) of restriction shall be
deemed to become, and thereafter be, the maximum time period and/or area for
which such are enforceable.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreements or understandings among the parties hereto with respect to the
subject matter hereof.
9. Amendments. This Agreement shall not be amended or modified except
by a writing signed by both parties hereto.
10. Miscellaneous. The failure of either party at any time to require
performance of the other party of any provision of this Agreement shall in no
way affect the right of such party thereafter to enforce the same provision, nor
shall the waiver by either party of any breach of any provision hereof be taken
or held to be a waiver of any other or subsequent breach, or as a waiver of the
provision itself. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, without regard to the
conflict of laws of such State. The benefits of this Agreement may not be
assigned nor any duties under this Agreement be delegated by the Employee
without the prior written consent of ATI, except as contemplated in this
Agreement.
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<PAGE> 5
11. Survival. The rights and obligations of the parties shall survive
the Term of Employment to the extent that any performance is required under this
Agreement after the expiration or termination of such Term of Employment.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
13. Notices. Any notice to be given hereunder by either party to the
other may be effected in writing by personal delivery, or by mail, certified
with postage prepaid, or by overnight delivery service. Notices sent by mail or
by an overnight delivery service shall be addressed to the parties at the
addresses appearing following their signatures below, or upon the employment
records of ATI but either party may change its or his address by written notice
in accordance with this paragraph.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
AMERICAN TELECASTING, INC. EMPLOYEE
By:
---------------------------- --------------------------
Lee G. Haglund
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<PAGE> 1
EXHIBIT 10.5
AGREEMENT
This Agreement is made on April ___, 1999, between Antilles Wireless,
L.L.C. ("Buyer") and American Telecasting of Billings, Inc. ("ATBI"), American
Telecasting of Nebraska, Inc. ("ATNI"), American Telecasting of Rapid City, Inc.
("ATRC"), and American Telecasting of Green Bay, Inc. ("ATGB"). ATBI, ATNI, ATRC
and ATGB are collectively referred to as "Sellers".
RECITALS:
a. ATBI OWNS AND OPERATES A WIRELESS CABLE SYSTEM WHICH SERVES THE
BILLINGS, MONTANA AREA (THE "ATBI SYSTEM"). ATNI OWNS AND OPERATES A WIRELESS
CABLE SYSTEM WHICH SERVES THE GRAND ISLAND, NEBRASKA AREA ALONG WITH WIRED CABLE
SYSTEMS, THE FRANCHISES FOR WHICH ARE HELD BY ATGB, SERVING A PORTION OF THAT
AREA (THE "ATNI SYSTEM"). ATRC OWNS AND OPERATES A WIRELESS CABLE SYSTEM WHICH
SERVES THE RAPID CITY, SOUTH DAKOTA AREA (THE "ATRC SYSTEM"). THE ATBI SYSTEM,
THE ATNI SYSTEM AND THE ATRC SYSTEM ARE COLLECTIVELY REFERRED TO AS THE
"SYSTEMS"; AND BILLINGS, GRAND ISLAND AND RAPID CITY ARE COLLECTIVELY REFERRED
TO AS THE "MARKETS".
b. IN CONNECTION WITH THEIR OPERATION OF THEIR RESPECTIVE SYSTEMS,
SELLERS HAVE ENTERED INTO CHANNEL LEASE AGREEMENTS WITH FEDERAL COMMUNICATIONS
COMMISSION ("FCC") LICENSEES OF, AND/OR APPLICANTS FOR, INSTRUCTIONAL TELEVISION
FIXED SERVICE ("ITFS"), MULTIPOINT DISTRIBUTION SERVICE ("MDS") AND MULTICHANNEL
MULTIPOINT DISTRIBUTION SERVICE ("MMDS") CHANNELS OR STATIONS IN THE MARKETS
(THE "LEASED CHANNELS"). IN ADDITION, SELLERS ARE LICENSEES OF AND/OR APPLICANTS
FOR MDS, MMDS, COMMERCIAL ITFS, CABLE TELEVISION RELAY SERVICE, RECEIVE-ONLY
SATELLITE EARTH STATION, BUSINESS RADIO AND OPERATIONAL FIXED SERVICE CHANNELS
OR STATIONS IN THE MARKETS (THE "LICENSED CHANNELS"). THE LEASED CHANNELS AND
THE LICENSED CHANNELS ARE COLLECTIVELY REFERRED TO AS THE "CHANNELS".
c. SELLERS DESIRE TO SELL, TRANSFER AND ASSIGN, AND BUYER DESIRES TO
PURCHASE THE SYSTEMS WHICH SHALL INCLUDE THE ASSETS AS DEFINED BELOW. THIS
AGREEMENT IS ENTERED INTO FOR THE PURPOSE OF SETTING OUT THE TERMS AND
CONDITIONS OF THE SALE AND PURCHASE, ALL OF WHICH SHALL BE SUBJECT TO THE
APPROVAL OF THE "FCC".
<PAGE> 2
AGREEMENT:
1. ASSETS TO BE SOLD, TRANSFERRED OR ASSIGNED:
The term "Assets" shall mean all assets owned by Sellers or in which
Sellers have an interest used in the operation of the Systems, including, but
not limited to:
a. SELLERS' RIGHTS AND OBLIGATIONS AS LESSEE UNDER THE LEASE AGREEMENTS
AND ANY RELATED AMENDMENTS, ADDENDUMS, ERRATUMS, MODIFICATIONS, RENEWALS,
CONSENTS OR EXTENSIONS CONCERNING THE LEASED CHANNELS LISTED ON SCHEDULE 1.A.
(THE "CHANNEL AGREEMENTS");
b. ALL LICENSES, PERMITS, AUTHORIZATIONS AND OTHER GRANTS OF AUTHORITY
ISSUED BY THE FCC FOR CONSTRUCTION AND/OR OPERATION OF TRANSMISSION, RECEPTION
AND RELATED FACILITIES UTILIZING THE CHANNELS LISTED ON SCHEDULE 1.B. (THE "FCC
LICENSES").
c. ALL FRANCHISES, PERMITS, AND LICENSES ISSUED TO SELLERS (EXCLUDING
THE FCC LICENSES) RELATING TO CURRENT OR PLANNED CONSTRUCTION AND OPERATION OF
THE SYSTEMS AND THE PROVISION OF SERVICE TO SUBSCRIBERS OF THE SYSTEMS DESCRIBED
ON SCHEDULE 1.C., AND THE RIGHTS TO THE CERTIFICATE OF MARK REGISTRATION FOR THE
NAME AND MARK "RAPID CHOICE" AS FILED WITH THE SOUTH DAKOTA SECRETARY OF STATE
(THE "LICENSES");
d. ALL FIXED ASSETS OF THE SYSTEMS OWNED BY SELLERS, INCLUDING TOWERS
AND TRANSMITTER SITE EQUIPMENT, DISTRIBUTION PLANT, HEADEND EQUIPMENT,
SUBSCRIBER EQUIPMENT AND INSTALLATIONS, MACHINERY, TOOLS, VEHICLES, FURNITURE,
OFFICE AND WAREHOUSE EQUIPMENT, FIXTURES, LEASEHOLD IMPROVEMENTS, TRAPS,
CONVERTERS, SUPPLIES, AND ALL OTHER PERSONAL PROPERTY INCLUDING, BUT NOT LIMITED
TO, THOSE LISTED ON SCHEDULE 1.D. (THE "FIXED ASSETS");
e. AN INVENTORY OF SUBSCRIBER EQUIPMENT (NOT ON SUBSCRIBER PREMISES)
WHICH SHALL INCLUDE AT LEAST 5,000 TOCOM CONVERTER BOXES AND 2,000 DOWN
CONVERTERS (THE "INVENTORY")
f. SELLERS' RIGHTS AND OBLIGATIONS AS LESSEE UNDER THE REAL AND
PERSONAL PROPERTY LEASES, EASEMENTS AND OTHER REAL ESTATE INTERESTS, CONTRACTS,
AND OPERATING AGREEMENTS, INCLUDING TOWER, OFFICE AND WAREHOUSE LEASES, AND POLE
ATTACHMENT AGREEMENTS LISTED ON SCHEDULE 1.F. (THE "CONTRACTS");
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<PAGE> 3
g. ALL REAL ESTATE OWNED BY SELLERS AND RELATING TO THE SYSTEMS
DESCRIBED ON SCHEDULE 1.G. (THE "OWNED REAL ESTATE").
h. ALL SUBSCRIBER LISTS, BILLING INFORMATION, AND OTHER CUSTOMER
INFORMATION RELATING TO THE SYSTEMS;
i. ALL MANUALS, WARRANTIES AND INVOICES PERTAINING TO THE FIXED ASSETS
WHICH ARE IN THE POSSESSION OF SELLERS; AND
j. ALL PLANS, DIAGRAMS, BLUEPRINTS, SCHEMATICS, AND BOOKS AND RECORDS
RELATING TO THE SYSTEMS WHICH ARE IN THE POSSESSION OF SELLERS.
Sellers shall deliver all of the Assets free and clear of all liens and
encumbrances of every nature, it being understood that the Licenses are for a
fixed term.
2. EXCLUSIONS:
The following items are excluded from the definition of "Assets" as
provided for above:
a. CASH OR CASH EQUIVALENTS;
b. ACCOUNTS RECEIVABLE INCLUDING THOSE FROM SUBSCRIBERS;
c. ALL SERVICE AGREEMENTS AND AGREEMENTS TO PURCHASE PROGRAMMING FROM
THIRD PARTIES;
d. ALL COPYRIGHT REGISTRATIONS, TRADEMARKS AND SERVICE NAMES EXCEPT FOR
THE RIGHTS TO THE MARK AND NAME "RAPID CHOICE";
e. ALL OTHER ASSETS WHICH MAY BE USED COMMONLY BY SELLERS IN THE
OPERATION OF OTHER SYSTEMS OWNED BY SELLERS (E.G., BILLING HARDWARE AND
SOFTWARE), AND WHICH ARE NOT LOCATED IN THE SYSTEMS; AND
f. THE ITEMS LISTED ON SCHEDULE 2.F.
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<PAGE> 4
3. CLOSING DATE:
The closing (the "Closing") will occur within 5 business days after the
date that the last of all necessary approvals of the FCC becomes a Final Order
(as defined in paragraph 10.f. of this Agreement) (the "Closing Date"), and
assuming that all other conditions precedent to closing have been met by that
date. However, if all conditions precedent to the obligation of a party to close
have not been met by September 30, 1999, then that party, provided it is not in
default of this Agreement, may thereafter rescind this Agreement in writing in
which case, this Agreement shall be terminated and have no further effect. The
Closing will take place at a location and time mutually agreeable to the
parties. At the Closing, Sellers shall deliver evidence as reasonably required
by Buyer that all conditions precedent to Buyer's obligations have been met. At
the Closing, Buyer shall deliver the Purchase Price as provided for in paragraph
4 along with evidence as reasonably required by Seller that all other conditions
precedent to Seller's obligations have been met.
4. PURCHASE PRICE:
The purchase price, subject to prorations and adjustments as provided
for below, shall be $6,245,000 ("the Purchase Price"), payable as follows:
a. $500,000 SHALL, ON THE CLOSING DATE, BE DELIVERED BY BUYER TO FIRST
NATIONAL BANK OF OMAHA (THE "ESCROW AGENT") AS THE "HOLDBACK". THE HOLDBACK
SHALL BE PLACED IN A FEDERALLY INSURED INTEREST BEARING ACCOUNT APPROVED BY
SELLERS, AND INTEREST ON THE DEPOSIT SHALL BE PAYABLE TO SELLERS. THE PARTIES
AGREE TO ENTER INTO AN ESCROW AGREEMENT WITH THE ESCROW AGENT IN THE FORM OF
"EXHIBIT A". THE HOLDBACK SHALL BE APPLIED AGAINST (I) ANY CLAIMS MADE BY BUYER
FOR SHORTAGES IN BASIC SUBSCRIBERS, (II) ANY NET ADJUSTMENTS (AS DEFINED BELOW)
IN BUYER'S FAVOR, OR (III) ANY AMOUNTS FOR WHICH SELLERS ARE REQUIRED TO
INDEMNIFY BUYER AS PROVIDED FOR IN THIS AGREEMENT. ANY AMOUNT OF THE HOLDBACK
NOT CLAIMED BY BUYER WITHIN 1 YEAR AFTER THE CLOSING DATE SHALL BE DISBURSED TO
SELLERS AT THAT TIME. HOWEVER, ANY AMOUNTS CLAIMED BY BUYER BUT WHICH ARE
DISPUTED BY SELLERS AS OF THAT TIME SHALL CONTINUE TO BE RETAINED BY THE ESCROW
AGENT UNTIL THE DISPUTE IS FINALLY RESOLVED.
b. $5,745,000 ADJUSTED FOR ANY SUBSCRIBER DEFICIENCIES (AS PROVIDED FOR
IN PARAGRAPH 5.B. BELOW) DETERMINABLE AS OF THE CLOSING DATE SHALL BE PAID IN
CASH OR THE EQUIVALENT ON THE CLOSING DATE.
c. THE PARTIES AGREE THAT THE ALLOCATION OF THE PURCHASE PRICE SHALL BE
NEGOTIATED AND TO THE EXTENT POSSIBLE, AGREED TO IN WRITING PRIOR TO THE
CLOSING. THE AGREED UPON ALLOCATION IS CONCLUSIVE AND BINDING FOR ALL PURPOSES
AND EACH PARTY WILL FILE ALL INCOME OR OTHER TAX RETURNS IN A MANNER CONSISTENT
WITH THAT ALLOCATION. IT IS
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<PAGE> 5
AGREED, HOWEVER, THAT THE VALUE OF (I) THE TOCOM CONVERTER BOXES SHALL BE $100
PER BOX, AND (II) THE DOWN CONVERTERS SHALL BE $40 PER CONVERTER.
5. PRORATIONS AND ADJUSTMENTS:
Adjustments shall be made to the Purchase Price in order to prorate
prepaid and accrued income and expenses as of 11:59 p.m. on the Closing Date to
reflect the fact that all income and expenses attributable to the Systems up to
the Closing Date are attributable to Sellers and all income and expenses after
the Closing Date are attributable to Buyer (the "Adjustments").
a. THE ADJUSTMENTS SHALL INCLUDE THE FOLLOWING PRORATED ITEMS:
(1) All payments and charges under the Channel Agreements, the
Licenses and the Contracts;
(2) General property taxes, special assessments and ad valorem
taxes levied and assessed against any of the Assets;
(3) Sales and use taxes (if any) payable with respect to
wireless cable television service and related sales to subscribers
served by the Systems;
(4) Charges and prepayments for utilities and other goods and
services furnished to the Systems;
(5) Prepayments by customers for services to be rendered after
the Closing Date;
(6) Customer Deposits, if any; and
(7) All other items of prepaid expenses and accrued
liabilities.
In addition, it is agreed that Sellers shall be responsible for all Copyright
fees based on signal carriage due and payable as of the end of the semi-annual
period during which the Closing occurs.
b. THE PURCHASE PRICE SHALL BE REDUCED BY THE SUM OF $671.51 FOR EACH
SUBSCRIBER OF THE SYSTEMS IN THE AGGREGATE LESS THAN 9300 FOR ALL OF THE SYSTEMS
AS OF
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THE CLOSING DATE. THE TERM "SUBSCRIBER" SHALL MEAN THE TOTAL OF ALL BASIC
SUBSCRIBERS AND EQUIVALENT BASIC SUBSCRIBERS DETERMINED AS FOLLOWS:
(1) The term "Basic Subscriber" shall mean a subscriber
(individual or household) of any of the Systems that is an active
subscriber to basic service and whose account is not more than 60 days
past due from the due date of payment, who has paid Sellers' standard
deposit and installation fees for such service (in accordance with
Sellers' ordinary business practices), and who has made at least one
monthly payment or applicable portion of the first month's payment for
basic service at the Sellers' normal monthly service charge.
(2) The term "Equivalent Basic Subscriber" shall mean a bulk
or commercial subscriber or a subscriber who otherwise pays other than
the full non-discounted rate in effect in the Systems (pursuant to a
regularly discounted rate disclosed on Schedule 5.c. which would
otherwise meet all of the requirements to be a Basic Subscriber). The
number of Equivalent Basic Subscribers shall be determined according to
the following formula: the total monthly recurring revenue from those
subscribers (i.e., excluding any revenues received for installation or
reconnection, programming guides, or other special items, and any taxes
and other pass-through charges) shall be divided by the monthly
non-discounted rate for those level(s) of service.
For purposes of determining whether a Subscriber is more than 60 days past due,
it shall be assumed that a subscriber's payment is due on the first day of the
service period with respect to which the bill has been generated, it being
acknowledged by the parties that bills are generally generated in advance of
service being provided. Forgiveness of an undisputed past due balance will not
be considered a payment for purposes of calculating any arrearage.
c. WITHIN SIXTY 60 DAYS AFTER THE CLOSING DATE, BUYER SHALL DELIVER TO
SELLERS A SCHEDULE OF PRORATIONS AND OTHER ADJUSTMENTS WHICH WERE NOT MADE AT
THE CLOSING DATE. THE PARTIES SHALL COOPERATE AND PROCEED IN GOOD FAITH TO
SETTLE ALL PRORATIONS AND ADJUSTMENTS WITHIN 30 DAYS AFTER THE DELIVERY TO BUYER
OF THE SCHEDULE. IN THE EVENT THAT THE PARTIES ARE NOT ABLE TO REACH A
SETTLEMENT AS TO PRORATIONS AND ADJUSTMENTS WITHIN THIS 30 DAY PERIOD, THEN THE
PARTIES SHALL SELECT A BIG SIX ACCOUNTING FIRM SATISFACTORY TO BOTH PARTIES TO
RESOLVE ANY UNRESOLVED DIFFERENCES. THE CHARGES OF THE ACCOUNTING FIRM SHALL BE
SHARED EQUALLY BY THE PARTIES. NOTHING IN THIS PARAGRAPH SHALL LIMIT THE
OBLIGATIONS OF THE PARTIES TO INDEMNIFY EACH OTHER AS PROVIDED FOR IN THIS
AGREEMENT.
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6. ASSUMPTION OF LIABILITIES:
Buyer will assume the following liabilities or obligations of Sellers
and no others:
a. THOSE RELATING TO LIABILITIES AND OBLIGATIONS OF THE SYSTEMS ARISING
AFTER THE CLOSING DATE UNDER ANY OF THE CHANNEL AGREEMENTS, THE FCC LICENSES,
THE LICENSES AND THE CONTRACTS (COLLECTIVELY THE "SYSTEM AGREEMENTS");
b. SUBSCRIBER SERVICE AGREEMENTS;
c. THOSE AGREEMENTS LISTED ON SCHEDULE 6.C.; AND
d. OTHER AGREEMENTS WHICH, AT BUYER'S SOLE OPTION, ARE SPECIFICALLY
ASSUMED BY BUYER BY NOTICE IN WRITING TO SELLERS AFTER BUYER HAS BEEN NOTIFIED
OF THE EXISTENCE OF ANY SUCH AGREEMENT.
All other liabilities and obligations of Sellers, including but not limited to,
accrued wages, tax liabilities, and litigation claims, shall remain the sole
obligations of Sellers. Specifically excluded from assumption under this
Agreement are any employment agreements and employee benefit plans, any
insurance policies, and any programming contracts or affiliation agreements.
Provided, Buyer may, in its sole discretion, elect to assume any retransmission
consent or equivalent agreements which are used or useful in the operation of
the Systems, in which case the assumed retransmission consent or equivalent
agreements shall be deemed to be a part of the Assets and be subject to all
rights and obligations related to them.
7. CONDUCT OF BUSINESS:
Until the Closing Date, Sellers will use their best efforts to preserve
and protect the Assets and related goodwill and to conduct its business relating
to the Systems according to past practices and all applicable laws and
regulations. Sellers will not engage in any transactions out of the ordinary
course of business, nor dispose of any of the Assets, except such as are retired
and replaced in the ordinary course of business. Sellers will not enter into any
new agreement or transaction or any extension of any existing agreement
affecting the Systems beyond the Closing Date without Buyer's prior written
consent, and will honor all of their commitments and obligations required to
have been performed prior to the Closing so that they do not default under any
of the System Agreements. Sellers will not implement any rate increases or
channel additions or reconfigure any existing tier service level unless agreed
to by Buyer in writing.
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<PAGE> 8
8. REPRESENTATIONS AND WARRANTIES OF SELLERS:
Sellers respectively represent and warrant as follows (it being
understood that each Seller is representing and warranting only to those matters
applicable to itself and not to those matters applicable to the other Sellers):
a. ATBI IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF DELAWARE, AND IS AUTHORIZED TO DO BUSINESS IN
MONTANA. ATBI HAS FULL POWER AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND
CARRY OUT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS AGREEMENT, AND
EACH AGREEMENT AND INSTRUMENT DELIVERED BY ATBI PURSUANT TO IT, IS THE LEGAL AND
BINDING OBLIGATION OF ATBI, ENFORCEABLE AGAINST ATBI ACCORDING TO ITS TERMS.
b. ATNI IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF DELAWARE, AND IS AUTHORIZED TO DO BUSINESS IN
NEBRASKA. ATNI HAS FULL POWER AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND
CARRY OUT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS AGREEMENT, AND
EACH AGREEMENT AND INSTRUMENT DELIVERED BY ATNI PURSUANT TO IT, IS THE LEGAL AND
BINDING OBLIGATION OF ATNI, ENFORCEABLE AGAINST ATNI ACCORDING TO ITS TERMS.
c. ATRC IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF DELAWARE, AND IS AUTHORIZED TO DO BUSINESS IN SOUTH
DAKOTA. ATRC HAS FULL POWER AND AUTHORITY TO ENTER INTO THIS AGREEMENT AND CARRY
OUT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS AGREEMENT, AND EACH
AGREEMENT AND INSTRUMENT DELIVERED BY ATRC PURSUANT TO IT, IS THE LEGAL AND
BINDING OBLIGATION OF ATRC, ENFORCEABLE AGAINST ATRC ACCORDING TO ITS TERMS.
d. SCHEDULE 1.B. CONTAINS A TRUE, CORRECT AND COMPLETE LIST OF THE FCC
LICENSES, SETTING FORTH FOR EACH THE (I) NAME OF THE AUTHORIZED LICENSEE OR
PERMITTEE, (II) FCC CALL SIGN, (III) AUTHORIZED CHANNELS, (IV) OUTSTANDING
CONSTRUCTION CERTIFICATION DATE, IF ANY, (V) DATE ON WHICH MOST RECENT
CERTIFICATION OR NOTICE OF COMPLETION OF CONSTRUCTION WAS FILED WITH THE FCC,
(VI) LICENSE EXPIRATION DATE, AND (VII) IF SUBJECT TO A CHANNEL AGREEMENT, THE
COMPANY WHICH IS THE LESSEE UNDER SUCH CHANNEL AGREEMENT. TRUE, CORRECT AND
COMPLETE COPIES OF ALL FCC LICENSES HAVE BEEN PROVIDED TO BUYER. EXCEPT AS SET
FORTH ON SCHEDULE 1.B.: (I) EACH OF THE FCC LICENSES IS IN FULL FORCE AND
EFFECT, AND THE FCC LICENSES INCLUDE ALL OF THE LICENSES, PERMITS AND
AUTHORIZATIONS FROM THE FCC NECESSARY FOR THE OPERATION OF THE SYSTEMS AS
CURRENTLY CONDUCTED, (II) THERE ARE NO PROCEEDINGS (OTHER THAN PROCEEDINGS OF
GENERAL
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<PAGE> 9
APPLICABILITY), COMPLAINTS OR INVESTIGATIONS PENDING OR, TO THE KNOWLEDGE OF
SELLERS, THREATENED BEFORE OR BY THE FCC OR ANY OTHER LOCAL, STATE OR FEDERAL
GOVERNMENTAL AUTHORITY RELATING TO ANY OF THE FCC LICENSES FOR THE LICENSED
CHANNELS THAT, IF ADVERSELY DETERMINED, COULD RESULT IN THE REVOCATION,
MODIFICATION, RESTRICTION, CANCELLATION, TERMINATION, NON-RENEWAL OR OTHER
ACTION THAT IS ADVERSE TO THE CHANNELS, THE SYSTEMS, OR THE SERVICE PROVIDED
OVER THE SYSTEMS, OR RESULT IN A MONETARY FORFEITURE, (III) TO THE KNOWLEDGE OF
SELLERS, THERE ARE NO PROCEEDINGS (OTHER THAN PROCEEDINGS OF GENERAL
APPLICABILITY), COMPLAINTS OR INVESTIGATIONS PENDING OR THREATENED BEFORE OR BY
THE FCC OR ANY OTHER LOCAL, STATE OR FEDERAL GOVERNMENTAL AUTHORITY RELATING TO
ANY OF THE FCC LICENSES FOR THE LEASED CHANNELS THAT, IF ADVERSELY DETERMINED,
COULD RESULT IN THE REVOCATION, MODIFICATION, RESTRICTION, CANCELLATION,
TERMINATION, NON-RENEWAL OR OTHER ACTION THAT IS ADVERSE TO THE CHANNELS, THE
SYSTEMS, OR THE SERVICE PROVIDED OVER THE SYSTEMS, OR RESULT IN A MONETARY
FORFEITURE, (IV) SINCE THE SYSTEMS WERE ACQUIRED BY SELLERS, THE CHANNELS HAVE
BEEN AND ARE IN MATERIAL COMPLIANCE, AND ARE OPERATING AND AT ALL TIMES HAVE
BEEN OPERATED CONSISTENT WITH THE FCC AUTHORIZATION THEREFORE, THE
COMMUNICATIONS ACT OF 1934, AS AMENDED, AND THE RULES, REGULATIONS AND POLICIES
OF THE FCC, AND (V) TO THE KNOWLEDGE OF SELLERS, PRIOR TO SELLERS' ACQUISITION
OF THE SYSTEMS, THE CHANNELS WERE IN MATERIAL COMPLIANCE, AND AT ALL TIMES
OPERATED CONSISTENT WITH THE FCC AUTHORIZATION THEREFORE, THE COMMUNICATIONS ACT
OF 1934, AS AMENDED, AND THE RULES, REGULATIONS AND POLICIES OF THE FCC.
e. SCHEDULE 8.E. CONTAINS A TRUE, CORRECT AND COMPLETE LIST OF THE MDS
BASIC TRADING AREA (THE "BTA") AUTHORIZATIONS FOR THE MARKETS THAT HAVE BEEN
GRANTED TO OR ACQUIRED BY THE SELLERS, SETTING FORTH FOR EACH SUCH
AUTHORIZATION: (I) THE NAME OF THE BTA, (II) THE NAME OF THE BTA AUTHORIZATION
HOLDER, (III) THE BUILD OUT DEADLINE, AND (IV) THE EXPIRATION DATE OF SUCH
AUTHORIZATION. EACH SUCH BTA AUTHORIZATION IS IN FULL FORCE AND EFFECT. SELLERS
HAVE PAID ALL AMOUNTS OWED FOR THE BTA AUTHORIZATIONS IN FULL, AND HAVE MADE
PAYMENT IN FULL TO RAND MCNALLY & COMPANY FOR USE OF THE TERMS "BASIC TRADING
AREA" AND "BTA". TRUE, CORRECT AND COMPLETE COPIES OF ALL SUCH BTA
AUTHORIZATIONS HAVE BEEN PROVIDED TO BUYER.
f. SCHEDULE 8.F. CONTAINS A TRUE, CORRECT AND COMPLETE LIST OF ALL
PENDING APPLICATIONS (THE "PENDING APPLICATIONS") FOR THE CHANNELS, INCLUDING
BUT NOT LIMITED TO APPLICATIONS FOR NEW MDS/MMDS AND ITFS STATION
AUTHORIZATIONS, MODIFICATION OF MDS/MMDS AND ITFS STATION AUTHORIZATIONS,
EXTENSION OF TIME TO CONSTRUCT MDS/MMDS AND ITFS STATIONS, AND RENEWAL OF
MDS/MMDS AND ITFS STATION AUTHORIZATIONS IN THE MARKETS. SCHEDULE 8.F. LISTS FOR
EACH OF THE PENDING APPLICATIONS THE: (I) NAME OF THE APPLICANT, (II) FCC FILE
NUMBER, (III) PROPOSED CHANNEL(S), AND (IV)
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<PAGE> 10
GENERAL PURPOSE OF SUCH APPLICATION. TRUE, CORRECT AND COMPLETE COPIES OF ALL OF
THE PENDING APPLICATIONS HAVE BEEN PROVIDED TO BUYER. EXCEPT AS SET FORTH ON
SCHEDULE 8.F.: (1) NO PENDING APPLICATION FOR OR RELATED TO THE LICENSED
CHANNELS IS SUBJECT TO ANY INFORMAL OBJECTION OR PETITION TO DENY, AND (2) TO
THE KNOWLEDGE OF SELLERS, NO PENDING APPLICATION FOR OR RELATED TO THE LEASED
CHANNELS IS SUBJECT TO ANY INFORMAL OBJECTION OR PETITION TO DENY.
g. EXCEPT AS SET FORTH ON SCHEDULE 8.G., AND EXCEPT TO THE EXTENT THAT
AN UNTIMELY FILING OR NON-FILING WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE
CHANNELS, THE SYSTEMS, THE FCC LICENSES AND THE SELLER'S OPERATIONS: (I) ALL
REPORTS, FILINGS, NOTICES, REGULATORY FEES, REGISTRATIONS AND OTHER DISCLOSURES
REQUIRED TO BE FILED WITH THE FCC WITH RESPECT TO EACH OF THE LICENSED CHANNELS
AND THE SYSTEMS HAVE BEEN DULY AND TIMELY FILED AND ARE TRUE, CORRECT AND
COMPLETE, AND (II) TO THE KNOWLEDGE OF SELLERS, ALL REPORTS, FILINGS, NOTICES,
REGULATORY FEES, REGISTRATIONS AND OTHER DISCLOSURES REQUIRED TO BE FILED WITH
THE FCC WITH RESPECT TO EACH OF THE LEASED CHANNELS HAVE BEEN DULY AND TIMELY
FILED AND ARE TRUE, CORRECT AND COMPLETE. TRUE, CORRECT AND COMPLETE COPIES OF
ALL SUCH DOCUMENTS PRESENTLY IN SELLERS' POSSESSION HAVE BEEN PROVIDED TO BUYER.
h. SELLERS HAVE ENTERED INTO THE CHANNEL AGREEMENTS PROVIDING FOR LEASE
OF CHANNEL CAPACITY ON CERTAIN OF THE CHANNELS, A TRUE, CORRECT AND COMPLETE
LIST OF WHICH ARE SET FORTH ON SCHEDULE 1.A. EXCEPT AS SET FORTH ON SCHEDULE
1.A., THE CHANNEL AGREEMENTS CONSTITUTE VALID AND BINDING OBLIGATIONS OF SELLERS
AND OF EACH OF THE OTHER RESPECTIVE PARTIES THERETO AND ARE IN UNCONDITIONAL
FULL FORCE AND EFFECT. NEITHER SELLERS NOR ANY OTHER PARTY TO THE AFOREMENTIONED
CHANNEL AGREEMENTS IS IN MATERIAL DEFAULT UNDER, OR MATERIAL BREACH OR VIOLATION
OF, ANY SUCH CHANNEL AGREEMENT, SELLERS HAVE NOT RECEIVED NOR HAVE SELLERS GIVEN
NOTICE OF ANY SUCH MATERIAL DEFAULT, BREACH OR VIOLATION UNDER ANY SUCH CHANNEL
AGREEMENT FROM OR TO ANY OF THE PARTIES THERETO, AND THERE HAS BEEN NO EVENT OR
CIRCUMSTANCES THAT GIVES ANY RIGHT TO ANY PARTY TO A CHANNEL AGREEMENT TO
TERMINATE SUCH CHANNEL AGREEMENT. THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, SUBJECT TO THE RECEIPT OF THE CONSENTS OF
LESSORS WHICH ARE LISTED ON SCHEDULE 1.A., WILL NOT CAUSE ANY BREACH OR DEFAULT
OF ANY OF THE CHANNEL AGREEMENTS. SCHEDULE 1.A. SETS FORTH FOR EACH CHANNEL
AGREEMENT A COMPLETE DESCRIPTION OF (I) THE NAME OF THE LESSOR, (II) THE
CHANNELS TO WHICH SELLERS HAVE THE RIGHT TO USE TRANSMISSION CAPACITY, (III) ANY
AND ALL RELATED AMENDMENTS, ADDENDUMS, ERRATUMS, MODIFICATIONS, RENEWALS,
CONSENTS OR EXTENSIONS, AND (IV) THE TERMINATION DATE. TRUE, CORRECT AND
COMPLETE COPIES OF ALL OF THE CHANNEL AGREEMENTS HAVE BEEN PROVIDED TO BUYER.
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<PAGE> 11
i. EXCEPT AS DISCLOSED ON SCHEDULES 8.D. AND 8.I., THE CHANNELS, THE
LICENSES AND THE CONTRACTS CONFORM IN ALL MATERIAL RESPECTS TO ALL APPLICABLE
FEDERAL, STATE AND LOCAL LAWS, ORDINANCES, LICENSES, CODES, LICENSING
ARRANGEMENTS, RULES AND REGULATIONS, AND SELLERS HAVE NOT RECEIVED ANY NOTICE TO
THE CONTRARY.
j. SCHEDULE 8.J. SETS FORTH A TRUE, COMPLETE AND CORRECT LIST OF ALL
RETRANSMISSION CONSENTS TO WHICH SELLERS ARE A PARTY WHICH RELATE TO THE
MARKETS, AND FOR EACH RETRANSMISSION CONSENT (I) THE NAME OF THE PARTY
PERMITTING RETRANSMISSION OF ITS SIGNAL AND (II) THE EXPIRATION DATE OF THE
APPLICABLE CONSENT. TRUE, CORRECT AND COMPLETE COPIES OF ALL SUCH CONSENTS HAVE
BEEN PROVIDED TO BUYER.
k. SCHEDULE 8.K. SETS FORTH A TRUE, CORRECT AND COMPLETE LIST OF ALL
INTERFERENCE AGREEMENTS TO WHICH SELLERS ARE A PARTY WHICH RELATE TO THE MARKETS
AND OBLIGATE SELLERS AND/OR THEIR RESPECTIVE LESSORS, AND FOR EACH SUCH
INTERFERENCE AGREEMENT (I) THE NAMES OF THE PARTIES, (II) A DESCRIPTION OF THE
NATURE AND EXTENT OF THE AGREEMENT AND THE RESPECTIVE OBLIGATIONS OF THE
PARTIES, AND (III) THE EXPIRATION DATE OF THE APPLICABLE AGREEMENT.
l. ALL OF THE LICENSES AND THE CONTRACTS ARE VALID AND BINDING AND
SUBSTANTIALLY IN FULL FORCE AND EFFECT, AND SELLERS ARE NOT IN ANY MATERIAL
BREACH OF ANY OF THE LICENSES AND THE CONTRACTS. SELLERS HAVE AND WILL
SUBSTANTIALLY COMPLY WITH ALL MATERIAL PROMISES OR COMMITMENTS ON THE PART OF
SELLERS WITH RESPECT TO THE SYSTEMS CONCERNING ALL PROMISES OR COMMITMENTS WHICH
ARE TO BE FULFILLED ON OR PRIOR TO THE CLOSING DATE. TRUE AND COMPLETE COPIES OF
EACH OF THE LICENSES AND THE CONTRACTS, TOGETHER WITH ANY AND ALL AMENDMENTS,
HAVE BEEN DELIVERED TO BUYER.
m. WHERE FRANCHISES ARE REQUIRED, SELLERS POSSESS FRANCHISES FROM THE
VARIOUS GOVERNING JURISDICTIONS IN WHICH THE SYSTEMS ARE LOCATED, AND THEY ARE
THE ONLY FRANCHISES NECESSARY FOR THE OPERATION OF THE SYSTEMS AS CURRENTLY
CONDUCTED.
n. EXCEPT AS NOTED IN SCHEDULE 8.N., THE FIXED ASSETS, THE OWNED REAL
ESTATE AND THE OTHER ASSETS BEING USED BY THE SELLERS PURSUANT TO THE SYSTEM
AGREEMENTS CONSTITUTE ALL OF THE FIXED ASSETS AND REAL ESTATE THAT ARE PRESENTLY
BEING USED IN THE OPERATION OF THE SYSTEMS, AND ARE THE ONLY FIXED ASSETS AND
REAL ESTATE NECESSARY TO OPERATE THE SYSTEMS LAWFULLY AND AS THEY PRESENTLY ARE
OPERATED.
o. SCHEDULE 8.O. CONTAINS: (I) A LISTING OF CHANNELS FOR WHICH THE
SYSTEMS DELIVER PROGRAMMING TO THEIR CUSTOMERS, (II) A RATE SUMMARY IDENTIFYING
EACH SERVICE OR PACKAGE OF SERVICES OFFERED TO SUBSCRIBERS, THE NUMBER OF
SUBSCRIBERS TO EACH SUCH
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<PAGE> 12
SERVICE OR PACKAGE, THE REGULAR RATES CHARGED FOR EACH SERVICE OR PACKAGE, AND
ANY PROMOTIONAL OR OTHER DISCOUNTED RATES CURRENTLY IN EFFECT, AND (III) A BULK
SUBSCRIBER SUMMARY IDENTIFYING THE NUMBER OF SUBSCRIBERS COMPRISING EACH BULK OR
COMMERCIAL BILLING ACCOUNT, AND THE PER SUBSCRIBER RATE FOR EACH SUCH ACCOUNT.
EXCEPT AS DISCLOSED ON SCHEDULE 8.O., THERE HAS BEEN NO MATERIAL CHANGE IN THE
BUSINESS PRACTICES OR POLICIES OF SELLERS DURING THE LAST 6 MONTHS WITH REGARD
TO SUBSCRIBER DISCONNECTS, ACCEPTANCE OF PARTIAL PAYMENTS, OR SALES INCENTIVES
AND DISCOUNTS.
p. SELLERS HAVE PREVIOUSLY DELIVERED TRUE, COMPLETE, AND CORRECT
FINANCIAL STATEMENTS FOR THE SYSTEMS' MOST RECENTLY COMPLETED FISCAL YEAR, ALONG
WITH ANY AVAILABLE INTERIM STATEMENTS COVERING LATER PERIODS. SINCE THE DATE OF
THOSE STATEMENTS, SELLERS HAVE OPERATED THE SYSTEMS ONLY IN THE ORDINARY COURSE
OF BUSINESS, AND THE SYSTEMS HAVE NOT SUFFERED ANY MATERIAL DAMAGE TO THE
ASSETS, WHEN TAKEN AS A WHOLE, NOR HAVE ANY MATERIAL RIGHTS RELATING TO THE
SYSTEMS BEEN GRANTED TO ANY THIRD PARTY.
q. THE UNAUDITED GROSS REVENUES FROM THE SYSTEMS FOR THE CALENDAR YEAR
1998 ARE AS FOLLOWS:
The ATBI System: $1,361,000
The ATNI System: $1,062,000
The ATRC System: $1,565,000
r. THERE ARE NO ACTIONS, SUITS, PROCEEDINGS, OR INVESTIGATIONS PENDING,
OR, TO SELLERS' KNOWLEDGE, THREATENED, AGAINST SELLERS WHICH MAY MATERIALLY
ADVERSELY AFFECT THE ASSETS, BUSINESS OPERATIONS, FINANCIAL CONDITION OR
CUSTOMER RELATIONS OF THE SYSTEMS OR THE RIGHT OF SELLERS TO ASSIGN OR TRANSFER
THE ASSETS BEING SOLD, OR TO ENTER INTO OR CARRY OUT THIS AGREEMENT.
s. THERE ARE NO TAX LIABILITIES OF SELLERS WHICH WOULD IN ANY WAY
CREATE ANY LIABILITY FOR BUYER OR CREATE ANY LIEN ON THE ASSETS AND/OR THE
SYSTEMS.
t. SELLERS HAVE GOOD AND MARKETABLE TITLE TO THE ASSETS, AND THE ASSETS
WILL BE AT THE CLOSING FREE OF ALL LIENS AND ENCUMBRANCES.
u. ALL FIXED ASSETS AND THE INVENTORY WILL BE AT THE CLOSING, IN GOOD
OPERATING CONDITION, SUBJECT TO REASONABLE WEAR AND TEAR, AND AS LIMITED TO THE
SCOPE AND NATURE OF THEIR AGE AND DESIGN.
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<PAGE> 13
v. SELLERS OWN, LEASE, OR POSSESS ALL EASEMENTS, RIGHTS OF WAY,
LICENSES, CONSENTS AND OTHER AGREEMENTS MATERIAL TO THE OPERATION OF THE SYSTEMS
AS AND WHERE THEY ARE PRESENTLY OPERATED, ALL OF WHICH ARE INCLUDED IN THE
ASSETS.
w. OTHER THAN CONSENTS FROM LESSORS UNDER THE CHANNEL AGREEMENTS, THE
APPROVAL OF THE FCC WITH RESPECT TO THE ASSIGNMENT OF THE FCC LICENSES, AND
APPLICABLE FRANCHISE AUTHORITIES, IF ANY, NO WRITTEN OR ORAL CONSENTS ARE
REQUIRED TO LEGALLY AND EFFECTIVELY TRANSFER THE ASSETS AND THE SYSTEMS TO
BUYER, EXCEPT AS SET FORTH ON SCHEDULE 8.W.
x. EXCEPT AS DISCLOSED ON SCHEDULE 8.X., AND EXCEPT FOR MINOR
VIOLATIONS WHICH DO NOT INTERFERE WITH THE ABILITY TO USE OR OPERATE THE SYSTEMS
AND THE ASSETS, THE SYSTEMS AND THE ASSETS ARE IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL, STATE, AND LOCAL STATUTES, ORDINANCES, AND REGULATIONS, INCLUDING FCC
AND FEDERAL AVIATION ADMINISTRATION REQUIREMENTS.
y. EXCEPT AS DISCLOSED ON SCHEDULE 8.Y., SELLERS HAVE OR WILL HAVE, AS
OF THE CLOSING, TIMELY FILED WITH THE U.S. COPYRIGHT OFFICE ALL NOTICES,
STATEMENTS OF ACCOUNT, SUPPLEMENTS, DECLARATIONS OF GROSS RECEIPTS, AND GROSS
RECEIPTS ADJUSTMENT SCHEDULES (COLLECTIVELY, "COPYRIGHT FILINGS"), AND HAVE PAID
ALL ROYALTY FEES AND OTHER FEES REQUIRED PURSUANT TO THE RULES AND REGULATIONS
OF THE COPYRIGHT OFFICE AND COPYRIGHT ACTS AND AMENDMENTS, RELATING TO THE
SYSTEMS FOR OPERATIONS DURING THE PERIOD THAT SELLERS HAVE OPERATED EACH SUCH
SYSTEM WHICH ARE DUE AND OWING ON OR PRIOR TO THE CLOSING DATE. SELLERS ARE NOT
LIABLE FOR COPYRIGHT INFRINGEMENT UNDER THE COPYRIGHT ACT AS A RESULT OF THEIR
BUSINESS OPERATIONS IN THE MARKETS. EXCEPT AS DISCLOSED ON SCHEDULE 8.Y., THERE
ARE NO UNRESOLVED INQUIRIES FROM THE COPYRIGHT OFFICE, OR ANY OTHER PARTY
QUESTIONING SUCH STATEMENTS OF ACCOUNT OR ANY SUCH COPYRIGHT ROYALTY PAYMENTS
MADE BY SELLERS WITH RESPECT TO THE SYSTEMS, AND NO CLAIM, ACTION OR DEMAND FOR
COPYRIGHT INFRINGEMENT OR FOR NON-PAYMENT OF ROYALTIES IS PENDING OR, TO
SELLERS' KNOWLEDGE, THREATENED AGAINST SELLERS WITH RESPECT TO THE SYSTEMS.
z. NO PART OF THE SYSTEMS OR ANY OF THE ASSETS ARE DIRECTLY OR
INDIRECTLY SUBJECT IN ANY MANNER TO ANY WRITTEN OR ORAL COMMITMENT OR ANY
ARRANGEMENT FOR THE SALE, TRANSFER, ASSIGNMENT, OR DISPOSITION, IN WHOLE OR IN
PART, EXCEPT PURSUANT TO THIS AGREEMENT.
aa. NONE OF THE OWNED REAL ESTATE, AND TO THE BEST OF SELLERS'
KNOWLEDGE NO OTHER REAL PROPERTY USED IN THE OPERATION OF THE SYSTEMS, HAS EVER
BEEN INCLUDED, OR CONSIDERED FOR INCLUSION, ON ANY FEDERAL, STATE, OR LOCAL LIST
OF PROPERTIES CONTAMINATED
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BY ANY "HAZARDOUS SUBSTANCE" OR ANY "POLLUTANT OR CONTAMINANT" (AS SUCH TERMS
ARE DEFINED IN THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, AS AMENDED (42 U.S.C. SECTION 9601 ET SEQ.), OR BY ANY
PETROLEUM, CRUDE OIL, DIESEL, NATURAL GAS, SYNTHETIC GAS USABLE FOR FUEL,
LIQUEFIED NATURAL GAS, ASBESTOS, POLYCHLORINATED BIPHENYLS (PCBS), OR ANY OTHER
SUBSTANCE THE PRESENCE, USE, TREATMENT, STORAGE, OR DISPOSAL OF WHICH ON THE
PROPERTY IS PROHIBITED BY ANY LEGAL REQUIREMENTS, OR WHICH REQUIRES SPECIAL
HANDLING, REPORTING, OR NOTIFICATION BY SELLERS OF ANY GOVERNMENTAL AUTHORITY
WITH RESPECT TO ITS COLLECTION, STORAGE, USE, TREATMENT, OR DISPOSAL
(COLLECTIVELY, "HAZARDOUS SUBSTANCES"). SELLERS HAVE NO KNOWLEDGE OF ANY
RELEASES, DISCHARGES, EMISSIONS, SPILLS, USE, OR STORAGE OF ANY HAZARDOUS
SUBSTANCES HAVING OCCURRED THEREON, AND SELLERS ARE NOT AWARE OF ANY CONDITION
THAT IS LIKELY TO RESULT IN ANY RELEASES, DISCHARGES, EMISSIONS, SPILLS, USE, OR
STORAGE OF ANY HAZARDOUS SUBSTANCES OCCURRING IN THE FUTURE.
bb. NO FRANCHISING AUTHORITY WHICH HAS GRANTED A CABLE FRANCHISE TO
SELLERS IN THE MARKETS, HAS TAKEN ANY ACTION, NOR TO SELLERS' KNOWLEDGE HAS ANY
ACTION BEEN THREATENED, TO CAUSE THE LOCAL REGULATION OF RATES CHARGED BY
SELLERS FOR THE PROVISION OF CABLE SERVICE, EXCEPT AS SET FORTH ON SCHEDULE
8.AB.
cc. NO REPRESENTATION OR WARRANTY MADE IN THIS AGREEMENT, IN ANY
SCHEDULE, OR IN ANY CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT CONTAINS OR
WILL CONTAIN ANY UNTRUE STATEMENT OF ANY MATERIAL FACT, OR OMITS OR WILL FAIL TO
STATE ANY MATERIAL FACT KNOWN TO ANY OF THE WARRANTING PARTIES THAT IS REQUIRED
TO MAKE THE STATEMENTS NOT MISLEADING.
dd. THE EXECUTION AND PERFORMANCE OF THIS AGREEMENT WILL NOT VIOLATE
ANY PROVISION OF LAW OR FRANCHISE, OR CONFLICT WITH OR RESULT IN ANY BREACH OF
ANY OF THE TERMS OR CONDITIONS OF, OR CONSTITUTE A DEFAULT UNDER ANY INDENTURE,
MORTGAGE, AGREEMENT OR OTHER INSTRUMENT TO WHICH SELLERS ARE A PARTY OR BY WHICH
THEY ARE BOUND (OTHER THAN OBLIGATIONS TO BE RELEASED AT CLOSING OR CONSENTS OR
APPROVALS, INCLUDING THAT OF THE FCC, TO BE OBTAINED WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT).
ee. SELLERS ARE NOT A PARTY TO ANY DEFINED BENEFIT, DEFINED
CONTRIBUTION, OR OTHER EMPLOYEE BENEFIT PLAN SUBJECT TO THE JURISDICTION OF THE
EMPLOYEES RETIREMENT INCOME SECURITY ACT ("ERISA") WHICH BUYER IS REQUIRED TO
CONTINUE.
ff. SELLER HAS NOT ENGAGED THE SERVICES OF ANY PARTY WHO WOULD BE
ENTITLED TO FINANCIAL ADVISORY, BROKERAGE, OR FINDERS' FEE OR COMMISSION OR
SIMILAR COMPENSATION IN CONNECTION WITH THIS AGREEMENT.
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<PAGE> 15
All representations and warranties made by Sellers shall survive for a period of
12 months following the Closing Date.
9. REPRESENTATIONS AND WARRANTIES OF BUYER:
Buyer represents and warrants as follows:
a. BUYER IS A LIMITED LIABILITY COMPANY ORGANIZED, EXISTING, AND IN
GOOD STANDING UNDER THE LAWS OF NEBRASKA, AND PRIOR TO THE CLOSING SHALL BE
AUTHORIZED TO DO BUSINESS IN MONTANA AND SOUTH DAKOTA. BUYER HAS FULL POWER AND
AUTHORITY TO ENTER INTO THIS AGREEMENT AND CARRY OUT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. THIS AGREEMENT, AND EACH AGREEMENT AND
INSTRUMENT DELIVERED BY BUYER PURSUANT TO IT, IS THE LEGAL AND BINDING
OBLIGATION OF BUYER, ENFORCEABLE AGAINST BUYER IN ACCORDANCE WITH ITS TERMS.
b. NO REPRESENTATION OR WARRANTY MADE IN THIS AGREEMENT, OR IN ANY
SCHEDULE, OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT CONTAINS OR WILL
CONTAIN ANY UNTRUE STATEMENT OF ANY MATERIAL FACT, OR OMITS OR WILL FAIL TO
STATE ANY MATERIAL FACT KNOWN TO BUYER THAT IS REQUIRED TO MAKE THE STATEMENTS
HEREIN OR THEREIN CONTAINED NOT MISLEADING.
c. BUYER IS QUALIFIED TO HOLD THE LICENSES, BECOME THE OPERATOR OF THE
SYSTEMS AND OTHERWISE CONSUMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
UNDER THE RULES AND REGULATIONS OF THE FCC.
d. BUYER HAS NOT ENGAGED THE SERVICES OF ANY PARTY WHO WOULD BE
ENTITLED TO FINANCIAL ADVISORY, BROKERAGE, OR FINDERS' FEE OR COMMISSION OR
SIMILAR COMPENSATION IN CONNECTION WITH THIS AGREEMENT.
All representations and warranties made by Buyer shall survive for a period of
12 months following the Closing Date.
10. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS:
All obligations of Buyer at the Closing are subject to the fulfillment
of each of the following conditions at or prior to the Closing, any or all of
which may be waived in writing in whole or in part by Buyer:
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<PAGE> 16
a. ALL REPRESENTATIONS AND WARRANTIES OF THE SELLERS SHALL BE TRUE AND
CORRECT ON AND AS OF THE CLOSING DATE, WITH THE SAME FORCE AND EFFECT AS THOUGH
MADE ON AND AS OF THE CLOSING DATE.
b. SELLERS SHALL IN ALL MATERIAL RESPECTS HAVE PERFORMED THEIR
OBLIGATIONS, AGREEMENTS, AND COVENANTS CONTAINED IN THIS AGREEMENT TO BE
PERFORMED BY, ON, OR BEFORE THE CLOSING DATE, INCLUDING BUT NOT LIMITED TO THOSE
ACTIONS LISTED ON SCHEDULE 10.B.
c. SELLERS SHALL HAVE DELIVERED TO BUYER COPIES OF RESOLUTIONS OF THEIR
RESPECTIVE BOARDS OF DIRECTORS AUTHORIZING AND APPROVING THE EXECUTION AND
PERFORMANCE OF THIS AGREEMENT, CERTIFIED BY SELLERS' SECRETARIES AS TRUE AND
CORRECT AS OF THE CLOSING DATE.
d. THE FCC HAS ISSUED ITS APPROVAL, BY FINAL ORDER, OF ALL OF THE
ASSIGNMENTS CONTEMPLATED BY THIS AGREEMENT WHICH REQUIRE THE APPROVAL OF THE
FCC, WHICH FINAL ORDER CONTAINS NO MATERIALLY ADVERSE OR UNUSUAL CONDITIONS. FOR
PURPOSES OF THIS AGREEMENT, A "FINAL ORDER" MEANS AN FCC ACTION GRANTING AN
APPLICATION AS TO WHICH THE TIME FOR FILING ADMINISTRATIVE OR JUDICIAL REVIEW OR
RECONSIDERATION OR FOR THE FCC TO SET ASIDE THE GRANT ON ITS OWN MOTION HAS
EXPIRED WITHOUT ANY SUCH FILING HAVING BEEN MADE OR FCC ACTION TAKEN, OR, IN THE
EVENT OF SUCH FILING OR FCC ACTION, THE FCC GRANT HAS BEEN REAFFIRMED OR UPHELD
AND THE TIME FOR SEEKING FURTHER ADMINISTRATIVE OR JUDICIAL REVIEW WITH RESPECT
THERETO HAS EXPIRED WITHOUT ANY SUCH REQUEST FOR FURTHER REVIEW HAVING BEEN
FILED.
e. SELLERS SHALL HAVE DELIVERED TO BUYER FULLY EXECUTED ORIGINALS OF
ALL CONSENTS NECESSARY FOR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT IN THE FORMS AS CONTAINED ON "EXHIBIT B". WITH RESPECT TO THE
SYSTEM AGREEMENTS, THESE CONSENTS SHALL CONTAIN A REPRESENTATION FROM THE
CONSENTING PARTY THAT THE AGREEMENT IS IN FULL FORCE AND EFFECT, AND THAT
SELLERS ARE NOT IN MATERIAL DEFAULT OF ANY OF ITS OBLIGATIONS TO THE CONSENTING
PARTY WITH RESPECT TO THE AGREEMENT. WHERE A CONSENT IS NOT REQUIRED, BUYER MAY
REQUIRE AN ESTOPPEL CERTIFICATE CONTAINING THIS REPRESENTATION. THE OBTAINING OF
ANY CONSENT OR ESTOPPEL CERTIFICATE SHALL NOT BE CONDITIONED UPON BUYER AGREEING
TO TERMS LESS FAVORABLE TO BUYER THAN THOSE SET FORTH IN THE CHANNEL AGREEMENTS,
THE LICENSES AND THE CONTRACTS AS DELIVERED TO BUYER, OR TO ANY OTHER CONDITIONS
MATERIALLY ADVERSE TO BUYER.
f. SELLERS SHALL HAVE DELIVERED A BILL OF SALE IN THE FORM OF "EXHIBIT
C" AND ANY DEEDS AND ASSIGNMENTS, IN A FORM REASONABLY ACCEPTABLE TO BUYER,
NECESSARY, TO
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<PAGE> 17
TRANSFER TO BUYER THE SYSTEMS AND ALL OF THE ASSETS. TITLE TO FEE INTERESTS IN
THE OWNED REAL ESTATE SHALL BE EVIDENCED BY ONE OR MORE POLICIES OF TITLE
INSURANCE FURNISHED BY THE SELLERS INSURING THE REAL PROPERTY AT ITS CURRENT
MARKET VALUE. THE COST OF THE OWNER'S COVERAGE SHALL BE DIVIDED EQUALLY BETWEEN
THE PARTIES.
g. NO MATERIAL ADVERSE CHANGE SHALL HAVE TAKEN PLACE IN THE CONDITION
OF AND/OR BUSINESS PROSPECTS (NOT INCLUDING MATTERS APPLICABLE TO THE WIRELESS
CABLE TELEVISION INDUSTRY IN GENERAL) RELATING TO THE ASSETS AND/OR THE SYSTEMS
PRIOR TO THE CLOSING.
h. BUYER SHALL HAVE BEEN FURNISHED WITH COPIES OF ALL OF SELLERS'
COPYRIGHT FILINGS REQUIRED TO HAVE BEEN FILED FOR THE SYSTEMS WHICH RELATE TO
THE LAST 6 SEMIANNUAL REPORTING PERIODS OCCURRING PRIOR TO THE CLOSING DATE.
i. BUYER SHALL HAVE BEEN FURNISHED WITH: (I) THE OPINION OF COUNSEL FOR
SELLERS IN THE FORM OF "EXHIBIT D", AND (II) THE OPINION OF FCC COUNSEL FOR
SELLERS IN THE FORM OF "EXHIBIT E".
j. SELLERS SHALL HAVE DELIVERED TO BUYER A NON-COMPETITION AGREEMENT IN
THE FORM OF "EXHIBIT F".
k. SELLERS SHALL HAVE DELIVERED TO BUYER APPROPRIATE CERTIFICATES DATED
NOT MORE THAN 10 DAYS PRIOR TO THE CLOSING DATE CONCERNING SEARCHES OF THE
UNIFORM COMMERCIAL CODE FILING OFFICES FOR (I) THE STATES OF MONTANA, NEBRASKA
AND SOUTH DAKOTA, AND (II) ALL COUNTIES IN WHICH TOWER OR HEADEND SITES ARE
LOCATED, TO THE EFFECT THAT THERE ARE NO PRESENTLY EFFECTIVE FINANCING
STATEMENTS, CHATTEL OR OTHER MORTGAGEES, TAX OR JUDGMENT LIENS, OR OTHER LIENS
PURPORTING TO AFFECT ANY OF THE ASSETS, EXCEPT FOR THOSE LIENS TO BE RELEASED OR
TERMINATED AT THE CLOSING. IN THE EVENT SELLERS HAS OPERATED ANY PART OF THE
SYSTEMS OR OWNED OR LEASED ANY OF THE ASSETS UNDER ANY FICTITIOUS OR ASSUMED
BUSINESS NAME OR TRADE NAME, SEPARATE CERTIFICATES SHALL HAVE BEEN DELIVERED
EVIDENCING A SEARCH OF THE APPLICABLE RECORDS UNDER EACH FICTITIOUS OR ASSUMED
BUSINESS NAME OR TRADE NAME AS WELL AS THE NAME OF SELLERS.
11. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS:
All obligations of Sellers at the Closing are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
or all of which may be waived in writing in whole or in part by Sellers:
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<PAGE> 18
a. A FINAL ORDER OF THE FCC SHALL HAVE BEEN ISSUED WITH RESPECT TO ALL
ASSIGNMENTS CONTEMPLATED BY THIS AGREEMENT WHICH REQUIRE THE APPROVAL OF THE
FCC.
b. ALL REPRESENTATIONS AND WARRANTIES OF BUYER SHALL BE TRUE ON THE
CLOSING DATE.
c. BUYER SHALL IN ALL MATERIAL RESPECTS HAVE PERFORMED ITS OBLIGATIONS,
AGREEMENTS, AND COVENANTS CONTAINED IN THIS AGREEMENT TO BE PERFORMED BY, ON, OR
BEFORE THE CLOSING DATE.
d. ALL CONSENTS NECESSARY TO CONSUMATE THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT SHALL HAVE BEEN OBTAINED.
e. BUYER SHALL HAVE PAID THE PURCHASE PRICE INCLUDING THE HOLDBACK.
f. BUYER SHALL HAVE DELIVERED ALL DOCUMENTS REQUIRED TO BE PROVIDED BY
BUYER TO SELLERS.
12. INDEMNIFICATION:
a. EACH PARTY SHALL INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY
AGAINST, AND SHALL REIMBURSE THE OTHER PARTY FOR:
(1) any and all obligations of the party not specifically
assumed by the other party pursuant to the terms of this Agreement;
(2) any and all losses, liabilities, or damages resulting from
any mispresentation, breach of warranty or failure to fulfill any
covenant or agreement by such party contained in this Agreement;
(3) any and all losses, liabilities, or damages (i) to Buyer
resulting from Sellers' operation or ownership of the Systems prior to
the Closing Date, and (ii) to Seller resulting from Buyer's operation
or ownership of the Systems after the Closing Date;
(4) any and all losses, liabilities, or damages (i) to Buyer
resulting from claims made by or on behalf of persons employed by
Seller relating to the period prior to the Closing Date, and (ii) to
Seller resulting from claims made by or on behalf of persons employed
by Buyer relating to the period after the Closing Date; and
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<PAGE> 19
(5) where indemnification is appropriate, any and all actions,
suits, proceedings, claims, demands, assessments, judgements, costs,
and expenses, including, without limitation, reasonable legal fees and
expenses, incident to any of the above matters or incurred in
investigating or attempting to avoid the same or to oppose their
imposition, or in enforcing this indemnity.
b. IF ANY CLAIM COVERED BY THE ABOVE INDEMNITIES IS ASSERTED BY A THIRD
PARTY, THE INDEMNITEE SHALL PROMPTLY GIVE THE INDEMNITOR NOTICE OF THE CLAIM AND
GIVE THE INDEMNITOR AN OPPORTUNITY TO DEFEND OR SETTLE THE CLAIM WITH COUNSEL OF
ITS CHOICE AND AT ITS EXPENSE, AND THE INDEMNITEE SHALL EXTEND ITS FULL
COOPERATION IN CONNECTION WITH THE DEFENSE, SUBJECT TO REIMBURSEMENT FOR ACTUAL
OUT-OF-POCKET EXPENSES INCURRED BY THE INDEMNITEE AS THE RESULT OF A REQUEST BY
THE INDEMNITOR. IF THE INDEMNITOR FAILS TO DEFEND A CLAIM WITHIN A REASONABLE
TIME, THE INDEMNITEE SHALL BE ENTITLED TO ASSUME THE DEFENSE AND THE INDEMNITOR
SHALL BE BOUND BY THE RESULTS OBTAINED BY THE INDEMNITEE WITH RESPECT TO THE
CLAIM, AND THE INDEMNITOR SHALL BE LIABLE TO THE INDEMNITEE FOR ITS EXPENSES
INCURRED IN THE DEFENSE, INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY'S
FEES AND ANY SETTLEMENT PAYMENTS.
c. THE INDEMNIFICATION PROVIDED FOR IN THIS AGREEMENT SHALL EXPIRE 12
MONTHS FROM THE CLOSING DATE UNLESS NOTIFICATION OF A CLAIM IS MADE WITHIN THIS
TIME PERIOD.
13. BEST EFFORTS TO OBTAIN CONSENTS:
a. SELLERS WILL USE THEIR COMMERCIALLY REASONABLE BEST EFFORTS TO
OBTAIN ANY AND ALL CONSENTS OF ALL THIRD PARTIES NECESSARY TO THE CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING BUT NOT LIMITED
TO, GOVERNMENTAL ENTITIES AND THE LESSOR UNDER EACH CHANNEL AGREEMENT.
"COMMERCIALLY REASONABLE BEST EFFORTS" SHALL MEAN THOSE EFFORTS THAT ARE
COMMERCIALLY REASONABLE UNDER THE CIRCUMSTANCES AND NOT INCONSISTENT WITH A
PARTY'S LEGAL OBLIGATIONS. PROVIDED, HOWEVER, NO PAYMENTS SHALL BE REQUIRED BY
SELLERS TO THIRD PERSONS NOT AFFILIATED WITH BUYER OR SELLERS IN EXCESS OF
$312,500 IN THE AGGREGATE FOR ALL SUCH CONSENTS (OTHER THAN PAYMENTS OF SUCH
FEES AS ARE EXPRESSLY REQUIRED TO BE PAID IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT OR THE SYSTEM AGREEMENTS).
b. BUYER WILL USE ITS COMMERCIALLY REASONABLE BEST EFFORTS (AS DEFINED
ABOVE) TO COOPERATE WITH SELLERS IN SELLERS' EFFORTS TO OBTAIN ANY AND ALL
CONSENTS OF ALL THIRD PARTIES NECESSARY TO THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS
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<PAGE> 20
AGREEMENT, INCLUDING BUT NOT LIMITED TO, GOVERNMENTAL ENTITIES AND THE LESSOR
UNDER EACH CHANNEL AGREEMENT. PROVIDED, HOWEVER:
(1) no payments shall be required by Buyers to obtain such
consents other than payments of such fees as are expressly required to
be paid after the Closing Date in accordance with the terms of this
Agreement or the System Agreements; and
(2) neither Buyer, nor anyone on Buyer's behalf shall meet or
communicate with the any of the lessors under the Channel Agreements
without the prior written consent of Sellers and Sellers' approval of
the communication, or Seller's participation in any meeting, as
appropriate. Notwithstanding the restrictions contained in the
foregoing sentence, if Buyer is contacted directly by a lessor of a
Channel Agreement, Buyer may provide information about Buyer to the
lessor without first obtaining the consent of Sellers.
14. NOTICES:
Any notices or other communications to Sellers or Buyer shall be
personally delivered, sent by certified or registered mail, return receipt
requested, or by Federal Express or similar service that records delivery, to
the addresses set out below, or to such other address as Sellers or Buyer may
designate, from time to time, by written notice to the other.
A notice shall be deemed effective upon receipt.
a. IF TO SELLERS:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Att: President
With a copy to:
McDermott, Will & Emery
600 Thirteenth Street, N.W., Suite 1200
Washington, D.C. 20005-3096
Att: Robert N. Jensen
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<PAGE> 21
b. IF TO BUYER:
Antilles Wireless, L.L.C.
1722 1st Avenue
P.O. Box 2299
Scottsbluff, Nebraska 69363-2299
Att.: Christian M. Hilliard
With a copy to:
Simmons & Olsen Law Firm
1502 Second Avenue
Scottsbluff, Nebraska 69361
Att: Rick L. Ediger
15. ACCESS:
Prior to the Closing Date, upon reasonable notice to Sellers and during
reasonable business hours, Sellers will permit Buyer on up to 5 occasions to
have access to the premises in which Sellers conducts its business and to all of
its books, records, and personnel concerning the Systems to include an on-site
inspection of the Systems and Assets. Sellers will furnish to Buyer financial
data, operating data, and other information as Buyer reasonably requests,
including but not limited to:
a. MONTHLY PROFIT AND LOSS STATEMENT FOR THE SYSTEMS FROM THE DATE OF
THIS AGREEMENT THROUGH THE CLOSING DATE;
b. MONTHLY SUBSCRIBER REPORTS FROM THE DATE OF THIS AGREEMENT THROUGH
THE CLOSING DATE, SHOWING THE NUMBER OF SUBSCRIBERS TO THE SYSTEMS RECEIVING
BASIC SERVICE, TIER SERVICE, PAY SERVICES, ADDITIONAL OUTLET SERVICES, AND
REMOTE CONTROL SERVICE; AND
c. UPON REQUEST, COPIES OF ALL RETIREMENT PLANS, EMPLOYMENT AGREEMENTS,
LEASES, CONTRACTS WITH SUPPLIERS, AND OTHER CONTRACTS OR DOCUMENTS TO WHICH
SELLERS ARE A PARTY AND WHICH PERTAIN TO THE SYSTEMS.
16. CONFIDENTIALITY:
The parties acknowledge that they have had and will have further
opportunities to inspect various matters concerning their respective operations
and financial matters. In
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<PAGE> 22
addition, the disclosure of certain terms of this Agreement prior to the Closing
may cause damage to one or both parties. The parties agree to take reasonable
steps to insure that (i) any information obtained from the other, and (ii) until
the Closing, the terms of this Agreement, including but not limited to paragraph
13 concerning "Best Efforts to Obtain Consents", shall be confidential and shall
not be revealed or disclosed to outside sources (other than to those assisting
in evaluating and financing the transactions contemplated by this Agreement)
unless the information is public knowledge, is independently developed, or is
required to be disclosed by law or legal process.
17. MISCELLANEOUS:
a. BUYER MAY, AT ANY TIME PRIOR TO THE CLOSING DATE, ASSIGN THIS
AGREEMENT TO AN ENTITY AFFILIATED WITH BUYER. PROVIDED, THE ASSIGNMENT SHALL NOT
RELIEVE BUYER OF ITS OBLIGATIONS UNDER THIS AGREEMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF SELLERS.
b. BUYER SHALL MAINTAIN ANY RECORDS CONCERNING THE ASSETS AND SYSTEMS
DELIVERED TO IT FOR A PERIOD OF 5 YEARS AFTER THE CLOSING DATE. DURING THIS TIME
PERIOD, SELLERS SHALL HAVE THE RIGHT, UPON REASONABLE NOTICE TO BUYER, TO ACCESS
THESE RECORDS AND MAKE COPIES WHEN NECESSARY FOR SELLERS' LEGITIMATE BUSINESS
PURPOSES.
c. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT OF THE PARTIES WITH
RESPECT TO ITS SUBJECT MATTER, AND MAY ONLY BE MODIFIED BY A WRITING SIGNED BY
ALL OF THE PARTIES. NO WAIVER OF ANY PROVISION, BREACH, OR DEFAULT SHALL BE
CONSIDERED VALID UNLESS CONTAINED IN A WRITING REFERRING TO THIS AGREEMENT AND
SIGNED BY THE PARTY GIVING THE WAIVER, AND NO SUCH WAIVER SHALL BE DEEMED A
WAIVER OF ANY OTHER PROVISION OR ANY SUBSEQUENT BREACH OR DEFAULT OF THE SAME OR
SIMILAR NATURE.
d. AT AND AFTER THE CLOSING, SELLERS AND BUYER WILL, WITHOUT FURTHER
CONSIDERATION, EXECUTE AND DELIVER FURTHER INSTRUMENTS AND DOCUMENTS AND DO
OTHER ACTS AND THINGS AS THE OTHER PARTY MAY REASONABLY REQUEST IN ORDER TO
EFFECT OR CONFIRM THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
e. WITHIN 10 DAYS OF THIS AGREEMENT, THE PARTIES SHALL PREPARE AND
BUYER WILL FILE ALL APPLICATIONS REQUIRED FOR ALL OF THE ASSIGNMENTS
CONTEMPLATED BY THIS AGREEMENT WHICH REQUIRE THE APPROVAL OF THE FCC. BUYER WILL
PAY ALL FILING FEES REQUIRED FOR THESE APPLICATIONS.
f. UNTIL THE CLOSING DATE, THE SELLERS WILL NOT OFFER THE ASSETS OF THE
SYSTEMS TO, ENTERTAIN OFFERS FOR THE ASSETS OF THE SYSTEMS FROM, NEGOTIATE FOR
THE SALE OF THE
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<PAGE> 23
ASSETS OF THE SYSTEMS TO, OR (OTHER THAN IN THE ORDINARY COURSE OF BUSINESS)
MAKE INFORMATION ABOUT THE ASSETS OF THE SYSTEMS AVAILABLE TO, ANY THIRD PARTY,
EXCEPT AS REQUIRED BY LAW.
g. THE RISK OF LOSS, DAMAGE, OR DESTRUCTION TO THE ASSETS SHALL BE
BORNE BY SELLERS AT ALL TIMES UP TO THE CLOSING DATE.
h. SELLERS SHALL TAKE ALL STEPS NECESSARY TO COMPLY WITH THE PROVISIONS
OF ANY APPLICABLE BULK SALES, FRAUDULENT CONVEYANCE, OR OTHER LAWS FOR THE
PROTECTION OF CREDITORS WHICH ARE REQUIRED TO BE TAKEN BY A SELLER UNDER THOSE
LAWS.
i. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT, EACH PARTY SHALL
PAY ITS OWN COSTS AND EXPENSES INCURRED IN CONNECTION WITH THIS AGREEMENT AND
THE CLOSING. THE PARTIES AGREE TO SPLIT ALL REAL ESTATE TRANSFER AND STAMP TAXES
AND RECORDING FEES, IF ANY, IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. ALL SALES OR USE TAXES, OTHER TRANSFER TAXES, STAMP TAXES,
EXCISE TAXES, AND LICENSE TAXES, AND ALL OTHER FEES CHARGED IN CONNECTION WITH
THE SALE, TRANSFER, OR DELIVERY OF ANY OF THE SYSTEMS AND THE ASSETS TO BUYER,
SHALL BE PAID AND BORNE BY THE SELLERS.
j. PRIOR TO THE CLOSING AND FOR A PERIOD OF 6 MONTHS FOLLOWING THE
CLOSING, BUYER SHALL NOT, WITHOUT THE CONSENT OF SELLERS, SOLICIT OR EMPLOY ANY
EMPLOYEE OF SELLERS OR THEIR AFFILIATES EXCEPT FOR (I) THOSE IDENTIFIED ON
SCHEDULE 17.J., OR (II) THOSE WHO ARE TERMINATED BY SELLERS OR THEIR AFFILIATES;
PROVIDED, HOWEVER, THAT BUYER CAN EMPLOY ANY INSTALLERS OR TECHNICIANS NOT
HOLDING A MANAGEMENT POSITION WITH SELLERS OR THEIR AFFILIATES WHO APPROACH
BUYER FOR EMPLOYMENT, BUT ARE NOT SOLICITED BY BUYER. BUYER RESERVES THE RIGHT
TO EMPLOY ANY OF SELLERS' CURRENT EMPLOYEES LISTED ON SCHEDULE 17.J. BY
NOTIFYING SELLERS OF THOSE EMPLOYEES THAT BUYER DESIRES TO HIRE AT LEAST 20 DAYS
PRIOR TO THE CLOSING. BUYER SHALL OFFER EMPLOYMENT TO THOSE EMPLOYEES IDENTIFIED
IN THIS NOTICE AT LEAST 20 DAYS PRIOR TO THE CLOSING, HOWEVER, BUYER HAS NO
OBLIGATION TO OFFER EMPLOYMENT TO ANY OF SELLERS' OTHER EMPLOYEES. AS OF THE
CLOSING, SELLERS SHALL TERMINATE ALL EMPLOYEES OF THE SYSTEMS WHO WILL NOT
REMAIN AS EMPLOYEES OF SELLERS (INCLUDING THOSE EMPLOYEES WHICH WILL BE EMPLOYED
BY BUYER), AND WILL PAY ALL TERMINATED EMPLOYEES ALL WAGES, SALARIES, VACATION
AND SICK PAY, AND ANY OTHER BENEFITS ACCRUING THROUGH THE CLOSING DATE, ALONG
WITH ANY AMOUNTS PAYABLE DUE TO THE TERMINATION.
k. SELLERS WILL PROVIDE REASONABLE ASSISTANCE TO BUYER TO FACILITATE
THE GENERATION OF BILLING STATEMENTS TO SUBSCRIBERS OF THE SYSTEMS FOR THE FIRST
BILLING PERIOD FOLLOWING THE CLOSING DATE, SUBJECT TO BUYER'S OBLIGATION TO
REIMBURSE SELLERS ONLY FOR
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<PAGE> 24
ALL ACTUAL OUT-OF-POCKET COSTS INCURRED BY SELLERS IN CONNECTION WITH THIS
ASSISTANCE, AND SELLERS SHALL COOPERATE WITH BUYER AND EXECUTE ALL DOCUMENTATION
NECESSARY TO ENABLE BUYER TO NEGOTIATE CHECKS FROM SUBSCRIBERS MADE PAYABLE TO
SELLERS BUT DELIVERED AFTER THE CLOSING DATE.
l. THE PARTIES AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE THIS
AGREEMENT AND/OR ANY ASSOCIATED DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF
COLORADO.
m. THE SCHEDULES AND EXHIBITS ARE INCORPORATED BY REFERENCE IN THIS
AGREEMENT.
[Signatures on the following page]
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<PAGE> 25
<TABLE>
<S> <C>
Antilles Wireless, L.L.C. American Telecasting of Billings, Inc.
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
American Telecasting of Nebraska, Inc. American Telecasting of Rapid City, Inc.
By: By:
----------------------------------- -------------------------------------
Title: Title:
-------------------------------- ----------------------------------
American Telecasting of Green Bay, Inc.
By:
-----------------------------------
Title:
--------------------------------
</TABLE>
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<PAGE> 1
EXHIBIT 10.6
BORROWING AGREEMENT
This BORROWING AGREEMENT, dated as of June 10, 1999, is entered into by
and between AMERICAN TELECASTING, INC., a Delaware corporation (the "Borrower"),
and SPRINT CORPORATION, a Kansas corporation (the "Lender").
WHEREAS, Borrower, Lender and a wholly owned subsidiary of Lender have
entered into an Agreement and Plan of Merger dated as of April 26, 1999 (the
"Merger Agreement").
WHEREAS, Borrower desires to borrow funds from Lender in accordance
with Section 5.17 of the Merger Agreement.
NOW THEREFORE, in consideration of the agreements contained herein and
for other good and valuable consideration, the parties hereto agree as follows.
SECTION 1.
DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the respective meanings set forth below:
"Acquisition Agreement" has the meaning set forth in Section 5.6(b) of
the Merger Agreement.
"Alternative Transaction" has the meaning set forth in Section 5.6(b)
of the Merger Agreement.
"Advances" has the meaning set forth in Section 2.1 hereof.
"Bankruptcy" means, with respect to the Borrower, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means the
inability of the Borrower generally to pay its debts as such debts become due,
or an admission in writing by the Borrower of its inability to pay its debts
generally or a general assignment by the Borrower for the benefit of creditors;
the filing of any petition or answer by the Borrower seeking to adjudicate it
bankrupt or insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
the Borrower or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking, consenting to, or acquiescing
in the entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for the Borrower or for any substantial
part of its property; or corporate action taken by the Borrower to authorize
any of the actions set forth above. An "Involuntary Bankruptcy" means, without
the consent or acquiescence of the Borrower, the entering of an order for relief
or approving a petition for relief or reorganization or any other petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any present or future bankruptcy,
insolvency or similar statute, law or regulation, or the filing of any such
petition against the Borrower which petition shall not be dismissed within sixty
(60) days, or, without the consent or acquiescence of the Borrower, the entering
of an order appointing a trustee, custodian, receiver or liquidator of the
Borrower or of all or any substantial part of the property of the Borrower which
order shall not be dismissed within sixty (60) days.
<PAGE> 2
"Business Day" means a day of the year on which banks are not required
or authorized by law to close in New York City.
"Effective Date" has the meaning set forth in Section 1.2 of the Merger
Agreement.
"Event of Default" is defined in Section 4 hereof.
"Maturity Date" means the day that is the first anniversary of the
termination of the Merger Agreement or, if such day is not a Business Day, the
next following Business Day, provided that if (i) the Borrower enters into an
Acquisition Agreement related to an Alternative Transaction, and (ii) the Merger
Agreement is terminated pursuant to Section 7.1(d)(i) of the Merger Agreement,
"Maturity Date" means the date of termination of the Merger Agreement or, if
such day is not a Business Day, the next following Business Day.
"Note" means the promissory note of the Borrower payable to Lender
substantially in the form of Exhibit A hereto.
SECTION 2.
ADVANCES; PAYMENTS OF PRINCIPAL AND INTEREST
Section 2.1 Advances.
(a) The Lender agrees, on the terms and conditions hereinafter set
forth, to make Advances to the Borrower from time to time on any Business Day
during the period from the date of this Agreement until the Effective Date in an
aggregate principal amount not to exceed three million five hundred thousand
dollars ($3,500,000).
(b) Each Advance shall be made on written request of the Borrower given
to the Lender not later than 11:00 A.M. (Central time) on the Business Day
prior to the date of the requested Advance. Each such request shall specify the
date of the requested Advance and the amount to be advanced.
Section 2.2 Interest.
(a) The Borrower shall pay interest on the Advances at the rate of 10%
per annum. Interest shall accrue on the basis of a year of 365 days and the
actual days elapsed. Interest shall be due and payable in arrears on an Advance
on each anniversary of such Advance or, if such day is not a Business Day, on
the next following Business Day, and on the Maturity Date.
(b) Notwithstanding the provisions set forth in (a) above, beginning
upon the occurrence and during the continuance of any Event of Default
hereunder, interest on Advances shall accrue and be payable by the Borrower at a
rate per annum equal to twelve percent (12%).
Section 2.3 Notes. Contemporaneously herewith, the Borrower shall
execute and deliver to Lender a Note payable to the order of Lender,
substantially in the form of Exhibit A hereto.
Section 2.4 Payments. All payments of principal and interest on the
Note shall be made exclusively in U.S. dollars and immediately available funds,
without any setoff, deduction, or
2
<PAGE> 3
counterclaim, at the account of the Lender at Citicorp, N.A., in New York City
or at such other payment location as Lender may designate in writing to
Borrower.
Section 2.5 Prepayment. The Borrower may at its option, and without any
penalty whatsoever, prepay Advances at any time in whole or in part. Prepayments
shall be applied first to pay all accrued and unpaid interest, then to the
outstanding principal balance.
Section 2.6 Security. The Advances shall be secured by a pledge of the
capital stock of American Telecasting of Michiana, Inc., a Delaware corporation
and a subsidiary of Borrower. Contemporaneously herewith, the Borrower shall
execute and deliver to Lender a Stock Pledge Agreement (the "Stock Pledge
Agreement") substantially in the form of Exhibit B hereto, the certificates
representing the capital stock of American Telecasting of Michiana, Inc., and a
stock power duly executed in blank.
Section 2.7 Use of Proceeds. The proceeds of the Advances shall be used
by the Borrower to pay to the holders of the Bond Appreciation Rights ("BARs")
relating to the Borrower's Senior Discount Notes due 2004 the value of the BARs
upon the exercise of the BARs.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows;
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note, and the consummation of the transactions contemplated
hereby, are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, and do not contravene (i) the Borrower's charter
or bylaws or (ii) any law or any contractual restriction binding on or affecting
the Borrower, which contravention in the case of item (ii) would reasonably be
expected to have a material adverse effect on the financial condition of the
Borrower or the ability of the Borrower to perform the transactions contemplated
by this Agreement and the Stock Pledge Agreement.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for the due execution, delivery and performance by the
Borrower of this Agreement or the Note.
(d) (i) This Agreement has been duly executed and delivered by the
Borrower; (ii) this Agreement is the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms; and
(iii) the Note when delivered hereunder will have been duly executed and
delivered by the Borrower and will be the legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its terms
(except in items (ii) and (iii), in any case, as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by principles of equity).
3
<PAGE> 4
SECTION 4.
EVENTS OF DEFAULT
The occurrence and continuance of any of the following events shall
constitute an event of default ("Event of Default") under this Agreement
(whatever the reason for such event and whether or not it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree, order, rule or regulation of any governmental authority): (a) the
Borrower uses the proceeds of the Advances for any purpose other than the
purposes set forth in Section 2.7; or (b) the Borrower fails to make any payment
of principal or interest on the Advances when the same is due and payable; (c)
the Bankruptcy of the Borrower; or (d) any representation or warranty made by
the Borrower in this Agreement proves to have been incorrect in any material
respect when made.
SECTION 5.
REMEDIES
(a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 4(c)), the Lender
may, in its sole discretion, declare the Note, including, without limitation,
principal, accrued interest and costs of collection (including, without
limitation, reasonable attorneys' fees and disbursements if collected by or
through an attorney at law or in bankruptcy, receivership or other judicial
proceedings) immediately due and payable.
(b) Upon the occurrence of an Event of Default described in Section
4(c), the Note, including, without limitation, principal, accrued interest and
costs of collection (including, without limitation, reasonable attorneys' fees
if collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) shall become immediately due and payable, without
presentment, demand, protest, or any other notice of any kind, all of which are
expressly waived.
(c) Upon the occurrence and during the continuation of an Event of
Default and acceleration of the Notes as provided in (a) or (b) above, the
Lender may pursue any remedy available under this Agreement or the Stock Pledge
Agreement or available at law or in equity, all of which shall be cumulative.
The order and manner in which the rights and remedies of the Lender under this
Agreement, the Stock Pledge Agreement, and otherwise may be exercised shall be
determined by the Lender in its sole discretion.
(d) For the purpose of computing the obligations hereunder, all
payments with respect to the Note received by the Lender after the occurrence of
an Event of Default and acceleration of the Note (regardless of how the Lender
may treat the payments for the purpose of its own accounting) shall be applied
first; to the costs and expenses (including attorneys' fees and disbursements)
incurred by the Lender as a result of the Event of Default, as set forth above,
second, to the payment of accrued and unpaid interest on the Note, to and
including the date of such application, and third, to the payment of the unpaid
principal of the Note. Until payment in full of all obligations due by Borrower
to Lender under this Agreement and the Stock Pledge Agreement, no application of
partial payments will cure any Event of Default or prevent acceleration, or
continued acceleration, of additional amounts payable under this Agreement, the
Stock Pledge Agreement or the Note or prevent the exercise, or continued
exercise, of rights or remedies of the Lender hereunder or under applicable law.
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<PAGE> 5
SECTION 6.
MISCELLANEOUS
Section 6.1 Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of Kansas (without
giving effect to the principles of conflict of laws in such jurisdiction).
Section 6.2 Waiver. The Borrower hereby waives presentment, protest,
notice of dishonor and any other formality with respect to the Note.
Section 6.3 Binding Effect. This Agreement shall be binding upon the
Borrower and its successors and assigns, except that the Borrower may not
delegate its obligations under this Agreement or the Note without the prior
written consent of Lender. The Lender may at any time assign or otherwise
transfer or sell the Note or any of its rights with respect thereto.
Section 6.4 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be given by delivery in
person, by telecopy or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses, or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 6.4. All such notices and communications shall,
when delivered, mailed or telecopied, be effective when delivered, deposited in
the mail or telecopied, except that written requests pursuant to Section 2.1(b)
shall not be effective until received by the Lender.
If to the Lender:
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
Telecopier: (913) 624-8252
Attention: Director, Capital Markets
If to the Borrower:
American Telecasting, Inc.
5575 Tech Center Drive, Suite 300
Colorado Springs, Colorado 80919
Telecopier: (719) 260-5010
Attention: Robert D. Hostetler
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AMERICAN TELECASTING, INC., Borrower SPRINT CORPORATION, Lender
By: /s/ DANIEL R. SENTMAN By: /s/ DENNIS C. PIPER
----------------------------- -----------------------------------
Name: Daniel R. Sentman Name: Dennis C. Piper
--------------------------- ---------------------------------
Title: Sr. Vice President & CFO Title: Vice President - Capital
--------------------------- --------------------------------
Markets and Assistant
--------------------------------
Treasurer
--------------------------------
5
<PAGE> 6
EXHIBIT A
FORM OF PROMISSORY NOTE
Principal Amount: Date: June __, 1999
Up to U.S. $3,500,000
FOR VALUE RECEIVED, the undersigned AMERICAN TELECASTING, INC., a
corporation organized under the laws of the State of Delaware (hereinafter the
"Borrower"), does hereby promise to pay to the order of Sprint Corporation, a
corporation formed under the laws of the State of Kansas (hereinafter the
"Lender"), on the Maturity Date (as defined in the Borrowing Agreement referred
to below), in lawful money of the United States of America, the principal amount
of the Advances (as defined in the Borrowing Agreement) made by Lender to the
Borrower pursuant to the terms of the Borrowing Agreement, dated as of June 10,
1999, by and between the Borrower and the Lender (the "Borrowing Agreement"),
together with accrued interest thereon.
Executed and delivered as of the date first above written by the duly
authorized officer of Borrower.
AMERICAN TELECASTING, INC.
By:
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.7
EXHIBIT B
STOCK PLEDGE AGREEMENT
THIS AGREEMENT, made this __ day of June, 1999 (this "Agreement"), by
and between American Telecasting, Inc., a Delaware corporation (the "Pledgor"),
and Sprint Corporation, a Kansas corporation (the "Pledgee").
A. Pledgor and Pledgee have entered into a Borrowing Agreement
("Borrowing Agreement") of even date.
B. In order to induce Pledgee to enter into the Borrowing
Agreement, Pledgor has agreed to pledge Pledgor's stock in American
Telecasting of Michiana, Inc., a Delaware corporation and a
wholly-owned subsidiary of Pledgor ("Subsidiary").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and undertakings hereinafter set forth, the parties agree as follows:
1. Pledge. Pledgor hereby pledges and grants a security interest to
Pledgee in 1,000 shares of stock in the Subsidiary represented by Certificate
No. 1, issued in the name of the Pledgor (the "Pledged Shares"). Concurrently
herewith, the Pledged Shares, together with a stock power duly endorsed in
blank, are delivered to Pledgee. The Pledgee shall hold the Pledged Shares as
security for Advances (as defined in the Borrowing Agreement) under the
Borrowing Agreement and any and all other indebtedness, obligations and
liabilities of Pledgor to Pledgee and its successors and assigns under the
Borrowing Agreement or this Agreement.
2. Rights and Duties Respecting Collateral. Pledgee shall be under no
duty or obligation to act in any manner with respect to the Pledged Shares other
than in the safe keeping thereof. Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Shares in its
possession if the Pledged Shares are accorded treatment substantially the same
as that which Pledgee accords its own property; provided, however, that Pledgee
shall have no obligation to take any steps to preserve rights against any other
parties with respect to the Pledged Shares.
3. Voting Rights. During the term of this pledge, and so long as the
Pledgor is not in default under this Agreement, Pledgor shall have the right to
vote the Pledged Shares on all corporate questions, except the Pledged Shares
shall not be voted in contravention of paragraph 5 hereof.
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<PAGE> 2
4. Representations and Covenants. The Pledgor represents and warrants,
as of the date hereof unless otherwise indicated, and agrees as follows:
(a) The Pledged Shares have been duly authorized and validly
issued and are fully paid and nonassessable and do now and will,
throughout the term of this pledge, constitute all of the issued and
outstanding capital stock of any class issued by Subsidiary.
(b) The Pledgor is, and at all times during the term of this
pledge will be, the legal, beneficial and record owner of the Pledged
Shares free and clear of any lien, security interest, option, contract
right or other charge or encumbrance, except for the security interest
created by this Agreement, and the Pledgor will warrant and defend the
title thereto, and the lien created by this Agreement thereon, against
all claims of all persons, and will maintain and preserve such lien.
(c) The Pledgor has the unrestricted right, power and
authority to execute this Agreement, to perform the Pledgor's
obligations hereunder and to transfer and create a security interest in
the Pledged Shares in the manner and for the purpose contemplated
hereby.
(d) The pledge and delivery of the Pledged Shares pursuant to
this Agreement create a valid and perfected first priority security
interest in the Pledged Shares in favor of the Pledgee.
(e) Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and holds those Federal Communications Commission ("FCC") licenses
listed in Attachment A. The FCC licenses are in full force and effect
and authorize the Subsidiary to provide wireless cable services to more
than 150,000 protected service area households.
(f) The Pledgor acknowledges that the Pledgee's actions under
this Agreement may require the prior approval of the FCC or relevant
governmental regulatory authority, as contemplated by Section 7(c)
hereof.
5. Conduct of Business. Except for actions taken to implement the
Agreement and Plan of Merger by and among Pledgee, DD Acquisition Corporation
and Pledgor dated as of April 26, 1999 (the "Merger Agreement") and the
transactions contemplated thereby and except as set forth in the Company
Disclosure Letter (as defined in the Merger Agreement), Pledgor hereby agrees
that at all times during the term of this pledge the Subsidiary will comply in
all material respects with all applicable laws and regulations wherever its
business is conducted and use all commercially reasonable efforts on a basis
consistent with
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<PAGE> 3
past practice and consistent with the Pledgor's business plan (i) to continue to
provide wireless cable television services to its subscriber base, (ii) to
maintain and protect the FCC licenses and other rights necessary to conduct its
business and (iii) to preserve substantially intact its business organization,
and Pledgor shall not authorize or permit, without the prior written consent of
the Pledgee, (a) any issuance of new stock of the Subsidiary or any warrants,
options, or other rights to acquire stock of the Subsidiary, (b) any share
dividend, reclassification, readjustment, or other change in the capital
structure of the Subsidiary, (c) any merger or consolidation of the Subsidiary
or the sale, lease or other transfer of all or substantially all of its
properties and assets, (d) any transfer of any FCC licenses to provide wireless
cable services owned by Subsidiary as of the date hereof or acquired at any time
hereafter, the surrender by Subsidiary of the right to use any FCC license to
provide wireless cable service, the creation of a security interest in any such
FCC licenses or the proceeds generated from the use of such licenses, or the
entering into by Subsidiary of any leasing or licensing agreements, take-or-pay
arrangements or other affiliations, alignments or agreements with respect to the
FCC licenses, except that the Subsidiary may renegotiate any Channel Lease (as
defined in the Merger Agreement) in the ordinary course of business, (e) except
as set forth in the Company Disclosure Letter, the disposition of any business
or assets of Subsidiary in a single transaction or series of transactions in
which the aggregate consideration is $100,000 or greater, (f) the issuance by
Subsidiary of any indebtedness for borrowed money or the guarantee by Subsidiary
of any such indebtedness, (g) the making of loans or advances to any person
other than the Pledgor (other than loans or advances less than $50,000 made in
the ordinary course of business consistent with past practice), (h) the payment
by Subsidiary of dividends or other distributions with respect to its capital
stock, (i) any increase in the compensation or benefits of directors, officers
and employees of the Subsidiary (other than increases in the ordinary course of
business consistent with past practice) or (j) any amendment of the Certificate
of Incorporation or Bylaws of the Subsidiary.
6. Events of Default. Pledgor shall be in default under this Agreement
upon the occurrence and continuance of any of the following events or
conditions:
(a) The occurrence of an Event of Default under the Borrowing
Agreement.
(b) The attempted sale or encumbrance of any of the Pledged
Shares, or the making of any levy, seizure or attachment thereof or
thereon.
(c) Any representation or warranty made by the Pledgor in this
Agreement proves to have been incorrect in any material respect when
made.
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<PAGE> 4
(d) Default in the performance, or breach, of any material
covenant of the Pledgor in this Agreement, which default is not
remedied.
7. Remedies.
(a) In the event that the Pledgor is in default under this Agreement
as provided in Section 6 hereof, the Pledgee shall have the rights and
remedies provided in the Uniform Commercial Code in force in the State
of Kansas, and in addition the Pledgee may do any one or more of the
following, to the extent permitted by applicable law, in such order as
it may elect:
(i) cause any or all of the Pledged Shares to be transferred into
its name or that of its nominee and obtain registration of
such transfer or transfers, without thereby effecting a
foreclosure of the pledge evidenced hereby, the Pledgor hereby
irrevocably constituting and appointing such Pledgee and any
nominee of such Pledgee the attorney-in-fact of the Pledgor
for such purpose, with full power of substitution;
(ii) vote any and all of the Pledged Shares and give any and all
consents, waivers and ratifications in respect thereof and
otherwise act with respect thereto as though it were the
outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Pledgee and any nominee of
such Pledgee the proxy and attorney-in-fact of the Pledgor for
such purpose, with full power of substitution; and
(iii) upon ten days' notice to the Pledgor, sent by registered mail,
and without liability for any diminution in price which may
have occurred, sell all the Pledged Shares in such manner and
for such price as the Pledgee may determine, the Pledgor
hereby waiving and releasing any and all rights or equity of
redemption which it otherwise might have after sale hereunder.
At any public or private sale the Pledgee shall be free to
purchase all or any part of the Pledged Shares free from any
such right or equity of redemption. The Pledgor agrees that in
any sale of any of the Pledged Shares whenever a default shall
have occurred and be continuing hereunder, Pledgee is hereby
authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law,
including, without limitation, compliance with such procedures
as may restrict the number of prospective bidders and
4
<PAGE> 5
purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to persons who will
represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution
or resale of such Pledged Shares, or in order to obtain any
required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor
further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Pledgee be
liable or accountable to the Pledgor for any discount allowed
by reason of the fact that such Pledged Shares are sold in
compliance with any such limitation or restriction. For the
purpose hereof, any agreement to sell all or any part of the
Pledged Shares shall be treated as a sale thereof, and Pledgee
shall be free to carry out such sale pursuant to such
agreement and the Pledgor shall not be entitled to the return
of any of the Pledged Shares subject thereto, notwithstanding
that, subsequent to such Pledgee's entering into such an
agreement, the Pledgor may have cured all defaults under this
Agreement.
(b) The proceeds of any sale hereunder of the Pledged Shares shall
be applied first to the payment of all costs and expenses of
collection, sale and delivery, including reasonable attorneys' fees and
expenses in connection therewith, whether or not involving a case or
proceeding before a federal or state court, and next to such of the
obligations of the Pledgor to Pledgee in such order as the Pledgee may
in its sole discretion determine. The balance, if any, of such proceeds
and moneys shall be paid to the Pledgor or such other person or persons
as may legally be entitled thereto. If the proceeds of such sale are
insufficient to pay such costs and expenses and to satisfy such
obligations of the Pledgor, the Pledgor shall remain liable for such
deficiency.
(c) Notwithstanding anything to the contrary contained herein or in
the Borrowing Agreement, the Pledgee will not take any action
(including the exercise of voting rights by the Pledgee with respect to
the Pledged Shares) pursuant to this Agreement or the Borrowing
Agreement that would constitute or result in any assignment of any FCC
license or any change of control of the Subsidiary without first
obtaining the prior approval of the FCC or the relevant governmental
regulatory authority if, under the law existing at such time, such
assignment of any FCC license or change of control would require the
prior approval of the FCC or such governmental regulatory
5
<PAGE> 6
authority. Prior to the exercise by the Pledgee of any power, right,
privilege or remedy pursuant to this Agreement which requires any
consent, approval, recording, qualification or authorization of any
governmental regulatory authority or instrumentality upon the request
of the Pledgee, the Pledgor will execute and deliver, or will cause the
execution and delivery of, all applications, certificates, instruments
and other documents and papers that the Pledgee may require to obtain
such governmental consent, approval, recording, qualification or
authorization. Without limiting the generality of the foregoing, the
Pledgor will use its best efforts upon the request of the Pledgee to
obtain from the appropriate governmental regulatory authorities the
necessary consents and approvals, if any, (i) for the granting to the
Pledgee pursuant hereto of the security interests provided for in this
Agreement to the extent, if any, such security interests may be granted
under existing statutes or regulations and (ii) for the change of
control of Subsidiary and/or the assignment or transfer of the FCC
licenses to the Pledgee or its designee upon or following default under
this Agreement.
8. Return of Pledged Shares. Following payment in full of the Advances
under the Borrowing Agreement and satisfaction of all obligations and payment of
all other amounts due under the Borrowing Agreement or this Agreement, the
Pledgee will, upon written demand by the Pledgor, promptly redeliver to the
Pledgor the Pledged Shares and any stock powers related thereto without recourse
to Pledgee and the Pledgee shall execute and deliver such documents and
instruments as the Pledgor may reasonably request to evidence such termination
and release.
9. Waiver. Pledgor waives any right that it may have to require Pledgee
to proceed against any other person, to proceed against or exhaust the Pledged
Shares or any part thereof, or to pursue any other remedy that Pledgee may have.
Pledgor consents to any and all extensions of time, renewals, waivers, or
modifications of any of the terms and conditions of any of the documents
creating any indebtedness in accordance with the terms of such documents, to the
release of Pledged Shares or any part thereof without substitution, and to the
release, substitution, or addition of parties primarily or secondarily liable on
any of the indebtedness. Notice of any of the above is hereby waived by Pledgor.
10. Expenses. The Pledgor will upon demand pay to Pledgee the amount of
any and all expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, whether or not involving a case or proceeding
before any federal or state court, that such Pledgee may incur in connection
with (a) the custody or preservations of, or the sale of, collection from or
other realization upon, any of the Pledged Shares, (b) the exercise or
enforcement of any
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<PAGE> 7
of the rights of Pledgee hereunder, or (c) the failure by the Pledgor to perform
or observe any of the provisions hereof.
11. Indemnification. Neither Pledgee, nor any director, officer, agent
or employee of Pledgee, shall be liable for any action taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct. The Pledgor hereby agrees to
Indemnify and hold harmless Pledgee and its officers, directors, employees,
agents, representatives, successors and assigns from and against any and all
liability incurred by any of them hereunder or in connection herewith, unless
such liability shall be due to its or their own gross negligence or willful
misconduct.
12. General Provisions.
(a) Rights Sustained. Any failure of the Pledgee to exercise
any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any time and from time to time
thereafter.
(b) Cumulative Remedies. No remedy or election under this
Agreement shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.
(c) Governing Law. This Agreement and the rights and duties of
the parties hereto shall be governed in all respects by the law of the
State of Kansas.
(d) Continuing Agreement. This Agreement is a continuing
Agreement and shall apply notwithstanding the insolvency of Pledgor.
(e) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Pledgee may assign or transfer, in
whole or in part, its security interest hereunder.
(f) Headings. The paragraph headings of this Agreement are for
convenience only and shall not limit or define the meaning or content
of this Agreement. All pronouns and variations thereof shall be deemed
to refer to the singular or plural, as the context may require.
(g) Prior and Subsequent Agreements. This instrument contains
the entire agreement between the parties regarding the pledge of the
Pledged Shares. This Agreement shall not be modified in any way except
by a writing executed by both parties.
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<PAGE> 8
(h) Severability. Any provisions of this Agreement which shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision of this Agreement, and such other
provisions shall remain in full force and effect.
(i) Notices. All notices, requests, demands and other
communications under this Agreement shall be given, made and received
in the manner provided in the Borrowing Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
AMERICAN TELECASTING, INC.
By:
-----------------------------------
Name:
Title:
SPRINT CORPORATION
By:
-----------------------------------
Name:
Title:
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<PAGE> 9
ATTACHMENT A
American Telecasting of Michiana, Inc.
BTA Authorization No. B126, Elkhart, Indiana
BTA Authorization No. B424, South Bend, Indiana
MMDS Station WMH360, Elkhart, Indiana
MDS Station KNSC421, Mishawaka, Indiana
Receive-Only Earth Station E980232, Mishawaka, Indiana
<PAGE> 1
EXHIBIT 10.8
RETENTION INCENTIVE AGREEMENT
THIS RETENTION INCENTIVE AGREEMENT dated as of June 1, 1999 by and
between American Telecasting, Inc. (the "Company") and Lee G. Haglund, (the
"Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive and managerial talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives and managers 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 a 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) consecutive months.
Retention Incentive Agreement - Page 1
<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 current
principal place of employment to a location
that is more than 60 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.
(iii) The consummation of the transaction
contemplated by the Agreement and Plan of
Merger by and among Sprint Corporation, DD
Acquisition Corp. and American Telecasting,
Inc. dated as of April 26, 1999, any
transfer of payroll functions from the
Company to Sprint Corporation (so that the
Employee shall become an employee of Sprint
Corporation or shall be paid by Sprint
Corporation) or any change in group
insurance, 40l(k) or other benefits shall
not constitute a Material Employment Change.
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 $25,000 (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, 2000; or
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 2000 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.
Retention Incentive Agreement - Page 2
<PAGE> 3
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.
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:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: President
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Randall H. Doud
If to the Employee:
Lee G. Haglund
505 SW Chestnut
Portland, OR 97219
Retention Incentive Agreement - Page 3
<PAGE> 4
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.
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.
American Telecasting, Inc.
---------------------------------------
Robert D. Hostetler
President and Chief Executive Officer
Employee
---------------------------------------
Lee G. Haglund
Retention Incentive Agreement - Page 4
<PAGE> 1
EXHIBIT 10.9
RETENTION INCENTIVE AGREEMENT
THIS RETENTION INCENTIVE AGREEMENT dated as of June 1, 1999 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 and managerial talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives and managers 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 a 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) consecutive months.
Retention Incentive Agreement - Page 1
<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 current
principal place of employment to a location
that is more than 60 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.
(iii) The consummation of the transaction
contemplated by the Agreement and Plan of
Merger by and among Sprint Corporation, DD
Acquisition Corp. and American Telecasting,
Inc. dated as of April 26, 1999, any
transfer of payroll functions from the
Company to Sprint Corporation (so that the
Employee shall become an employee of Sprint
Corporation or shall be paid by Sprint
Corporation) or any change in group
insurance, 40l(k) or other benefits shall
not constitute a Material Employment Change.
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 $25,000 (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, 2000; or
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 2000 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.
Retention Incentive Agreement - Page 2
<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 twelve
(12) 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. This obligation supersedes any commitments by
the Company under any prior Retention Agreement.
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.
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:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: President
Retention Incentive Agreement - Page 3
<PAGE> 4
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:
Bryan H. Scott
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.
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.
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.
Retention Incentive Agreement - Page 4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
American Telecasting, Inc.
------------------------------------------
Robert D. Hostetler
President and Chief Executive Officer
Employee
------------------------------------------
Bryan H. Scott
Retention Incentive Agreement - Page 5
<PAGE> 1
EXHIBIT 10.10
RETENTION INCENTIVE AGREEMENT
THIS RETENTION INCENTIVE AGREEMENT dated as of June 1, 1999 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 and managerial talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives and managers 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 a 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) consecutive months.
Retention Incentive Agreement - Page 1
<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 current
principal place of employment to a location
that is more than 30 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.
(iii) The consummation of the transaction
contemplated by the Agreement and Plan of
Merger by and among Sprint Corporation, DD
Acquisition Corp. and American Telecasting,
Inc. dated as of April 26, 1999, any
transfer of payroll functions from the
Company to Sprint Corporation (so that the
Employee shall become an employee of Sprint
Corporation or shall be paid by Sprint
Corporation) or any change in group
insurance, 40l(k) or other benefits shall
not constitute a Material Employment Change.
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 $25,000 (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, 2000; or
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 2000 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.
Retention Incentive Agreement - Page 2
<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 nine
(9) 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. This obligation supersedes any commitments by
the Company under any prior Retention Agreement.
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.
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:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: President
Retention Incentive Agreement - Page 3
<PAGE> 4
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:
Nasser Sharabianlou
415 Sutcliffe Place
Walnut Creek, CA 94598
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.
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.
Retention Incentive Agreement - Page 4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
American Telecasting, Inc.
------------------------------------------
Robert D. Hostetler
President and Chief Executive Officer
Employee
------------------------------------------
Nasser Sharabianlou
Retention Incentive Agreement - Page 5
<PAGE> 1
EXHIBIT 10.11
RETENTION INCENTIVE AGREEMENT
THIS RETENTION INCENTIVE AGREEMENT dated as of June 1, 1999 by and
between American Telecasting, Inc. (the "Company") and Charles A. Spann, (the
"Employee").
WITNESSETH:
WHEREAS, the Company recognizes the competitive nature of the market
for executive and managerial talent; and
WHEREAS, the Company has determined that appropriate steps should be
taken to encourage certain key executives and managers 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 a 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) consecutive months.
Retention Incentive Agreement - Page 1
<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 current
principal place of employment to a location
that is more than 60 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.
(iii) The consummation of the transaction
contemplated by the Agreement and Plan of
Merger by and among Sprint Corporation, DD
Acquisition Corp. and American Telecasting,
Inc. dated as of April 26, 1999, any
transfer of payroll functions from the
Company to Sprint Corporation (so that the
Employee shall become an employee of Sprint
Corporation or shall be paid by Sprint
Corporation) or any change in group
insurance, 40l(k) or other benefits shall
not constitute a Material Employment Change.
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 $25,000 (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, 2000; or
(iv) the Employee's death or Disability.
(b) If the Employee's employment is terminated prior to
June 30, 2000 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.
Retention Incentive Agreement - Page 2
<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 twelve
(12) 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. This obligation supersedes any commitments by
the Company under any prior Retention Agreement.
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.
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:
If to the Company:
5575 Tech Center Drive, Suite 300
Colorado Springs, CO 80919
Attention: President
Retention Incentive Agreement - Page 3
<PAGE> 4
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:
Charles A. Spann
5385 Evening Light Crt.
Colorado Springs, CO 80917
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.
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.
Retention Incentive Agreement - Page 4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
American Telecasting, Inc.
---------------------------------------
Robert D. Hostetler
President and Chief Executive Officer
Employee
---------------------------------------
Charles A. Spann
Retention Incentive Agreement - Page 5
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,819
<SECURITIES> 0
<RECEIVABLES> 859
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,777
<PP&E> 20,803
<DEPRECIATION> 0
<TOTAL-ASSETS> 117,308
<CURRENT-LIABILITIES> 13,371
<BONDS> 256,416
0
0
<COMMON> 195,303
<OTHER-SE> (351,474)
<TOTAL-LIABILITY-AND-EQUITY> 117,308
<SALES> 0
<TOTAL-REVENUES> 9,666
<CGS> 0
<TOTAL-COSTS> 19,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,648
<INCOME-PRETAX> (19,139)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,139)
<DISCONTINUED> 0
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<NET-INCOME> (19,139)
<EPS-BASIC> (.74)
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</TABLE>
