-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DIoIiDfQ5aiIV52mggYF5TrpfrcW/rVdfi8G5A9FE6icQ4srgXuT0iLDxFhbv8vJ k9UIek1IfD4fIO6xUyW81g== 0000950134-97-002269.txt : 19970328 0000950134-97-002269.hdr.sgml : 19970328 ACCESSION NUMBER: 0000950134-97-002269 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN TELECASTING INC/DE/ CENTRAL INDEX KEY: 0000913271 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 541486988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23008 FILM NUMBER: 97564383 BUSINESS ADDRESS: STREET 1: 5575 TECH CENTER DR STREET 2: STE 300 CITY: COLORADO SPRINGS STATE: CO ZIP: 80919 BUSINESS PHONE: 7192605533 MAIL ADDRESS: STREET 1: 5575 TECH CENTER DRIVE CITY: COLORADO SPRINGS STATE: CO ZIP: 80919 10-K 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1996 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 [FEE REQUIRED] OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO [NO FEE REQUIRED] COMMISSION FILE NUMBER 0-23008 AMERICAN TELECASTING, INC. (Exact name of registrant as specified in its charter) DELAWARE 54-1486988 (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization) 5575 TECH CENTER DRIVE, SUITE 300 COLORADO SPRINGS, COLORADO 80919 (Address of principal executive offices) (Zip Code)
REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE: (719) 260-5533 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class A Common Stock, $0.01 Par Value INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K (SEC. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] As of March 11, 1997, the aggregate market value of Class A Common Stock held by non-affiliates* of the Registrant approximated $59.3 million based upon the closing price of the Class A Common Stock as reported on Nasdaq as of the close of business on that date. As of March 11, 1997, 25,743,607 shares of the registrant's Class A Common Stock were outstanding. --------------------- DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated into this Form 10-K by reference: Proxy Statement for Annual Meeting of Stockholders to be held on April 24, 1997 Part III --------------------- * Without acknowledging that any individual director or executive officer of the Company is an affiliate, the shares over which they have voting control have been included as owned by affiliates solely for purposes of this computation. ================================================================================ 2 PART I ITEM 1. BUSINESS All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's plans for future development and operation of its business, are based on current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: a lack of sufficient capital to finance the Company's business plan on terms satisfactory to the Company; pricing pressures which could affect demand for the Company's service; changes in labor, equipment and capital costs; unavailability of digital compression technology and equipment at reasonable prices; the Company's inability to incorporate digital compression technology into certain of its subscription television systems in a cost efficient manner; the Company's inability to develop and implement new services such as high-speed Internet access and telephony; the Company's inability to obtain the necessary authorizations from the Federal Communications Commission ("FCC") for such new services; competitive factors, such as the introduction of new technologies and competitors into the wireless communications business; a failure by the Company to attract strategic partners; general business and economic conditions; and the other risk factors described from time to time in the Company's reports filed with the Securities and Exchange Commission ("SEC"). The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995, and as such, speak only as of the date made. GENERAL American Telecasting, Inc. ("ATI" or the "Company") was formed in 1988 to develop wireless cable television systems in mid-sized markets throughout the United States. As of December 31, 1996, the Company provided subscription television service to approximately 179,800 subscribers through 38 operational wireless cable systems located in selected U.S. markets (the "Developed Markets"). The Company also has significant wireless cable (microwave) frequency interests in 16 other U.S. markets (the "Undeveloped Markets" and together with the Developed Markets, the "Markets"). As of December 31, 1996, the Company had approximately 12.0 million Estimated Households in Service Area in its Markets, although some of these households will be "shadowed" and unable to receive the services offered by the Company due to certain characteristics of the particular market, such as transmitter height and transmission power, terrain and foliage ("Line-of-Sight Constraints"). See "-- Markets". Wireless cable systems use microwave frequencies licensed by the FCC to transmit signals over the air from a transmission tower to a microwave receiver installed at the customer's home or business. Wireless cable systems transmit signals over coverage areas of approximately 20 to 40 miles from their central transmission point, although increases in transmission power and other factors may expand the coverage area of a system to approximately 40 to 50 miles from the central transmission point. Because microwave signals are transmitted over the air, wireless cable technology does not require the large networks of cable and amplifiers utilized by franchise cable operators to deliver services. Thus, wireless cable technology has been developed as a reliable, yet relatively low cost medium to provide service to customers in single family homes, multiple dwelling units and commercial properties. The Company was incorporated in Delaware in December 1988 and has its principal executive offices at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado 80919. The Company's telephone number is (719) 260-5533. The Company operates its business through its subsidiaries. Except as otherwise indicated, references in this Report to "ATI" or the "Company" refer to American Telecasting, Inc. and its subsidiaries collectively. BUSINESS STRATEGY Since inception, the Company has focused principally on developing wireless cable systems to provide multiple channel television programming similar to that offered by franchise cable companies. The Company's 3 primary strategy has been to develop systems in mid-sized markets where terrain and other conditions are well suited to wireless cable service. To attract subscribers in these markets, the Company has sought to exploit the cost advantage that wireless cable has over other subscription television services by offering the most popular programming (including "basic" channels such as ESPN, CNN, USA Network, Nickelodeon, Discovery, regional sports channels, MTV, local broadcast channels, and one to three "premium" channels such as Home Box Office, Showtime and The Disney Channel) at affordable prices and by emphasizing a strong commitment to customer service. In developing and implementing its business strategy, the Company also has sought to maintain the flexibility to adapt to new technologies such as digital compression and interactive services. During 1996, the Company's business strategy evolved to adapt to the significant regulatory and technological changes that have occurred recently in the telecommunications industry and to the Company's capital constraints. See "-- Regulation" and "-- Competition." Since early 1996 the Company has taken certain actions aimed at reducing its costs and conserving its capital, including reductions in the size of the Company's workforce and decreases in capital expenditures and discretionary expenses. Management now believes that the most promising use of the Company's wireless assets may be to provide a variety of digital wireless services, instead of the traditional analog-based technology utilized by the Company to date. Such digital wireless services could include digital video (i.e., subscription television), high-speed Internet access, and telephony services. A successful deployment of such services might include the full bundle of broad band (i.e., video and high-speed Internet) and narrow band (i.e., telephony) services. Digital Video Service Digital video is capable of delivering a significantly expanded number of high quality channels of compressed video programming services, including off-air programming. Digital compression allows the capacity of each wireless cable channel to increase by four to ten times. The first fully operational commercial microwave digital video system in North America was launched in Canada in late 1996. To date, no wireless cable operator has commercially introduced digital video compression technology in the United States, although a number of wireless cable operators, including the Company, have successfully tested such technology in their systems and have announced various plans for commercial deployment. While management believes that the Company is generally prepared for the introduction of digital video compression in certain of its markets, the purchase of digital video compression transmission and receiving equipment would involve substantial capital expenditures, which the Company is not in a position to make at this time. In addition, although the FCC generally authorized the use of digital technologies in 1996, further specific authorizations must be obtained from the FCC and affected FCC licensees and applicants on a market-by-market basis in order for the Company to begin offering digital video service. See "-- Regulation." To the extent that the Company is able to implement digital compression technology in any of its markets, management anticipates that this expanded channel capacity will increase the Company's opportunities to compete with other providers of video services. In addition, the application of digital compression may result in the availability of channel capacity for other services, as described below. High-Speed Internet Access Service The Company is working to deploy high-capacity, high-speed Internet access service in certain of its markets. During 1996, the Company, along with other industry participants, successfully tested a two-way wireless Internet technology at the Company's Lakeland, Florida system using existing transmission and reception equipment. This test confirmed that wireless cable frequencies are capable of delivering two-way Internet access at speeds that are significantly faster than speeds commonly available using conventional telephone lines. However, before the Company may begin offering two-way Internet access on a commercial basis, it must secure certain regulatory approvals from the FCC. The Company, together with other wireless cable operators, petitioned the FCC in March 1997 to expand its digital authorizations to permit two-way transmission. See "-- Regulation." Prior to any two-way authorization, the Company intends to deploy an asymmetrical (i.e., one-way) high-speed Internet access service in its Colorado Springs, Colorado system during the second quarter of 1997. 2 4 This technology utilizes a high-speed wireless cable modem for downstream Internet access, while relying on a telephone line for upstream Internet access. The Company's plan in deploying a one-way high-speed Internet service in Colorado Springs is to establish the commercial viability of its service by confirming the reliability and performance of the technologies involved and exploring the level of customer demand for such service. Based upon the Company's experience in Colorado Springs, available capital and other factors, it will consider a broader deployment of commercial Internet services in other markets. Telephony Service The Company is considering using its wireless spectrum to deliver telephony services. Although the development of such telephony services is in its early stages, management believes that the Company's wireless spectrum may be capable of providing "local loop" telephone service in the future. While the Company intends to continue its development efforts with respect to local loop telephone service, the introduction of such service in any of the Company's markets would involve substantial capital expenditures, which the Company is not in a position to make at this time. The Company's ability to commence delivery of wireless local loop service will also depend upon successful development of wireless local loop technology and equipment and the availability of appropriate transmission and reception equipment on satisfactory terms. Regulatory approvals and changes, especially routine two-way licensing of the radio spectrum used by the Company, also would be required before the Company could commercially introduce local loop telephone service. See "-- Regulation." CERTAIN REQUIREMENTS AND UNCERTAINTIES While the Company has begun planning and testing of the digital wireless services described above, it has not yet introduced any of these services. The Company's ability to introduce these services on a commercial basis will depend on a number of factors, including the availability of sufficient capital, the success of the Company's development efforts, competitive factors (such as the introduction of new technologies or the entry of competitors with significantly greater resources than the Company), the level of consumer demand for such services, the availability of appropriate transmission and reception equipment on satisfactory terms, and the Company's ability to obtain the necessary regulatory changes and approvals. The Company expects that the market for any such additional services will be extremely competitive. See "-- Competition." There can be no assurance that sufficient capital will be available on terms satisfactory to the Company, or at all, to fund the introduction of such digital wireless services, that the Company's development efforts will be successful, that the Company will be able to obtain the necessary regulatory approvals and changes to commercially introduce such services, that there will be sufficient customer demand for such services to justify the cost of their introduction in any of the Company's markets, or that the Company will be successful in competing against existing or new competitors in the market for such digital wireless services. The Company will require significant additional capital to fully implement its digital strategy. To meet such capital requirements, the Company is pursuing opportunities to enter into strategic relationships or transactions with other providers of telecommunications services. These relationships could provide the Company with access to technologies, products, capital and infrastructure. Such relationships or transactions could involve, among other things, joint ventures, sales or exchanges of stock or assets, or loans to or investments in the Company by strategic partners. As of the date of this Report, except for the BellSouth Agreement (as defined herein), the Company has not reached any agreements or understandings with respect to such strategic relationships or transactions and there can be no assurance that any such agreements or understandings will be reached. During 1997, the Company intends to continue to operate its Developed Markets principally as an analog wireless cable business. However, because of its current financial condition and its revised business strategy, the Company does not plan to make the capital expenditures necessary to add enough new subscribers to replace those subscribers that choose to stop receiving the Company's service. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Moreover, at this time, the Company does not generally intend to further develop any of its Undeveloped Markets using analog technology. Thus, the 3 5 Company anticipates that its analog customer base will decrease somewhat during 1997. As the Company's analog subscriber base decreases, its revenues are expected to decrease unless and until it is able to successfully introduce other revenue-producing wireless services, such as those described above. RECENT DEVELOPMENT On March 18, 1997, the Company entered into a definitive agreement (the "BellSouth Agreement") with BellSouth Corporation and BellSouth Wireless Corporation ("BellSouth Wireless") providing for the sale of all of the Company's Florida and Louisville, Kentucky wireless cable assets (the "Southeastern Assets") to BellSouth Wireless (the "BellSouth Transaction"). The Southeastern Assets include operating wireless cable systems in Orlando, Lakeland, Jacksonville, Daytona Beach, and Ft. Myers, Florida and Louisville, Kentucky and wireless cable channel rights in Bradenton, Naples, Sebring and Miami, Florida. As of December 31, 1996, the Southeastern Assets represented approximately 2.6 million Estimated Households in Service Area and served over 35,000 subscribers. Pursuant to the BellSouth Agreement, the purchase price for all of the Southeastern Assets will range from $67.9 million to $103.2 million, depending upon the number of wireless cable channel rights that are ultimately transferred to BellSouth Wireless. A first closing is expected to occur when all necessary third party and governmental consents to the assignment of a minimum number of channel positions in Orlando, Jacksonville, Daytona Beach, Ft. Myers, Miami, Lakeland, Bradenton and Louisville have been obtained, which the Company expects will occur prior to the end of the fourth quarter of 1997. The remainder of the Southeastern Assets will be sold upon the satisfaction of certain closing conditions that are specific to the markets involved, but in no event later than two years after the date of the first closing. The BellSouth Agreement grants BellSouth Wireless a right of first refusal in the event of a proposed sale by the Company of any wireless cable channel rights that the Company owns or subsequently develops in Florida, Georgia, Alabama, Mississippi, Louisiana, Kentucky, Tennessee, North Carolina or South Carolina. The BellSouth Agreement also contains a covenant not-to-compete that prohibits the Company from competing with BellSouth Wireless in the video distribution business in the Florida and Louisville, Kentucky BTAs (as defined herein) for a period of five years from the closing date. The BellSouth Agreement contains customary conditions to closing, including the expiration of applicable waiting periods under the federal antitrust laws and the satisfaction of all applicable regulatory requirements. There can be no assurance that all of such conditions will be satisfied or that the BellSouth Transaction will be consummated. The Company also has granted to BellSouth Wireless an option to purchase for $9.0 million the Company's wireless cable channel rights in Yuba City, California and the Company's Yuba City and Sacramento, California BTA authorizations. The option can be exercised by BellSouth Wireless at any time within 18 months after the date of the BellSouth Agreement. SUBSCRIPTION TELEVISION INDUSTRY The subscription television industry began in the late 1940's and 1950's to serve the needs of residents in predominantly rural areas with limited access to local off-air VHF/UHF broadcasts. The industry expanded to metropolitan areas due to, among other things, the fact that subscription television offered better reception and more programming. Currently, subscription television systems offer various types of programming, which generally include basic service, expanded basic service, premium service, and, in some instances, pay-per-view service. A subscription television customer generally pays an initial connection charge and a fixed monthly fee for basic service. The amount of the monthly basic service fee varies from one area to another and is a function, in part, of the number of channels and services included in the basic service package and the cost of such services to the subscription television system operator. In most instances, a separate monthly fee for each premium service and certain other specific programming is charged to customers, with discounts generally available to customers receiving multiple premium services. Monthly service fees for basic, expanded basic, and premium 4 6 services constitute the major source of revenue for subscription television systems. Customers normally are free to discontinue service at any time. Converter rentals, remote control rentals, installation charges and reconnect charges are also included in a subscription television system's revenues, but generally are not a significant component of such revenues. TRADITIONAL HARDWIRE CABLE TECHNOLOGY Most subscription television systems are franchise (hardwire) cable systems that currently use a coaxial cable to transmit television signals. Traditional hardwire cable operators receive, at a headend, signals for programming services, such as CBS, NBC, ABC, FOX, HBO, Cinemax and CNN, which have been transmitted to them by a broadcast or satellite transmission. A headend consists of signal reception equipment and decryption, retransmission, encoding and related equipment. The operator then delivers the signal from the headend to customers via a distribution network consisting of coaxial cable, amplifiers and other components ("Cable Plant"). As a direct result of the use of Cable Plant to deliver signals throughout a service area, traditional hardwire cable systems are susceptible to signal problems. Signals can only be transmitted via coaxial cable a relatively short distance without amplification. Each time a television signal passes through an amplifier, some measure of noise is added. A series of amplifiers between the headend and the viewing customer leads to progressively greater noise, and thus a grainier picture for some viewers. Also, an amplifier must be properly balanced or the signal may be improperly amplified. Failure of any one amplifier in the chain of Cable Plant will black out the system transmission signal from that point on. Regular system maintenance is required due to water ingress, temperature changes, and other equipment problems, all of which may affect the quality of signals delivered to customers. Some franchise cable operators have begun installing fiber optic networks which will substantially reduce the transmission and reception problems currently experienced by traditional franchise cable systems and expand channel capacity of their systems. The installation of such networks will require a substantial investment by franchise cable operators. WIRELESS CABLE TECHNOLOGY The wireless cable industry was made commercially possible in 1983 when the FCC reallocated a portion of the electromagnetic radio spectrum located between 2500 and 2700 MHz and permitted this spectrum to be used for commercial purposes. At that time, the FCC also modified its rules on the usage of the remaining portion of such spectrum. Nevertheless, regulatory and other obstacles impeded the growth of the wireless cable industry through the remainder of the 1980s. For example, before the 1992 Cable Act (as defined herein) became effective, a continued supply of programming from cable controlled programmers was not assured. The factors contributing to the growth of wireless cable systems since that time include: (i) regulatory reforms by the FCC to facilitate competition for franchise cable operators; (ii) increased availability of programming for wireless cable systems; (iii) consumer demand for an alternative to traditional franchise cable; (iv) increasing accumulation by wireless cable operators of a sufficient number of channels in each market to create a competitive product; and (v) increased availability of capital to wireless cable operators in the public and private markets. Like a traditional franchise cable system, a wireless cable system receives programming at a headend. Unlike a traditional franchise cable system, however, the programming is then retransmitted by a microwave transmitter from an antenna located on a tower associated with the headend to a small microwave receiver located at the customer's premises. At the customer's location, the signals are converted to frequencies that can pass through conventional coaxial cable into a descrambling converter located on top of a television set. Wireless cable requires a clear line-of-sight because the microwave frequencies used will not pass through dense foliage, hills, buildings, or other obstructions. Some of these obstructions can be overcome with the use of signal repeaters, which retransmit an otherwise blocked signal over a limited area. Since wireless cable systems do not require extensive Cable Plant, wireless cable operators are capable of providing customers with a high-quality picture with few transmission disruptions at a significantly lower system capital cost per installed customer than traditional hardwire cable systems. 5 7 REGULATION The subscription television industry is highly regulated. Wireless cable companies are subject to both federal and local regulation, as described below. Federal Communications Commission The FCC has authorized access for wireless cable service to a series of channel groups, consisting of certain channel groups specifically allocated for wireless cable ("MDS"), and other channels originally authorized for educational purposes ("ITFS"), although excess capacity can be leased from ITFS licensees by wireless cable providers. Currently, up to 33 total channels are potentially available for licensing, lease or purchase by wireless cable companies in each market. Up to 13 channels in any given market typically can be owned by commercial operators for full-time usage without programming restrictions. The remaining 20 channels in a given market generally are allocated for ITFS use. FCC rules generally prohibit the ownership or leasing of MDS and ITFS authorizations by cable companies if the MDS facility is located within 35 miles, or the ITFS facility is located within 20 miles, of the cable company's franchise or service areas. Pursuant to the 1996 Act, the cable-MDS rule does not apply to a cable operator in a franchise area in which the operator is subject to effective competition. Authorizations have been issued, or are currently pending, for the majority of MDS wireless cable licenses in most major U.S. markets, and, as discussed below, under the current regulatory structure, only holders of a BTA authorization may apply for available MDS frequencies within the BTA. In a number of markets, certain ITFS frequencies are still available. However, except as noted below, eligibility for ownership of ITFS licenses is limited to accredited educational institutions, governmental organizations engaged in the formal education of enrolled students and non-profit organizations whose purposes are educational and include providing educational and instructional television material to such accredited institutions and governmental organizations ("qualified ITFS educational entities"). Non-local applicants must demonstrate that they have arranged with local educational entities to provide them with programming and that they have established a local programming committee. On July 10, 1996, the FCC adopted an Order in which it authorized the interim use of certain digital compression technologies for the provision of video, voice and data services over MDS and ITFS frequencies. Such technology may be utilized by a wireless cable operator or an MDS or ITFS licensee, after applying for, and being granted, such an authorization by the FCC. The Company has filed, and will continue to file, applications for digital authorizations in many of its markets. The FCC has begun granting digital authorizations. Upon receiving a digital authorization, a licensee also may transmit one-way downstream Internet service. The Company, along with other wireless cable industry companies, petitioned the FCC in March 1997 to expand its digital authorizations to permit the grant of applications for two-way transmission of interactive services over MDS and ITFS frequencies. The petition proposes rule changes necessary for the FCC to routinely grant wireless cable companies the right to implement two-way wireless services without licensing delays. There can be no assurance that the petition will be granted, or if granted, that the Company will be able to develop commercially successful products using two-way transmission. FCC rules require ITFS operators to transmit a minimum amount of educational programming per channel per week. If the educational programming minimums are met, remaining airtime can be leased to wireless cable operators for profit and used to transmit non-educational programming. ITFS licensees are now entitled to meet their minimum educational programming requirements for all licensed channels using only one channel via "channel loading," if desired. Beginning in November 1995, the FCC auctioned all available MDS rights on the basis of Basic Trading Areas ("BTAs"), with one such authorization available per BTA. The winning bidder acquired the right to apply to operate one or more MDS stations within the BTA, as long as its station proposals complied with the FCC's interference requirements and other rules. With regard to commercial ITFS channels, only the BTA license holder may apply for available authorizations within the BTA. A BTA licensee has a five-year build-out period within which to expand or initiate new service within its BTA. It may sell, trade or otherwise alienate all or part of its rights in the BTA and may also partition its BTA along geopolitical boundaries and 6 8 contract with eligible parties to allow them to apply for MDS authorizations within the partitioned area, and conversely, acquire such rights from other BTA licensees. The license term for each station authorized under these BTA procedures is ten years, commencing on the date that the FCC announced that the auction for the BTA had closed. The Company was the winning bidder in 59 BTAs and, as of December 31, 1996, had been issued MDS authorizations in 55 of its BTAs. The Company has filed applications for MDS licenses in the other four BTAs in which it was the winning bidder. The FCC must approve these applications before the MDS authorizations will be issued. Competing applications cannot be filed but the FCC will consider petitions to deny the Company's applications. There can be no assurance that the FCC will approve the Company's remaining applications. As long as the Company continues to hold the BTA rights in any given market, other entities seeking new licenses or certain modifications to existing licenses within such market must seek approval from the Company, as the BTA owner. Similarly, to the extent the Company wishes to obtain new licenses or certain modifications to its existing licenses in markets in which it was not the BTA winner, it will be required to negotiate with the BTA owner for approval of such licenses or modifications. Certain of the Company's MDS applications were filed prior to adoption of the BTA rules. Once such MDS applications are processed by the FCC and the Company resolves any deficiencies identified by the FCC, a conditional license is expected to be issued, allowing construction of the station to commence. Construction of such stations generally must be completed within one year after the date of grant of the conditional license. ITFS authorization holders generally have 18 months within which to construct the station. All ITFS licenses have terms of ten years and most current non-BTA MDS licenses will expire on May 1, 2001. The FCC's standards for renewal of MDS and ITFS licenses are similar to those for other FCC licenses. Licenses also may be revoked for cause in a manner similar to other FCC licenses. FCC rules prohibit the sale for profit of an MDS authorization not obtained by auction or of a controlling interest in the licensee of such a facility prior to construction of the station or, in certain instances, prior to the completion of one year of operation. The FCC, however, does permit the leasing of 100% of an MDS licensee's spectrum capacity to a third party and the granting of options to purchase a controlling interest in an authorization once the required time period has lapsed. The Company is also subject to various FCC regulatory limitations relating to ownership and control. The Communications Act and FCC rules require the FCC's approval before a license may be assigned or control of the holder of a license may be transferred. Moreover, the Act provides that certain types of licenses, including those for MDS stations, may not be held directly by corporations of which non-U.S. citizens or entities ("Aliens") own of record or vote more than 20% of the capital stock. In situations in which such an FCC license is directly or indirectly controlled by another corporation, Aliens may own of record or vote no more than 25% of the controlling corporation's capital stock. In light of these restrictions, ATI amended its certificate of incorporation in April 1995 to require that all of its officers and directors be U.S. citizens and to empower the Board of Directors to redeem ATI's outstanding capital stock to the extent necessary to protect the loss or secure the reinstatement of any license or franchise from any governmental agency if a situation arises whereby more than the permitted percentage of outstanding capital stock of ATI is owned or voted by Aliens. Moreover, the amendments adopted in April 1995 provide that, in such circumstances, no transfers of shares may be made to Aliens and shares causing ATI to exceed the statutory limit may neither be voted, receive dividends, nor be entitled to any other rights, until transferred to U.S. citizens. Telecommunications Act of 1996 On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") became law. Among other things, the 1996 Act eliminates the cable/telephone cross-ownership restriction, allowing a telephone company the option of providing video programming within its telephone service area over a cable system or a video platform. Conversely, cable companies are now permitted to provide telephone service. The 1996 Act also limits, and in some cases eliminates, FCC regulation of cable rates established by the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), depending upon the size of the 7 9 cable system and whether the system is subject to effective competition and the nature of the rate. Specifically, regulation of upper tier rates is scheduled to end March 31, 1999. Moreover, small cable operators and systems subject to effective competition are now exempt from rate regulation as a result of the 1996 Act. The 1996 Act also vests the FCC with exclusive jurisdiction over the provision of DBS (as defined herein) service and preempts the authority of local authorities to impose certain taxes on such services. While current FCC regulations are intended to promote the development of a competitive subscription cable television industry, there can be no assurance that these regulations will have a favorable impact on the Company. Changes in FCC policies or procedures could have a negative effect on the wireless cable industry as a whole and/or the Company in particular. In addition, the FCC's regulation of other spectrum could permit the operation of other wireless services to interfere with MDS and ITFS frequencies. Pending Legislation Legislation has been introduced in several states that would authorize state and local authorities to impose taxes on providers of subscription television programming, including wireless cable operators, based upon their gross receipts. Because the nature of any such legislation, if enacted, is unknown, the Company cannot predict what impact such legislation would have upon its operations. Other Forms of Regulation Federal law requires that all "cable companies," as defined by Section 602 of the Communications Act, obtain local or state franchises prior to constructing a subscription television distribution system. Because wireless cable systems deliver programming to subscribers by means of microwave facilities rather than through coaxial cable and are not specifically defined as "cable systems" in Section 602 of the Communications Act, the 1992 Cable Act, or in earlier statutes or FCC regulations, they have not been considered cable companies under FCC rules in this context. Accordingly, wireless cable companies generally are not required to obtain franchises and are generally not subject to state regulation by public utility or cable commissions. The Company's Lakeland system (which was acquired in September 1994) consists of a hybrid of wireless cable and franchise cable, the latter being utilized to serve areas that are not reached by the system's microwave signals or to distribute programming to limited areas, such as apartment buildings, housing subdivisions and mobile home parks. This system is deemed a "cable company" under the Communications Act and the FCC's rules promulgated thereunder. As such, this system is subject to regulation under some or all of the federal, state and local rules that govern traditional franchise cable operators. Similarly, the Company's subscription television assets in Cincinnati, Ohio include both wireless cable and SMATV facilities, the latter of which have been deemed by the FCC to constitute cable systems. By letter dated October 17, 1996, the FCC provided a temporary waiver of the cable/MDS cross-ownership rules to allow the common ownership and operation of these facilities, which will expire on November 5, 1997. By that date, the Company will be required to take all actions necessary to comply with these rules, including possible divestiture. Wireless cable operators also are subject to regulation by the Federal Aviation Administration and the FCC with respect to construction of transmission towers and certain local zoning regulations affecting construction of such towers and other facilities. Additional restrictions may also be imposed by local authorities, neighborhood associations and other similar organizations limiting the use of certain types of reception equipment used by the Company and its subscribers. COMPETITION The subscription television industry is highly competitive. Currently, the Company's existing and potential competitors consist of a broad range of companies engaged in the communications and entertainment businesses, including cable operators, digital satellite program providers, television networks and home video products companies. To date, the Company has sought to differentiate itself from its competitors through lower priced, streamlined pricing plans, service guarantees, high-quality customer service and system 8 10 performance, and local community involvement and support. In the future, the Company expects to face intense competition from numerous other companies offering video, audio and data products and services. Many of the Company's existing or potential competitors have substantially greater name recognition and financial, technical and human resources than the Company and may be better equipped to develop and operate systems providing subscription television service, high-speed Internet access and telephony services. The Company's principal existing and potential competitors are described below: Franchise Cable Systems Currently, the Company's principal competitors are franchise cable companies that own local franchises to operate their systems in the Company's markets. Cable television service is currently available to the vast majority of U.S. television households. In most instances, the franchise cable operators with which the Company competes serve more subscribers on both a local and national level. Franchise cable companies typically offer a larger selection of programming than the Company. The Company seeks to compete with franchise cable companies by offering the most widely demanded programming choices at lower prices, combined with high-quality customer service. The Company believes that a number of franchise cable operators will be required to significantly upgrade their coaxial systems to provide digital programming, which will involve a substantial investment of capital. Many cable television providers are already in the process of upgrading their systems and other cable operators have announced their intentions to make significant upgrades. A number of proposed technological improvements, when fully completed, will permit cable companies to increase channel capacity, thereby increasing programming alternatives, and to deliver a better quality signal without significant upgrades to their systems. Many of the largest cable systems in the United States have announced plans to offer data and telephony service through upgraded networks, and have entered into agreements with major telephony providers to further these efforts. In some cases, trials of data and telephony services are underway. In the event that these trials are successful, the cable operators who are capable of offering both data and telephony services will have a competitive advantage over wireless companies if consumers choose to receive both their cable and telephone service from the same operator. Direct Broadcast Satellite ("DBS") DBS involves the transmission of an encoded signal direct from a satellite to the customer's home. Because the signal is at a higher power level and frequency than most satellite-transmitted signals, its reception can be accomplished with a relatively small (18-inch) dish mounted on a rooftop or in the customer's yard. The cost of constructing and launching the satellites used to distribute DBS programming is substantial. When first introduced, DBS reception equipment for a single television set cost approximately $650 per customer, plus installation fees, service charges and off-air antenna installation, where applicable. Furthermore, each additional, independent outlet requires a separate descrambling device at additional cost to the subscriber. These prices have decreased as additional competitors have entered the DBS market. Recent promotions have offered DBS reception equipment for less than $150 (exclusive of installation and other charges) when the consumer agrees to prepay a one-year subscription fee. The Company's principal DBS competitors are described below. DirecTV, Inc. ("DirecTV"), which is substantially owned by GM-Hughes Electronics, successfully launched its first satellite in December 1993, its second satellite in August 1994, and a third satellite as an in-orbit spare in June 1995. The third satellite may also be operated by DirecTV to provide additional capacity. Each of DirecTV's satellites are high power satellites. As of December 31, 1996, according to trade publications, DirecTV served approximately 2.3 million subscribers. Recently, AT&T Corporation ("AT&T") and DirecTV entered into an exclusive agreement for AT&T to market and distribute DirecTV's DBS service and related equipment to AT&T's large customer base. As part of the agreement, AT&T made an initial investment of approximately $137.5 million to acquire 2.5% of the equity of DirecTV, with an option to 9 11 increase its investment to up to 30% over five years. This agreement provides a significant base of potential customers for DirecTV's DBS systems and allows AT&T and DirecTV to offer customers a package of digital entertainment and communications services. AT&T and DirecTV have also announced plans to jointly develop new multimedia services for DirecTV under the agreement. United States Satellite Broadcasting Corporation ("USSB") owns and operates DBS spectrum on DirecTV's first satellite and offers a programming service separate from DirecTV's service. As of December 31, 1996, this programming service had over 25 channels of premium video programming not available from DirecTV. USSB's selection of programming services (and its use of transponders on the same satellite used by DirecTV, which enables subscribers to receive both DirecTV and USSB signals with a signal satellite receiver) allows it to be marketed as a complementary service to DirecTV, partially offsetting the competitive handicap caused by its relatively limited channel capacity. According to trade publications, as of December 31, 1996, approximately one-half of DirecTV's 2.3 million subscribers received USSB programming. PrimeStar Partners ("PrimeStar") currently offers medium power Ku-band programming service to customers using dishes approximately three feet in diameter. PrimeStar is owned by a group of franchise cable operators and provides service nationwide. According to trade publications, PrimeStar had approximately 1.6 million subscribers as of December 31, 1996. EchoStar Communications Corporation ("EchoStar") launched a high power satellite in December 1995, commenced national broadcasting of programming channels in March 1996 and, as of December 31, 1996, broadcasted approximately 150 channels of programming. EchoStar has announced plans to increase its program offering through the launch of two additional satellites (one in each of 1997 and 1998). As of December 31, 1996, EchoStar had approximately 350,000 subscribers, according to trade publications. During 1996, MCI Communications Corporation ("MCI") acquired high power DBS spectrum with the capacity to offer over 200 channels of digital video programming for $682.5 million in an FCC auction. Thereafter, MCI entered into a joint venture with The News Corporation ("News Corp") to build and launch a high power digital satellite system. On February 24, 1997, EchoStar and News Corp announced that News Corp had agreed to acquire a 50% ownership interest in EchoStar in exchange for aggregate consideration of approximately $1.0 billion (such consideration consisting of cash and certain DBS assets). The EchoStar/ News Corp alliance, which will do business using the "Sky" brand name, announced that it plans to provide approximately 500 channels of digital programming, including local broadcast signals, by the end of 1998 to a majority of the continental United States. As a result of its alliance with News Corp, EchoStar will have substantially greater financial and other resources than the Company and can be expected to increase the competition that the Company encounters in the overall market for subscription television customers. C-band Satellite Program Distributors The Company also competes with C-band satellite program distributors (also referred to as "backyard dish" or television receive only ("TVRO") systems). C-band systems have been popular (mostly in rural and semi-rural areas) since the late 1970s, and currently serve approximately 2.1 million subscribers in the aggregate, according to trade publications. The primary advantages of wireless cable systems over TVRO systems are lower equipment costs and broader availability of local programming. TVRO systems, on the other hand, enjoy the advantage of access to a wider variety of satellite programming and serve areas not served by franchise or wireless cable systems. A conventional TVRO antenna system costs in excess of $1,000 per subscriber, and subscribers are charged monthly fees for access to certain programming. TVRO systems typically cannot receive local off-air broadcast channels. Telephone Companies Certain regional and long distance telephone companies could become significant competitors of the Company in the future, as they have expressed an interest in becoming subscription television providers. The 1996 Act removes barriers to entry that previously inhibited telephone companies from competing, or made it more difficult for telephone companies to compete, in the provision of video programming and information services. Certain telephone companies have received authorization to test market video and other services in 10 12 certain geographic areas using fiber optic cable and digital compression over existing telephone lines. Estimates for the timing of wide-scale deployment of such multichannel video service vary, as several telephone companies have pushed back originally announced deployment schedules. As more telephone companies begin to provide subscription television programming and other information and communications services to their customers, significant additional competition for subscribers is expected to develop. Among other things, telephone companies have an existing relationship with substantially every household in their service area, substantial financial resources and an existing infrastructure, and may be able to subsidize the delivery of programming through their position as the sole source of telephone service to the home. VHF/UHF Broadcasters Most areas of the United States are covered by traditional territorial over-the-air VHF/UHF broadcasters. Consumers can receive from three to ten channels of over-the-air programming in most markets. These stations provide local, network and syndicated programming free of charge, but each major market is generally limited in the number of programming channels. Congress is expected to consider the release of additional digital spectrum for use by VHF/UHF broadcasters in the delivery of high definition television services later in 1997. Private Cable Private cable is a multi-channel subscription television service where the programming is received by a satellite receiver and then transmitted via coaxial cable throughout private property, often multiple dwelling units ("MDUs"), without crossing public rights of way. Private cable operates under an agreement with a private landowner to service a specific MDU, commercial establishment or hotel. The FCC recently amended its rules to allow the provision of point-to-point delivery of video programming by private cable operators and other video delivery systems in the 18 GHz bandwidth. Private cable operators compete with the Company for exclusive rights of entry into MDUs. Local Multi-Point Distribution Service ("LMDS") On March 13, 1997, the FCC released service and competitive bidding rules for LMDS, which is located at 27.5 to 28.35 GHZ, 29.1 to 29.25 GHZ and 31.0 to 31.3 GHZ in the frequency band. There will be one 1150 MHz LMDS license and one 150 MHz LMDS license awarded for each BTA, for a total of 986 authorizations. There will be no restrictions on the number of licenses an entity may hold, but incumbent LECs and cable companies will not be able to obtain the 1150 MHz licenses in-region for three years. A simultaneous multiple round auction will be scheduled for later this year. Certain issues regarding geographic partitioning and spectrum disaggregation are the subject of a pending rulemaking. The rules for use of the spectrum are relatively broad, but it is expected that the spectrum will be used for multichannel video programming, telephony, video communications and data services, including two-way video communications. Wireless Communications Service ("WCS") On February 19, 1997, the FCC announced service and auction rules for WCS, which is located at about 2.3 GHz in the frequency band. There will be two 10 MHz WCS licenses for each of 52 major economic areas and two 5 MHz WCS licenses for each of 12 regional economic area groupings. A simultaneous, multiple-round electronic auction for the WCS licenses is expected to begin in April 1997. The rules for use of the spectrum are relatively broad. Since the licenses involve much less total spectrum than is available to other providers of subscription television service, such as the Company, in a typical market, it is unlikely that WCS license winners will be able to effectively compete with such subscription television providers. However, WCS license winners could increase competition in the data and wireless telephony businesses in the future. The Company has not determined the degree of participation, if any, it will have in the WCS auction. 11 13 MARKETS The Company operates under a decentralized management structure in order to maximize the Company's local presence in each market. Most of the Company's operational systems or system clusters are managed by a general or operations manager who reports directly to a regional manager. General and operations managers are responsible for the day-to-day operations of their respective systems. Each operating system is staffed with customer service and sales representatives and service technicians. Most non-executive employees of the Company have incentive compensation programs that are tied to service quality levels and sales goals. Pricing and programming decisions are made at the local level, subject to review by the Company's executive management. Each of the Company's analog wireless cable systems typically offers 15 to 25 basic cable channels, one to three premium channels, and one or two pay-per-view channels. Pay-per-view programming is offered only on an event-by-event basis in certain of the Company's markets. The following table sets forth, by region, certain information relating to the Company's Markets as of December 31, 1996:
ESTIMATED TOTAL DEVELOPED HOUSEHOLDS REGION MARKETS MARKETS IN SERVICE AREA SUBSCRIBERS ------ ------- --------- --------------- ----------- Rocky Mountain....................................... 11 9 2,045,000 63,200 Southeast............................................ 8 5 2,134,000 35,500 Western.............................................. 17 11 3,709,000 35,100 Upper Midwest........................................ 10 7 1,008,000 14,700 Midwest.............................................. 8 6 3,096,000 31,300 -- -- ---------- ------- 54 38 11,992,000 179,800 == == ========== =======
Information regarding the Company's Markets as of December 31, 1996 is presented in the following table. "Estimated Households in Service Area" represents the approximate number of households within a 35 mile radius of the Company's tower sites, subject to certain downward adjustments for overlapping service areas. This information is based upon household estimates provided by Strategic Mapping, Inc. using data obtained from the Donnelley Marketing Inc. Residential Database. Some of these households will be "shadowed" and therefore unable to receive the Company's service due to Line-of-Sight Constraints. The percentage of Estimated Households in Service Area that the Company estimates may be shadowed due to Line-of-Sight Constraints generally ranges from 10% to 50% depending upon the market. 12 14 WIRELESS CABLE CHANNELS
OWNED OR TOTAL EXPECTED LEASED CHANNELS ANALOG CHANNELS ESTIMATED OWNED SUBJECT TO (INCLUDING HOUSEHOLDS IN OR LEASED PENDING FCC TOTAL OFF-AIR SERVICE AREA FCC CHANNELS APPLICATIONS(1) MICROWAVE CHANNELS)(2) ------------- ------------ --------------- --------- --------------- ROCKY MOUNTAIN REGION Denver, CO............................. 689,000 29 4 33 41 Oklahoma City, OK...................... 391,000 28 -- 28 37 Little Rock, AR........................ 231,000 30 1 31 37 Wichita, KS............................ 213,000 28 3 31 34 Colorado Springs, CO(3)................ 190,000 33 0 33 38 Greeley, CO(3)......................... 113,000 24 9 33 41 Fort Collins, CO(3).................... 91,000 29 4 33 41 Billings, MT........................... 52,000 28 4 32 35 Pueblo, CO(3).......................... 49,000 8 24 32 37 Alamoso, CO(3)......................... 14,000 13 8 21 21 Sheridan, WY........................... 12,000 23 4 27 30 ---------- Regional Total....................... 2,045,000 SOUTHEAST REGION Orlando, FL(3)......................... 521,000 27 -- 27 33 Lakeland, FL(3)........................ 305,000 30 3 33 41 Jacksonville, FL(3).................... 373,000 19 3 22 29 Daytona Beach, FL(3)................... 193,000 13 4 17 25 Ft. Myers, FL(3)....................... 175,000 20 8 28 33 Bradenton, FL.......................... 417,000 9 4 13 19 Naples, FL............................. 99,000 18 5 23 27 Sebring, FL............................ 51,000 -- 20 20 20 ---------- Regional Total....................... 2,134,000 WESTERN REGION Seattle, WA............................ 1,254,000 13 -- 13 23 Portland, OR(3)........................ 579,000 28 -- 28 34 Las Vegas, NV(3)....................... 368,000 23 4 27 39 Fresno, CA............................. 268,000 25 -- 25 39 Salem, OR(3)........................... 180,000 24 3 27 34 Monterey/Salinas, CA(3)................ 171,000 22 5 27 34 Eugene, OR(3).......................... 124,000 26 3 29 32 Visalia, CA............................ 117,000 31 2 33 44 Santa Barbara, CA...................... 103,000 4 4 8 14 Anchorage, AK.......................... 99,000 25 4 29 36 Yuba City, CA(3)....................... 93,000 27 -- 27 38 Medford, OR(3)......................... 92,000 33 -- 33 33 Redding, CA(3)......................... 70,000 24 7 31 36 Merced, CA............................. 69,000 17 16 33 38 Bend, OR............................... 44,000 28 4 32 36 Wenatchee, WA(3)....................... 41,000 9 12 21 23 Maui, HI(3)............................ 37,000 28 3 31 37 ---------- Regional Total....................... 3,709,000 UPPER MIDWEST REGION Omaha, NE(3)........................... 299,000 13 16 29 33 Green Bay, WI(3)....................... 198,000 21 7 28 34 Sheboygan, WI(3)....................... 198,000 11 10 21 26 Lincoln, NE(3)......................... 50,000 32 -- 32 39 Fargo, ND(3)........................... 85,000 32 -- 32 37 Rapid City, SD......................... 46,000 30 -- 30 35 Grand Island, NE(3).................... 43,000 32 -- 32 41 Tecumseh, NE(3)........................ 39,000 16 4 20 20 Windom, MN(3).......................... 31,000 12 17 29 33 Geneva, NE(3).......................... 19,000 8 -- 8 15 ---------- Regional Total....................... 1,008,000 MIDWEST REGION Columbus, OH(3)........................ 575,000 20 9 29 34 Cincinnati, OH(3)...................... 622,000 9 4 13 19 Louisville, KY......................... 438,000 20 4 24 34 Youngstown, OH(3)...................... 431,000 31 2 33 37 Toledo, OH............................. 351,000 32 -- 32 40 South Bend/Elkhart, IN(3).............. 292,000 27 4 31 36 Lansing, MI(3)......................... 224,000 15 17 32 38 Jackson, MI(3)......................... 163,000 17 13 30 34 ---------- Regional Total....................... 3,096,000 Total.................................... 11,992,000 ==========
13 15 - --------------- (1) New station applications, petitions for reconsideration, and petitions for reinstatement are subject to approval by the FCC. The entities with which the Company has entered into leasing agreements have filed a series of applications for wireless cable channels. In many cases, the Company's applicant is the sole applicant. Due to the qualifications of the Company's applicants relative to competing filings, the Company expects that most of these applications will be approved by the FCC. However, there can be no assurance that these FCC applications will be approved. (2) Represents total expected wireless channels (including channels not yet in service) plus local off-air broadcast channels which are generally available in the Company's broadcast signal area and which the Company does not expect to rebroadcast over its wireless cable channels. (3) The Company is the BTA holder in this market. In certain cases, two or more of the Company's existing or target markets may be contained within a single BTA. In addition to the channel interests detailed above, the Company holds channel rights in a number of other U.S. markets. The Company may seek additional channel rights in these markets or sell or exchange the channel rights it already holds. Pursuant to an Investment Agreement dated January 19, 1991, between CFW Communications Company, a diversified publicly-traded telecommunications company based in Waynesboro, Virginia ("CFW") and ATI (which agreement provided for the purchase by CFW of 1,209,678 shares of ATI's Series A Convertible Preferred Stock), the Company is entitled to receive payments equal to 10% of the earnings (as defined in the agreement) of each wireless cable system developed by CFW in the Commonwealth of Virginia for a 15-year period after each respective system has achieved accumulated pre-tax income. In return, the Company is required to provide certain advisory services to CFW in connection with the development of such systems. CFW currently operates wireless cable systems in Richmond, Charlottesville and other cities within the Shenandoah Valley, and maintains certain wireless cable channel rights in Lynchburg and Winchester, Virginia. ACQUISITIONS AND DIVESTITURES Since May 1993, the Company has acquired 22 operational wireless cable systems and wireless cable channel rights in 18 additional markets, and has sold two operational wireless cable systems and wireless cable channel rights in two additional markets. On March 18, 1997, the Company entered into the BellSouth Agreement, which provides for the sale of all of the Company's Southeastern Assets to BellSouth Wireless. The Southeastern Assets include operating wireless cable systems in Orlando, Lakeland, Jacksonville, Daytona Beach and Ft. Myers, Florida and Louisville, Kentucky and wireless cable channel rights in Bradenton, Naples, Sebring and Miami, Florida. The purchase price for all of the Southeastern Assets will range from $67.9 million to $103.2 million, depending upon the number of wireless cable channel rights that are ultimately transferred to BellSouth Wireless. See "-- Recent Development". The BellSouth Agreement contains customary conditions to closing, including the expiration of applicable waiting periods under the federal antitrust laws and the satisfaction of all applicable regulatory requirements. There can be no assurance that all of such conditions will be satisfied or that the BellSouth Transaction will be consummated. The Company may in the future pursue other opportunities to sell or exchange certain of its wireless cable television assets. There can be no assurance that the Company will be successful in completing any such transactions. PROGRAMMING The Company's analog wireless cable systems seek to offer popular programming at affordable prices. The Company selects its basic programming channels to appeal to a specific customer base and generally does not offer programming which appeals to small, specialized market segments. The Company's typical analog channel offering includes between 15 and 25 basic cable channels, one to three premium channels (typically HBO, Showtime or the Disney Channel) and one or two pay-per-view channels. Pay-per-view service is offered in certain markets only on an event-by-event basis. Specific programming packages vary according to 14 16 particular market demand. Local off-air channels are received by the subscriber along with the Company's wireless channels, thereby adding, on average, four to eight channels to the number of basic channels offered and resulting in aggregate offerings currently ranging from 14 to 44 channels. Programming expenses typically equal approximately one-third of the Company's revenue and have been increasing relative to revenues. The Company could be adversely affected if it cannot increase subscriber rates, because of market pressures or otherwise, to offset increases in programming and other expenses. SERVICE The Company's subscription television business emphasizes a strong commitment to high-quality customer service. This commitment is evidenced, in a number of the Company's Developed Markets, by seven-day-a-week, fixed-appointment-time installations; same-day response to service call requests; short telephone hold times; and extended office, telephone and technical service hours. SALES AND MARKETING In marketing its subscription television service, the Company continues to target specific consumer segments which have demonstrated a propensity toward value-added choices and offers specific marketing programs based on local demand, general market characteristics, and customer surveys. EQUIPMENT AND FACILITIES The Company's analog wireless cable systems utilize fully addressable subscriber equipment. In-home wireless subscriber equipment components used in the Company's systems are generally similar to those used in franchise cable systems. Subscriber equipment includes a microwave receiver, downconverter, set-top converter and remote control unit. The Company is not dependent upon any one supplier for its equipment needs. LICENSES AND CHANNEL LEASES The Company generally does not hold FCC licenses for channels that it uses to broadcast programming; instead, it has acquired the right to broadcast under long-term leases with third party licensees. The average term of the Company's channel leases, including renewals at the Company's option, is more than ten years. Although the Company anticipates that it will continue to have access to a sufficient number of channels to operate a successful wireless cable system, if a significant number of the Company's channel leases are not renewed, a significant number of its pending FCC applications are not granted, or the FCC terminates, forfeits, revokes or fails to renew the authorizations held by the Company's channel lessors, ATI may be unable to provide a viable programming package to subscribers in some or all of its markets. Prior to November 1993, the Company was a direct FCC licensee with respect to approximately ten wireless cable authorizations used by its systems to broadcast programming and had applications pending with the FCC regarding 39 other authorizations. In November and December 1993, the Company assigned its FCC licenses, and filed amendments to assign these pending FCC applications, to Wireless Properties, Inc., Wireless Properties of Virginia, Inc., Wireless Properties -- East, Inc. or Wireless Properties -- West, Inc. (collectively, the "Wireless Companies"). The Wireless Companies are owned and controlled by Donald R. DePriest, Chairman of the Board of Directors and a Director of ATI. In return, the Wireless Companies agreed to grant to the Company the exclusive right to use such FCC licenses for an initial term of five years and, at the Company's option, for an unlimited number of successive one-year terms thereafter, pursuant to certain channel lease agreements. The Wireless Companies assigned the majority of such licenses back to the Company during 1996. The annual lease payments required to be paid by the Company pursuant to its channel lease agreements with the Wireless Companies were nominal. 15 17 EMPLOYEES As of December 31, 1996, the Company had approximately 640 employees. The Company considers relations with its employees to be satisfactory. The Company also uses independent contractors to perform some installations and door-to-door sales. ITEM 2. PROPERTIES The principal physical assets of a wireless cable system consist of satellite signal reception equipment, radio transmitters and transmission antennas, as well as office space and transmission tower space. The Company's principal office is located in approximately 18,000 square feet of leased office space in Colorado Springs, Colorado. The Company occupies this space under a lease agreement that expires in 2000. The Company believes that such office space in Colorado Springs is adequate for the near future. The Company currently leases additional office and warehouse space in each of its Developed Markets and certain of its Undeveloped Markets pursuant to lease agreements that expire at various times over the next three to five years. The Company also leases tower transmission space in all of its Developed Markets (except for three markets where it owns transmission towers) and certain of its Undeveloped Markets, pursuant to long-term lease arrangements. The Company's tower lease agreements provide for locating transmitter, antenna and other equipment at existing towers to broadcast wireless cable signals. The agreements generally cover a period of five to seven years and are subject to renewal upon expiration. To date, the Company has been able to obtain suitable tower space on satisfactory terms in each of its Developed Markets. In the event that any one or more of these tower space leases is terminated or not renewed upon expiration, the Company will be required to obtain alternative tower space in order to broadcast its programming. ITEM 3. LEGAL PROCEEDINGS On or about February 17, 1994, Fresno Telsat, Inc. ("FTI"), the 35% general partner of Fresno MMDS Associates ("the Fresno Partnership") which operates the Company's Fresno, Merced and Visalia wireless cable systems, filed a Complaint in the Superior Court of the State of California for the County of Monterey against Robert D. Hostetler, Terry J. Holmes, the Company, and certain other named and unnamed defendants. From 1989 through June 10, 1993, Mr. Hostetler was a member of the Board of Directors and President of FTI. Mr. Hostetler and his wife currently own 28% of the outstanding capital stock of FTI. Mr. Hostetler has been employed by the Company since December 10, 1993 and became a Director of the Company on March 22, 1994. In January 1996, Mr. Hostetler was appointed President and Chief Executive Officer of the Company. From 1991 until June 1995, Mr. Holmes was General Manager of the Fresno Partnership. He is currently Managing Director of the Fresno Partnership. Mr. Holmes has been employed by the Company since June 1995, and became Vice President -- Operations of the Company in January 1996. The Complaint alleges that, while he was a director and employee of FTI, Mr. Hostetler engaged in wrongful conduct, including misappropriation of corporate opportunity, fraud and unfair competition by exploiting business opportunities that were the property of FTI. The Complaint also alleges that Mr. Holmes engaged in a misappropriation of corporate opportunities belonging to FTI. The Complaint further alleges that all defendants, including the Company, participated in a conspiracy to misappropriate corporate opportunities belonging to FTI and that the Company and the unnamed defendants engaged in wrongful interference with fiduciary relationship by intentionally causing Mr. Hostetler to breach his fiduciary duty to FTI and causing Mr. Hostetler to wrongfully transfer FTI's corporate opportunities to the Company. On August 28, 1996, ATI filed a Cross-Complaint (the "Cross-Complaint") against FTI and certain of its officers and directors (the "Cross-Defendants"). The Cross-Complaint alleges that the Cross-Defendants have engaged in a violation of Section 26-1-8-401 of the Indiana Code, conversion, conspiracy, and breach of trust by failing to acknowledge and record ATI's ownership of approximately 7% of FTI's capital stock purchased by ATI from a former shareholder of FTI, and continuing to represent that FTI qualifies for Subchapter S status under the Internal Revenue Code. The Cross-Complaint seeks specific performance of the transfer of shares to ATI, compensatory damages, punitive damages, an injunction against any further 16 18 actions by the Cross-Defendants in breach of trust or with the effect of dissipating and diverting the property and assets of FTI, and the appointment of a receiver to handle the affairs of FTI during the pendency of the FTI proceeding. On or about February 24, 1997, the Company and Mr. Holmes each filed a motion for summary judgment seeking dismissal of the claims in the Complaint relating to an alleged conspiracy to misappropriate corporate opportunities of FTI. The motion to dismiss is scheduled to be heard on April 25, 1997. On or about March 5, 1997, FTI filed a motion for leave to amend the Complaint to add allegations that ATI aided and abetted Mr. Hostetler's misappropriation of corporate opportunity and that all defendants wrongfully interfered with FTI's prospective business opportunities. The Complaint seeks compensatory damages (in an unspecified amount but estimated by the plaintiff to be no less than $5 million) and exemplary damages against all defendants, costs, an accounting, injunctive relief prohibiting Mr. Hostetler from continuing to engage in unfair competition against FTI and prohibiting all defendants from engaging in misappropriation of corporate opportunities belonging to FTI, and the imposition of a constructive trust upon the corporate opportunities of FTI utilized in the Company's initial public offering. While discovery has commenced in this proceeding, no trial date has been scheduled. Although the ultimate outcome of the litigation cannot be predicted at this time, management believes, based upon its review of the Complaint and after consultation with counsel, that resolution of this matter will not have a material adverse impact on the Company's financial position or future results of operations. On January 12, 1996, Videotron (Bay Area) Inc. filed a complaint against ATI in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. The Complaint alleges that ATI has caused certain entities from which ATI leases channels and airtime for its Bradenton and Lakeland, Florida wireless cable markets (the "ATI Lessors") to actively oppose Videotron's FCC applications to increase broadcast power in Videotron's Tampa, Florida wireless cable system (the "Tampa market") in violation of a Non-Interference Agreement between Videotron and ATI (the "Non-Interference Agreement"). The Complaint seeks injunctive relief directing ATI to perform all acts, services and undertakings required under the Non-Interference Agreement, including but not limited to using reasonable best efforts to cause the ATI Lessors not to object to Videotron's attempt to increase broadcast power in the Tampa market and to enter into certain non-interference agreements with respect thereto. In the alternative, the Complaint seeks damages for breach of the Non-Interference Agreement (in an unspecified amount but exceeding $15,000). Recently, in responding to written interrogatories, Videotron estimated its damages to be approximately $113.5 million. Although the ultimate outcome of this litigation cannot be predicted at this time, management of ATI believes, based upon its review of the Complaint and after consultation with counsel, that resolution of this matter will not have a material adverse impact on the Company's financial position or future results of operations. In addition, the Company is occasionally a party to legal actions arising in the ordinary course of its business, the ultimate resolution of which cannot be ascertained at this time. However, in the opinion of management, resolution of these matters will not have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of 1996. 17 19 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (FURNISHED IN ACCORDANCE WITH ITEM 401(B) OF REGULATION S-K, PURSUANT TO GENERAL INSTRUCTION G(3) OF FORM 10-K) The following table sets forth certain data concerning the Company's executive officers as of the date of this Report:
NAME AGE PRESENT POSITION BUSINESS EXPERIENCE AND OTHER INFORMATION ---- --- ---------------- ----------------------------------------- Donald R. DePriest...... 57 Chairman of the Board of Chairman of the Board of Directors since March Directors 1990; President of the Company from 1988 through March 1990; Chairman of the Board of Directors, President and sole stockholder of MedCom Development Corporation ("MedCom"), the sole general partner of MCT, an investment partnership specializing in the communications and health care industries and ATI's largest stockholder; also a limited partner of MCT; Chairman of the Board and President of Boundary Healthcare Products Corporation, a hospital products manufacturer, from 1987 through its sale to Maxxim Medical, Inc. ("Maxxim") in December 1992; Director of Maxxim, a publicly-traded hospital products manufacturer, since December 1992. Richard F. Seney........ 42 Vice Chairman of the Board Vice Chairman of the Board of Directors since of Directors and Secretary October 1993; Secretary of the Company since 1988; Treasurer of the Company from 1988 to March 1994; Vice President and General Manager of MedCom since 1987; limited partner of MCT. Robert D. Hostetler..... 55 President and Chief President and Chief Executive Officer of the Executive Officer Company since January, 1996; Vice President -- Development from January 1995 through December 1995; Director of Mergers and Acquisitions of the Company from December 1993 through December 1994; a member of the Board of Directors of the Company since March 1994; Director and/or officer of several affiliated wireless cable entities in the Choice TV Group (as defined herein) and President of FTI from 1988 to December 1993. David K. Sentman........ 46 Senior Vice President, Chief Senior Vice President and Chief Financial Financial Officer, and Officer since January 1996; Vice Treasurer President -- Finance and Chief Financial Officer from July 1995 through December 1995; served in various capacities, including Chief Financial Officer, with Artisoft, Inc. from July 1992 through February 1995; prior to July 1992, held various management positions with CTS Corporation. Terry J. Holmes......... 42 Vice President -- Operations Vice President -- Operations since January 1996; Regional Manager -- Western Region from June 1995 through December 1995; currently Managing Director of the Fresno Partnership; General Manager of the Fresno Partnership from June 1991 to June 1995; prior to June 1991, held various positions with Telecommunications, Inc., Prime Cable and other private cable operators. John B. Suranyi......... 36 Vice President -- Operations Vice President -- Operations since January 1996; Regional Manager -- Rocky Mountain and Upper Midwest Regions from September 1993 through December 1995; prior to September 1993, held various positions with Telecommunications, Inc. and United Artists Cable.
18 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Class A Common Stock is quoted on the Nasdaq Stock Market under the symbol "ATEL." The high and low closing sale prices of the Class A Common Stock for 1995 and 1996 on the Nasdaq Stock Market (as reported by Nasdaq) are set forth below: NASDAQ DAILY CLOSING PRICE
HIGH LOW ---- ---- 1995 First Quarter............................................... $17 3/4 $ 9 1/4 Second Quarter.............................................. 16 1/2 11 3/4 Third Quarter............................................... 13 3/4 9 1/2 Fourth Quarter.............................................. 15 12 1996 First Quarter............................................... $17 $13 3/4 Second Quarter.............................................. 16 11 1/4 Third Quarter............................................... 14 1/4 8 3/4 Fourth Quarter.............................................. 11 1/2 5 1/4
As of March 11, 1997, there were approximately 408 record holders of the Company's Class A Common Stock, not including stockholders who beneficially own Class A Common Stock held in nominee or street name. As of March 11, 1997, there were approximately 5,000 beneficial owners of the Company's Class A Common Stock held in nominee or street name. The Company has never declared or paid any cash dividends on its Class A Common Stock and does not expect to declare dividends in the foreseeable future. Payment of any future dividends will depend upon the earnings and capital requirements of the Company, the Company's debt facilities, and other factors the Board of Directors considers appropriate. The Company currently intends to retain its earnings, if any, to support future growth and expansion. The Company's ability to declare dividends is affected by covenants in certain debt facilities that prohibit the Company from declaring dividends and the Company's subsidiaries from transferring funds in the form of cash dividends, loans or advances to ATI. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." 19 21 ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data as of and for each period in the five year period ended December 31, 1996 have been derived from, and are qualified by reference to, the Company's Consolidated Financial Statements which have been audited by Arthur Andersen LLP, independent public accountants. This data should be read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto for the three years ended December 31, 1996, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Report.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1992 1993(1) 1994(2) 1995(3) 1996 ------- -------- -------- -------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Total revenues............................................ $ 3,534 $ 7,178 $ 21,629 $ 47,501 $ 62,032 Costs and expenses: Operating............................................... 2,563 4,524 13,128 26,021 36,029 Marketing, general and administrative................... 1,729 2,937 13,486 27,870 26,256 Depreciation and amortization........................... 1,158 2,563 12,032 29,276 44,665 Impairment of wireless cable assets..................... -- -- -- -- 21,271 ------- -------- -------- -------- --------- Loss before interest and taxes............................ (1,916) (2,846) (17,017) (35,666) (66,189) Interest expense and other, net........................... (258) (1,665) (7,271) (22,300) (35,488) ------- -------- -------- -------- --------- Loss before income tax benefit............................ $(2,174) $( 4,511) $(24,288) $(57,966) $(101,677) ======= ======== ======== ======== ========= Net loss applicable to Class A Common Stock(4)............ $(2,174) $ (4,511) $(15,478) $(66,635) $(104,630) ======= ======== ======== ======== ========= Net loss per share(5)..................................... $ (0.46) $ (1.07) $ (4.17) $ (5.78) ======== ======== ======== ========= Weighted average shares outstanding(5).................... 9,831 14,445 15,977 18,096 ======== ======== ======== ========= OPERATING AND OTHER DATA: Earnings (loss) before interest, income taxes, depreciation and amortization(6)........................ $ (758) $ (283) $ (4,985) $ (6,390) $ (253) Number of operational systems (at end of period).......... 3 10 26 38 38 Number of subscribers (at end of period).................. 15,300 31,400 106,500 173,700 179,800 CONSOLIDATED BALANCE SHEET DATA: Cash, cash equivalents and short-term investments......... $ 81 $ 36,377 $ 33,331 $ 32,514 $ 18,476 Intangible assets, net.................................... 1,678 46,273 118,397 166,194 160,052 Total assets.............................................. 11,275 101,653 226,920 317,049 283,572 Long-term obligations (net of current portion and deferred income taxes)........................................... 3,871 11,641 117,761 225,512 256,354 Stockholders' equity...................................... 2,903 79,056 93,843 53,736 3,113
- --------------- (1) Includes the results of operations of the Billings, Denver and South Bend/Elkhart systems from their respective acquisition dates. (2) Includes the results of operations of the Bend, FEN/WEN Group, Oklahoma City, Wichita and Lakeland systems from their respective acquisition dates. (3) Includes the results of operations of the Medford, Sheridan, Redding, Las Vegas and Rapid City systems and Fresno Wireless Cable Television, Inc. ("FWCTI") from their respective acquisition dates. (4) Reflects the cumulative effect of the change in accounting for installation costs effected January 1, 1995 (income, net of income taxes, of $602,000 or $0.04 per share) and the extraordinary charge on early retirement of debt recognized during the quarter ended September 30, 1995 (charge of $11.5 million or $0.72 per share). Net loss for the year ended December 31, 1996 includes dividend embedded in conversion feature of Series B Convertible Preferred Stock of $6.25 million. (5) Net loss per share and weighted average shares outstanding for the years ended December 31, 1993 and 1994 give effect to the conversion in January 1994 of all outstanding shares of ATI's Series A Convertible Preferred Stock into 2,014,098 shares of Common Stock. Net loss per share for the year ended December 31, 1996 gives effect to the dividend embedded in conversion feature of Series B Convertible Preferred Stock of $6.25 million. (6) Earnings (loss) before interest, taxes, depreciation and amortization is a commonly used measure of performance within the wireless cable industry. However, it does not purport to represent cash used by operating activities and should not be considered in isolation or as a substitute for measures of performance in accordance with generally accepted accounting principles. The amount for 1996 excludes impairment of wireless cable assets of approximately $21.3 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fiscal Year 1996 Compared to Fiscal Year 1995." 20 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's plans for future development and operation of its business, are based on current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: a lack of sufficient capital to finance the Company's business plan on terms satisfactory to the Company; pricing pressures which could affect demand for the Company's wireless communications services; changes in labor, equipment and capital costs; the unavailability of digital compression technology and equipment at reasonable prices; the Company's inability to incorporate digital compression technology into certain of its subscription television systems in a cost efficient manner; the Company's inability to develop and implement new services such as high-speed Internet access and telephony; the Company's inability to obtain the necessary authorizations from the FCC for such new services; competitive factors, such as the introduction of new technologies and competitors into the wireless communications business; a failure by the Company to attract strategic partners; general business and economic conditions; and the other risk factors described from time to time in the Company's reports filed with the SEC. The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995, and as such, speak only as of the date made. INTRODUCTION During 1996, the Company's business strategy evolved to adapt to the significant regulatory and technological changes that have occurred recently in the telecommunications industry and to the Company's capital constraints. See "Business -- Regulation" and "Business -- Competition." Management now believes that the most promising use of the Company's wireless assets may be to provide a variety of digital wireless services, instead of the traditional analog-based technology utilized by the Company to date. Such digital wireless services could include digital video (i.e., subscription television), high-speed Internet access and telephony services. A successful deployment of such services might include the full bundle of broad band (i.e., video and high-speed Internet) and narrow band (i.e., telephony) services. While the Company has begun planning and testing of these wireless services, it has not yet introduced any of these services. As more fully described above under "Business -- Certain Requirements and Uncertainties," the Company's ability to introduce these services will depend on a number of factors, including the availability of sufficient capital, competitive factors (such as the introduction of new technologies or the entry of competitors with significantly greater resources than the Company), the level of consumer demand for such services, and the Company's ability to obtain the necessary regulatory changes and approvals. During 1997, the Company intends to continue to operate its Developed Markets principally as an analog wireless cable business. However, because of its current financial condition and its revised business strategy, the Company does not plan to make the capital expenditures necessary to add enough new subscribers to replace those subscribers that choose to stop receiving the Company's service. Moreover, at this time, the Company does not generally intend to further develop any of its Undeveloped Markets using analog technology. Thus, the Company anticipates that its analog customer base will decrease somewhat during 1997. As the Company's analog subscriber base decreases, its revenues are expected to decrease unless and until it is able to successfully introduce other revenue-producing wireless services, such as digital video, high-speed Internet access and telephony. Since early 1996, the Company has taken certain actions aimed at reducing its costs and conserving its capital, including reductions in the size of the Company's workforce and decreases in capital expenditures and discretionary expenses. As a result, the Company currently expects that its existing cash and investment balances, proceeds from the Credit Facility (as defined herein), and cash generated from operations will be sufficient to finance its operations during 1997. Thereafter, additional financing will be required. If the Company's capital resources are not sufficient to finance its operations, either in 1997 or thereafter, the Company will be required to curtail its operations and development plans, which curtailment could involve, among other things, a complete cessation of new customer additions. In March 1997, the Company entered into an agreement to sell certain assets to BellSouth Wireless with anticipated proceeds to the Company 21 23 ranging from $67.9 million to $103.2 million, depending on the number of wireless cable channel rights that are ultimately transferred to BellSouth Wireless. See "Business -- Recent Development." Any such proceeds will provide further resources to help finance the Company's operations and development plans. In addition, the Company is pursuing strategic relationships or transactions with other providers of telecommunications services. One of the Company's primary objectives in pursuing such relationships and transactions is to facilitate access to additional capital. See "-- Liquidity and Capital Resources -- Sources and Uses of Funds -- Strategic Relationship Objectives." The Company's Developed Markets generate negative operating cash flow until the subscriber base becomes sufficiently large for incremental revenues, net of incremental costs, to offset fixed costs, other than depreciation and other non-cash expenses. Certain costs, such as programming costs, generally increase in proportion to the number of subscribers, while other costs, such as tower rental and related maintenance costs, remain constant or increase at proportionately lower levels. Accordingly, systems with larger subscriber bases generally produce higher operating margins, and systems with small subscriber bases usually produce negative operating margins. For the year ended December 31, 1996, 24 of the Company's 38 Developed Markets generated positive operating cash flow. Operating cash flow is a commonly used measure of performance in the wireless cable industry. However, operating cash flow does not purport to represent cash used by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. The Company leases many of the channels used to transmit its programming from FCC license holders. Typically, these leases provide for payments based upon the number of subscribers, subject in many cases to certain minimums, as more fully discussed in the Notes to the Company's Consolidated Financial Statements included herein. Total channel lease payments approximated 4.1% of total revenues during the year ended December 31, 1996. Total programming expenses approximated 31.2% of total revenues during the same period. Such expenses vary from system to system depending upon the number of channels offered and pay channel penetration. Marketing costs are expensed in the period incurred. As a result, operating results in any period are negatively affected by expenditures for marketing and promotion. Since the Company's monthly services are billed in advance, accounts receivable are relatively small. The Company capitalizes all installation costs (labor, subcontractor costs and supplies). Such capitalized installation costs generally are amortized over three years. Headend equipment is generally depreciated over ten years. Equipment purchased and awaiting installation into subscriber premises is classified as part of property and equipment in the Company's Consolidated Financial Statements. Management believes that period-to-period comparisons of the Company's financial results to date are not necessarily meaningful and should not be relied upon as an indication of future performance due to the Company's historically high growth rate and the number of system launches and acquisitions during the periods presented. LIQUIDITY AND CAPITAL RESOURCES SOURCES AND USES OF FUNDS The Company has experienced negative cash flows from operations in each year since its formation, and although certain of the Company's more established systems currently generate positive cash flow from operations, the Company expects to continue to experience negative consolidated free cash flow from operations. Until sufficient cash flow is generated from operations, the Company will be required to utilize its current capital resources or external sources of funding to satisfy its working capital and capital expenditure needs. The Company expects that its principal capital expenditure requirements for 1997 will relate to replacement of customer churn, launch of high-speed Internet services in one or more markets and the purchase of transmission equipment for new channels. The Company intends to finance these capital expenditures from existing cash and investment balances, borrowings under the Credit Facility, and cash 22 24 generated from system operations. The commercial introduction by the Company of digital services, such as digital video, high-speed Internet access and telephony, would require substantial additional capital expenditures. While the Company may use a portion of the proceeds from the BellSouth Transaction to acquire assets for the development of such digital services, management does not expect that such proceeds will be sufficient to fully implement its digital strategies for video, Internet access and telephony throughout its markets. As further described below, the Company is pursuing relationships or transactions with other providers of telecommunications services to facilitate access to additional capital, among other things. See "-- Strategic Relationship Objectives." The Company's ability to fully implement its revised business strategy will depend on its ability to attract sufficient additional capital through relationships with strategic partners or otherwise. There can be no assurance that sufficient capital will be available on terms satisfactory to the Company, or at all. On March 18, 1997, the Company entered into the BellSouth Agreement, which provides for the sale of all of the Company's Southeastern Assets to BellSouth Wireless. The Southeastern Assets include operating wireless cable systems in Orlando, Lakeland, Jacksonville, Daytona Beach and Ft. Myers, Florida and Louisville, Kentucky and wireless cable channel rights in Bradenton, Naples, Sebring and Miami, Florida. The purchase price for all of the Southeastern Assets will range from $67.9 million to $103.2 million, depending upon the number of wireless cable channel rights that are ultimately transferred to BellSouth Wireless. See "Business -- Recent Development." The BellSouth Agreement contains customary conditions to closing, including the expiration of applicable waiting periods under the federal antitrust laws and the satisfaction of all applicable regulatory requirements. There can be no assurance that all of such conditions will be satisfied or that the BellSouth Transaction will be consummated. To date, the Company's operations have required substantial amounts of capital for (i) the installation of equipment in new subscribers' homes, (ii) the construction of additional transmission and headend facilities and related equipment purchases, (iii) the funding of start-up losses and other working capital requirements, (iv) the acquisition of wireless cable channel rights and systems, and (v) investments in, and maintenance of, vehicles and administrative offices. The Company's capital expenditures, exclusive of acquisitions of wireless cable systems and additions to deferred license and leased license acquisition costs, during the years ended December 31, 1994, 1995 and 1996 were approximately $35.5 million, $49.3 million, and $32.5 million, respectively. Such expenditures were primarily for the construction and expansion of the Company's wireless cable systems and the installation of equipment in new subscribers' homes. In addition, the Company was involved in the bidding process for wireless cable channel authorizations in certain basic trading areas ("BTAs"), which was completed in March 1996. The Company was the highest bidder in 59 markets. In the aggregate, the Company's bids in these markets totaled approximately $10.1 million. Of such amount, a total of approximately $9.3 million has been paid. The remaining amount (approximately $800,000) is due upon the FCC's notification to the Company of the issuance of the remainder of its BTA licenses, which the Company expects will occur in 1997. On June 28, 1996, the Company entered into a definitive agreement to acquire wireless cable channel rights and certain other subscription television assets in Cincinnati, Ohio (the "Cincinnati Acquisition") for aggregate consideration of approximately $5.2 million (of which approximately $3.5 million had been paid as of January 31, 1997). Also on June 28, 1996, the Company acquired certain of the Cincinnati subscription television assets and entered into a management agreement to operate the subscription television assets that it has not yet acquired. The subscription television assets acquired or to be acquired by the Company in connection with the Cincinnati Acquisition served approximately 3,100 subscribers as of the date of acquisition. Completion of the Cincinnati Acquisition is subject to certain contingencies, such as FCC approvals, the satisfactory completion of due diligence, and other customary conditions to closing, which may or may not be satisfied. There can be no assurance that the Cincinnati Acquisition will be consummated. In February 1996, $2.5 million of notes issued in connection with the Company's September 1995 acquisition of Superchannels of Las Vegas, Inc. were converted into 162,854 shares of ATI Common Stock. In May 1996, the Company completed an offering of 1,700,000 shares of its Class A Common Stock resulting in net proceeds of approximately $19.9 million. In August 1996, the Company completed a private placement 23 25 of 100,000 shares of its Series B Convertible Preferred Stock, resulting in net proceeds to the Company of $9.4 million. In October 1996, the Company completed a private placement of 150,000 shares of its Series B Convertible Preferred Stock, resulting in net proceeds to the Company of $14.3 million. During 1996, the Company also completed the sale of wireless cable systems in St. James, Minnesota and Yankton, South Dakota and wireless cable channel assets in Sioux Falls, South Dakota for cash consideration totaling $3.1 million (of which approximately $355,000 is being held in escrow pending completion of certain post closing events). Under the terms of a Supplemental Indenture dated August 10, 1995, governing the Company's Senior Discount Notes due 2004 (the "2004 Notes"), the yield to maturity of the 2004 Notes was to be adjusted to 15 1/2% per annum (from 14 1/2% per annum) if the Company did not, between August 10, 1995 and November 10, 1996, issue equity securities having a value at the time of issuance of at least $50.0 million in the aggregate. Subsequent to August 10, 1995, the Company issued equity securities which had an aggregate value at the time of issuance in excess of $50.0 million. These issuances satisfied the condition set forth in the Supplemental Indenture. Accordingly, the yield to maturity of the 2004 Notes will remain at 14 1/2%. STRATEGIC RELATIONSHIP OBJECTIVES As described above, the Company will require significant additional capital to fully implement its revised business strategy (including costs associated with the provision of digital video service in certain of its Developed Markets and the introduction of other digital wireless services such as high-speed Internet access and telephony). To meet such capital requirements, the Company is pursuing opportunities to enter into strategic relationships or transactions with other providers of telecommunications services. Such relationships or transactions could involve, among other things, joint ventures, sales or exchanges of stock or assets, or loans to or investments in the Company by strategic partners. As of the date of this Report, other than the BellSouth Transaction, the Company has not reached any agreements or understandings with respect to such relationships or transactions and there can be no assurance that any such agreements or understandings will be reached. CREDIT FACILITIES Credit Facility On February 26, 1997, the Company entered into a $17.0 million credit facility the ("Credit Facility") with Banque Indosuez, New York Branch (the "Bank"). Proceeds of the Credit Facility are to be used to repay a portion of the Company's existing debt, for capital expenditures, to complete certain pending acquisitions of wireless cable channel rights, and for working capital and other general corporate purposes. The term of the Credit Facility is up to twelve months. The loan must be repaid earlier than the specified termination date and certain mandatory prepayments must be made with proceeds from debt issuances or certain asset sales, including the BellSouth Transaction. The Credit Facility bears interest at a rate of 12.5%, which rate shall increase by 0.50% per quarter. Borrowings under the Credit Facility are secured by a security interest in favor of the Bank in substantially all of the assets of ATI and its subsidiaries. The Credit Facility is further secured by a pledge of the stock of substantially all of ATI's subsidiaries as well as a pledge of the note due to the Company from its Fresno subsidiary under the Fresno Facility (as defined herein). The Company paid the Bank a commitment fee of $340,000. At closing, the Company paid an additional fee of $340,000 and reimbursed the Bank for its out of pocket expenses incurred in conjunction with the making of the loan. During the term of the Credit Facility, the Company is required to pay to the Bank a commitment commission on the unused loan balance at the annual rate of 0.50%. At closing, the Company also delivered 4,500 bond appreciation rights ("BARs") and an option to exercise 141,667 debt warrants or 141,667 equity warrants. The debt warrants give the holder the right to increase the principal amount of the loan by $6.00 per warrant, or the right to require the Company to purchase the debt warrant for $6.00 per warrant. The debt warrants are exercisable or puttable during a five-day period beginning on the earlier of one year from the date of issuance, or notice that payment in full of 24 26 the Credit Facility has occurred or will occur shortly. The equity warrants give the holder the right to purchase up to 141,667 shares of the Company's Class A Common Stock for a price of $3.281 per share. Pursuant to the option agreement relating to the warrants, the equity warrants become exercisable only to the extent that the holder elects not to exercise or put the debt warrants or, if the holder elects to put the debt warrants to the Company, the Company fails to make payment therefor within the time required. Amounts payable in connection with the BARs are based upon the appreciation in price of $4.5 million face value of the Company's 2004 Notes. The BARs are exercisable after the earlier of June 15, 1999 or the occurrence of an Event of Default under the 2004 Notes. The payment due upon exercise of each BAR is equal to the market price of the 2004 Notes on the closing date less $290. The net value of the BARs is payable to holders of the BARs in cash. The Company has deposited $1.0 million in escrow to satisfy certain interest obligations under the Credit Facility. Fresno Facility During 1996, the Fresno Partnership maintained a revolving credit facility (the "Fresno Facility") with a bank that provided for borrowings for the Fresno, Visalia and Merced systems. However, no amounts were available for borrowing under such facility as of December 31, 1996. Effective June 30, 1996, the Fresno Facility was amended (the "Amended Agreement") to, among other things (i) permit the incurrence by the Fresno Partnership of up to $2.3 million in subordinated debt due ATI; (ii) permit the payment to ATI by the Fresno Partnership of a loan fee of up to $23,000; and (iii) modify certain of the financial and other operating covenants specified in the original agreement. In addition, past violations of certain financial and other operating covenants associated with the Fresno Facility were waived by the bank. In exchange for the bank's entering into the Amended Agreement, the Fresno Partnership agreed to cause the bank's participation in the Fresno Facility to be eliminated by March 31, 1997, through prepayment by the Fresno Partnership of all amounts due, assignment of the bank's participation to a third party lender or lenders (including ATI), or some combination of the foregoing. In connection therewith, as of December 31, 1996 ATI had purchased, in the aggregate, a $5.5 million participation in the Fresno Facility from the bank. In February 1997, ATI purchased the remaining $3.0 million participation in the Fresno Facility from the bank. As a result, the Fresno Facility is now an obligation of the Fresno Partnership to ATI. The Fresno Facility contains various financial and other restrictive covenants that, among other things, prohibit the payment of dividends. As of December 31, 1996, the Fresno Partnership was not in compliance with certain of the restrictive covenants contained in the Fresno Facility. Outstanding borrowings under the Fresno Facility bear interest at the banks' prime rate plus 2.25% (10.5% at December 31, 1996). Interest expense relating to the Fresno Facility during the year ended December 31, 1996 totaled $763,000. The Fresno Facility is secured by the assets of the Fresno, Visalia and Merced systems. OTHER LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS AND LIMITATIONS As a result of certain limitations contained in the Indentures (the "Indentures") relating to the 2004 Notes and the Company's 14.5% Senior Discount Notes due 2005 (the "2005 Notes"), the Company's total borrowing capacity outside the 2004 Notes and the 2005 Notes is currently limited to $17.5 million and its additional borrowing capacity is currently limited to approximately $8.2 million. The Company expects that it will utilize the Credit Facility to borrow all amounts that it is permitted to borrow under the terms of the Indentures. Thus, the Company does not expect to be able to raise additional debt capital in the foreseeable future. Moreover, under current market conditions, the Company does not expect to be able to raise additional capital by issuing equity securities. In the future, the issuance of moderate amounts of certain types of new equity could, under Section 382 of the Internal Revenue Code, require the Company to pay income taxes on gains received on asset sales because of the Company's inability to fully offset such gains against net operating loss carryforwards. The Company has taken certain actions aimed at reducing its costs and conserving its capital, including reductions in the size of its workforce and decreases in capital expenditures and discretionary expenses. As a result of these actions, the Company currently expects that its existing cash and investment balances, proceeds from the Credit Facility, and cash generated from operations will be sufficient to finance its operations during 25 27 1997. Thereafter, additional financing will be required. If the Company's capital resources are not sufficient to finance its operations, either in 1997 or thereafter, the Company will be required to curtail its operations and development plans, which curtailment could involve, among other things, a complete cessation of new customer additions. If the BellSouth Transaction or any strategic relationships or transactions with other providers of telecommunications services are consummated, the proceeds therefrom will provide further resources to help finance the Company's operations and development plans. Historically, the Company has generated operating and net losses on a consolidated basis and can be expected to do so for the foreseeable future. Such losses may increase as the Company's analog subscriber base declines, unless and until the Company is able to successfully introduce other revenue-producing wireless services. As a result of its history of net losses, the Company currently has a negative tangible net worth and expects that negative stockholders' equity will result before March 31, 1997. A negative tangible net worth or stockholders' equity position has significant implications, including, but not limited to, non-compliance with Nasdaq National Market listing criteria. If the Company ceases to satisfy the Nasdaq National Market listing criteria, its Class A Common Stock will be subject to delisting, unless an exception is granted by the National Association of Securities Dealers. If an exception is not granted, trading in the Company's Class A Common Stock would thereafter be conducted in the over-the-counter market. Consequently, it would be more difficult to dispose of, or to obtain accurate quotations as to the price of the Class A Common Stock. Delisting could result in a decline in the trading market for the Class A Common Stock, which could potentially depress the Company's stock and bond prices, among other things. The Company believes that the proceeds of the BellSouth Transaction, if consummated, will help bring the Company into compliance with the Nasdaq National Market listing criteria. However, there can be no assurance that the Company will be able to achieve or sustain positive tangible net worth, stockholders' equity or net income in the future. RESULTS OF OPERATIONS Fiscal Year 1996 Compared to Fiscal Year 1995 Service revenues increased $14.5 million, or 31.4%, during the year ended December 31, 1996 to $60.7 million, as compared to $46.2 million during the year ended December 31, 1995. This increase resulted primarily from the addition of new subscribers. Subscriber increases resulted primarily from the 1996 acquisition of subscription television subscribers in Cincinnati, the 1995 acquisitions of the Redding, Las Vegas and Rapid City systems, and the completion of construction and commencement of operation of systems in Yuba City and Lincoln during 1995 and Anchorage and Portland during 1996. Service price increases contributed only a small portion of the aggregate increase in service revenues. The number of subscribers to the Company's wireless cable systems increased to 179,800 at December 31, 1996, compared to 173,700 at December 31, 1995. On a "same system" basis (comparing systems that were operational for all of each of the years ended December 31, 1996 and 1995), service revenues increased $6.7 million, or 16.9%, to $46.3 million during the year ended December 31, 1996, as compared to $39.6 million for the year ended December 31, 1995. Same systems during these periods totaled 24 systems. The average number of same-system subscribers increased approximately 13.2% during the year ended December 31, 1996, as compared to the year ended December 31, 1995. Installation revenues totaled $1.3 million in each of the years ended December 31, 1996 and 1995. The number of installations completed during the year ended December 31, 1996 decreased approximately 22.0% as compared to the year ended December 31, 1995. However, this decrease was fully offset by less discounting of installation rates. Installation rates vary widely by system based upon competitive conditions. The Company occasionally reduces installation charges as part of selected promotional campaigns. Operating expenses, principally programming, site costs and other direct expenses, aggregated $36.0 million (or 58.1% of total revenues) during the year ended December 31, 1996, compared to $26.0 million (or 54.8% of total revenues) during the year ended December 31, 1995. The increase of $10.0 million was primarily the result of additional systems and subscribers, as well as increased programming costs for additions to channel line-ups and increased pay-per-view offerings in various systems. 26 28 Marketing and selling expenses totaled $7.4 million (or 12.0% of total revenues) during the year ended December 31, 1996, compared to $8.7 million (or 18.3% of total revenues) during the year ended December 31, 1995. The decrease in such expenses of $1.3 million resulted from decreased marketing activity, net of marketing expenses associated with the addition of new systems. During the year ended December 31, 1996, general and administrative expenses totaled $18.8 million (or 30.4% of total revenues), a $400,000 decrease over the year ended December 31, 1995 ($19.2 million or 40.4% of total revenues). The decrease in general and administrative expenses principally resulted from reductions in the number of employees and certain non-recurring expenses totaling $1.1 million recognized during 1995 relating to the recognition of certain lease termination and severance costs. Such decreases were partially offset by increased general and administrative expenses associated with the addition of new systems. In the fourth quarter of 1996, after considering the Company's 1996 operating loss, its history of such operating losses and the expectation of future operating losses, changes in the Company's strategic direction, developments relating to previously scheduled industry transactions and ventures, and the industry factors described above under "Business -- Regulation" and "Business -- Competition", the Company evaluated the ongoing value of its wireless cable business in each Developed Market. Based on this valuation, the Company determined that assets with a carrying value of $95.1 million were impaired according to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and wrote down the carrying value of such assets by $21.3 million to their fair value. An evaluation was made for each of the Company's Developed Markets individually, not for the Company's markets as a whole. Fair value was based on recent transactions in the wireless cable industry. In addition, during the fourth quarter of 1996, the Company prospectively revised the lives of its subscriber premise equipment from seven years to three or four years. The Company's loss from operations was $66.2 million during the year ended December 31, 1996, as compared to $35.7 million during the year ended December 31, 1995. The increase in the loss from operations of $30.5 million during 1996 resulted primarily from the impairment loss of $21.3 million described above and increased depreciation and amortization expense. Depreciation and amortization expense (principally depreciation of property and equipment and amortization of deferred license and leased license acquisition costs, goodwill and covenants not-to-compete) increased $15.4 million in the year ended December 31, 1996, compared to the year ended December 31, 1995, due to increases in deferred license costs, goodwill and subscriber equipment resulting from the acquisition and addition of new systems and the addition of equipment installed in new subscribers' homes. Interest expense increased $12.8 million during the year ended December 31, 1996 to $37.3 million, as compared to $24.5 million during the year ended December 31, 1995. The increase in interest expense primarily resulted from noncash interest charges associated with the Company's 2004 Notes and 2005 Notes. Interest expense associated with the 2004 Notes also increased due to an increase in the interest rate on the 2004 Notes from 12.5% to 14.5% effected in August 1995 in conjunction with the Company's offering of the 2005 Notes. Loss before interest, taxes, depreciation and amortization and the impairment write down described above totaled $253,000 for the year ended December 31, 1996, as compared to a loss before interest, taxes, depreciation, and amortization of $6.4 million during the year ended December 31, 1995. Fiscal Year 1995 Compared to Fiscal Year 1994 Service revenues increased $25.5 million, or 122.5%, during the year ended December 31, 1995 to $46.2 million, as compared to $20.7 million during the year ended December 31, 1994. This increase resulted primarily from the addition of new subscribers. Subscriber increases resulted not only from the 1994 acquisitions of the Bend, FEN/WEN Group, Oklahoma City, Wichita and Lakeland systems, the 1995 acquisitions of the Medford, Sheridan, Fresno, Visalia, Merced, Redding, Las Vegas and Rapid City systems, and the commencement of operations in Columbus, Youngstown, Jacksonville, Lansing and Monterey during 1994 and Ft. Collins, Greeley, Yuba City, and Lincoln during 1995, but also from increased marketing and promotional efforts in all markets. Service price increases contributed only a small portion of the aggregate 27 29 increase in service revenues. The number of subscribers to the Company's wireless cable systems increased to approximately 173,700 at December 31, 1995 compared to approximately 106,500 at December 31, 1994. On a "same system" basis (comparing systems that were operational for all of each of the years ended December 31, 1994 and 1995), service revenues increased $8.0 million, or 57.5%, to $21.9 million for the year ended December 31, 1995, as compared to $13.9 million for the year ended December 31, 1994. This increase resulted primarily from the addition of new subscribers. Same systems during this period consisted of the Company's Colorado Springs, Orlando, Ft. Myers, Billings, Toledo, Daytona Beach, Michiana, Denver, Little Rock and Louisville systems. The number of subscribers in these systems increased approximately 40.7% during the year ended December 31, 1995. Installation revenues for the year ended December 31, 1995 totaled $1.3 million, as compared to $871,000 during the year ended December 31, 1994. The increase in installation revenues of $441,000, or 50.6%, was primarily the net result of more subscriber installations in each system, less the effect of lower per-subscriber installation charges in certain systems. Operating expenses aggregated $26.0 million (or 54.8% of total revenues) during the year ended December 31, 1995, as compared to $13.1 million (or 60.7% of total revenues) during the year ended December 31, 1994. The increase of $12.9 million was primarily the result of additional systems and subscribers as well as increased programming costs from additions to channel line-ups in various systems. In 1995, the Company began capitalizing all subscriber installation costs. Previously, the Company expensed an amount equal to installation revenues and capitalized installation costs in excess of installation revenues. This change in accounting method was effected to better match installation costs with related subscriber service revenues. Operating expenses for the year ended December 31, 1994 include installation costs which were expensed of approximately $871,000. Marketing and selling expenses totaled $8.7 million (or 18.3% of total revenues) during the year ended December 31, 1995, as compared to $4.1 million (or 18.8% of total revenues) during the year ended December 31, 1994. The increase in such expenses of $4.6 million resulted primarily from the addition of new systems, intensified sales and marketing efforts (including the introduction of the WANTV(SM) brand name in certain of the Company's systems), and from increased media spending. During 1995, general and administrative expenses totaled $19.2 million (or 40.4% of total revenues), a $9.8 million increase over the year ended December 31, 1994 (43.6% of total revenues). This increase resulted not only from the addition of new systems and increased corporate and regional overhead expenses, but also from the recognition of severance costs totaling $711,000 and lease termination costs of $420,000 related to the relocation of the Company's corporate headquarters to larger office space in Colorado Springs. The Company's loss from operations was $35.7 million during the year ended December 31, 1995, as compared to $17.0 million during the year ended December 31, 1994. The increase in the loss from operations of $18.7 million resulted from increased depreciation and amortization expense, as well as from the increases in marketing and general and administrative expenses described above. Depreciation and amortization expense (principally depreciation of property and equipment and amortization of deferred license and leased license acquisition costs, goodwill and covenants not-to-compete) increased $17.2 million due to increases in deferred license costs, goodwill and subscriber equipment resulting from the acquisition and addition of new systems and the addition of equipment installed in new subscribers' homes. Approximately $644,000 of the increase in depreciation and amortization expenses was attributable to the change in accounting for installation costs previously described. Interest expense increased $15.2 million during the year ended December 31, 1995 to $24.5 million, as compared to $9.3 million during the year ended December 31, 1994. The increase in interest expense primarily resulted from noncash interest charges associated with the 2004 Notes and 2005 Notes and additional borrowings under, and higher interest rates associated with, the Company's various revolving credit facilities. The Company's loss before interest, taxes, depreciation and amortization totaled $6.4 million for the year ended December 31, 1995, as compared to $5.0 million during the year ended December 31, 1994 (a pro forma amount of $4.1 million assuming the change in accounting method was applied retroactively). The increase in the loss before interest, taxes, depreciation and amortization of $1.4 million primarily resulted from 28 30 proportionately larger start-up losses of the Company's systems that commenced operation during 1994, pre-opening costs and start-up losses of the Company's systems that commenced operations during 1995, increased marketing expenses, and increased corporate overhead related to significant system development and market expansion activities. Such increases were partially offset by improved operating results from growth in the Company's other systems. The Medford, Sheridan, Redding, Fresno, Visalia, Merced, Las Vegas and Rapid City systems acquired during 1995 generated, in the aggregate, earnings before interest, taxes, depreciation and amortization of $1.3 million. Excluding these acquisitions, the Company's loss before interest, taxes, depreciation and amortization for the year ended December 31, 1995 approximated $7.7 million. INCOME TAX MATTERS ATI and its subsidiaries file a consolidated federal tax return. The Company has had no state or federal income tax expense since inception. As of December 31, 1996, the Company had approximately $156.6 million in net operating loss carryforwards for tax purposes, expiring through 2011. Section 382 of the Internal Revenue Code limits the amount of loss carryforwards that a company can use to offset future income upon the occurrence of certain changes in ownership. The issuance of moderate amounts of certain types of new equity could limit the Company's ability to use net operating losses to offset future gains from the sale of assets, thus requiring the Company to pay income taxes on gains received in such asset sales. NEW ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the future undiscounted cash flows are not sufficient to recover the assets' carrying amount. The resultant impairment loss is measured by comparing the fair value of the asset to its carrying amount. The Company adopted SFAS No. 121 in the first quarter of 1996. SFAS No. 121 did not have a material effect on the Company's financial position or results of operations at the time of adoption. As previously described, during the fourth quarter of 1996, the Company determined that indicators of impairment were present. As a result, a charge of $21.3 million was recognized to write down the carrying value of certain assets to their fair value. The Company follows the guidelines established by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its employee stock options. In October 1995, the FASB issued SFAS No. 123, "Accounting and Disclosure of Stock-Based Compensation," which established an alternative method of expense recognition for stock-based compensation awards to employees based on fair values. The Company elected not to adopt the statement for expense recognition purposes. On March 3, 1997, the FASB released SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires dual presentation of basic and diluted earnings per share on the face of the income statement for all periods presented. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted earnings per share is computed similarly to fully diluted earnings per share pursuant to Accounting Principles Bulletin No. 15. SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and when adopted, it will require restatement of prior years' earnings per share. Since the effect of outstanding options is antidilutive, they have been excluded from the Company's computation of net loss per share. Accordingly, management does not believe that SFAS No. 128 will have an impact upon historical net loss per share as reported. 29 31 INFLATION Inflation has not affected the Company's operations significantly during the past three years. The Company believes that its ability to increase charges for services in future periods will depend primarily on competitive pressures. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Consolidated Financial Statements included in this Report at pages F-1 through F-25 are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item with respect to the identity and business experience of the Company's Directors is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, under the caption "Election of Directors," which information is hereby incorporated herein by reference. The information required by this Item with respect to the identity and business experience of the Company's Executive Officers is set forth on page 18 of this Report under the Caption "Executive Officers of the Registrant." The information required by this item with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, under the caption "Section 16(a) Beneficial Ownership Reporting Compliance," which information is hereby incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, under the captions "Compensation and Other Information Concerning Executive Officers," and "Board of Directors Interlocks and Insider Participation," which information is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, under the caption "Stock Ownership of Certain Beneficial Owners and Management," which information is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on April 24, 1997, under the caption "Certain Relationships and Related Transactions," which information is hereby incorporated herein by reference. 30 32 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: (1) Financial Statements
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets as of December 31, 1995 and 1996...................................................... F-3 Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996.......................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996.............. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.......................... F-6 Notes to Consolidated Financial Statements.................. F-7
(2) Exhibits 3.1 -- Certificate of Designation for Series B Convertible Preferred Stock of American Telecasting, Inc. dated August 6, 1996 (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on August 7, 1996). 3.2 -- Amendment to Restated Certificate of Incorporation of American Telecasting, Inc. dated April 24, 1996 (incorporated by reference to Exhibit 3.1(i) to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 3.3 -- Restated Certificate of Incorporation of American Telecasting, Inc., dated April 27, 1995 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995). 3.4 -- Amended and Restated By-Laws of American Telecasting, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995). 4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A filed on December 6, 1993). 4.2 -- Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 filed on April 26, 1996). 4.3 -- Specimen Class B Common Stock Certificate. 4.4 -- Specimen Series B Convertible Preferred Stock Certificate. 4.5 -- Supplemental Indenture dated as of August 10, 1995 between American Telecasting, Inc. and First Trust National Association, Trustee, supplementing and amending the Indenture dated as of June 23, 1994 (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.6 -- Indenture dated as of June 23, 1994 between American Telecasting, Inc. and First Trust National Association, Trustee (incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 4.7 -- Form of Senior Discount Note due 2004 (included within Exhibits 4.5 and 4.6). 31 33 4.8 -- Supplemental Warrant Agreement dated as of August 10, 1995 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.9 -- Warrant Agreement dated as of June 23, 1994 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 4.10 -- Form of Warrant (included within Exhibits 4.8 and 4.9). 4.11 -- Collateral and Disbursement Agreement dated as of June 23, 1994 between First Trust National Association and American Telecasting, Inc. (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 4.12 -- Indenture dated as of August 10, 1995 between American Telecasting, Inc., as Issuer, and First Trust National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.13 -- Form of Senior Discount Note due 2005 (included within Exhibit 4.12). 4.14 -- Warrant Agreement dated as of August 10, 1995 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.15 -- Form of Warrant (included within Exhibit 4.14). 4.16 -- Registration Rights Agreement dated as of August 10, 1995 by and among American Telecasting, Inc. and Dillon Read & Co., Inc. and CS First Boston Corporation (incorporated by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.1 -- Stock Purchase and Sale Agreement dated as of June 7, 1995 by and between Bruce Merrill and Virginia Merrill and their successors in trust, as trustees of the Merrill Revocable Trust dated August 20, 1982 and American Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.2 -- Binding Letter Agreement dated as of July 6, 1995 by and between Red Rock Communications, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.3 -- Management Agreement dated as of February 3, 1996 between Fresno MMDS Associates and American Telecasting Development, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.4 -- Standard Commercial Lease Agreement, dated as of September 18, 1995, between Tech Center VI Associates, L.P., as Lessor, and American Telecasting, Inc., as Lessee (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.5 -- Employment Agreement effective as of January 4, 1996 between American Telecasting, Inc. and Robert D. Hostetler (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1996). 32 34 10.6 -- Employment Agreement dated August 10, 1995 between American Telecasting, Inc. and David K. Sentman (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995). 10.7 -- First Amendment to Amended and Restated Revolving Credit Agreement dated as of June 30, 1996 among Fresno MMDS Associates, First Union National Bank of North Carolina, Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc.; related Subordination Agreement dated as of June 30, 1996 by American Telecasting, Inc. and Fresno MMDS Associates in favor of First Union National Bank of North Carolina; related Assignment Acceptance and Intercreditor Agreement dated as of July 18, 1996 among First Union National Bank of North Carolina as agent and Fresno MMDS Associates (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.8 -- Side agreement between Fresno Telsat, Inc. and American Telecasting, Inc. dated July 18, 1996 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.9 -- Amended and Restated Revolving Credit Agreement between Fresno MMDS Associates, First Union National Bank of North Carolina, Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc. dated as of September 30, 1994; related Amended and Restated Revolving Credit Note by Fresno MMDS Associates in favor of First Union National Bank of North Carolina; related Pledge and Security Agreement dated as of September 30, 1994 between Fresno MMDS Associates and First Union National Bank of North Carolina; related Collateral Assignment and Security Agreement dated as of September 30, 1994 by and between FMA Licensee Subsidiary, Inc. and First Union National Bank of North Carolina (incorporated by reference to Exhibit 10.21 to the Company's Form S-4 Registration Statement filed on September 22, 1995). 10.10 -- Credit Agreement dated as of February 26, 1997, among American Telecasting, Inc. and Banque Indosuez, New York Branch, as Agent, and the lending institutions listed therein (the "Banks"); related Option Agreement dated as of February 26, 1997 among American Telecasting, Inc. and Indosuez CM II, Inc.; related Bond Appreciation Rights Certificate dated February 26, 1997; related Securities Pledge Agreement dated as of February 26, 1997 in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related Securities Pledge Agreement dated as of February 26, 1997 made by American Telecasting of Green Bay, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related General Security Agreement dated as of February 26, 1997 made by certain subsidiaries of American Telecasting, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related Registration Rights Agreement dated as of February 26, 1997 among American Telecasting, Inc. and the holders of the warrants to purchase an aggregate of 141,667 shares of the Class A Common Stock of American Telecasting, Inc.; related Securities Pledge Agreement dated as of February 26, 1997 made by American Telecasting, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks. 10.11 -- Form of Underwriting Agreement dated as of May 21, 1996 among Alex. Brown & Sons Incorporated, Dillon, Read & Co. Inc., and American Telecasting, Inc. (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form S-3 filed on April 10, 1996). 33 35 10.12 -- Stock Purchase Agreement dated as of August 6, 1996 by and among American Telecasting, Inc., Museum Assets Ltd., and Ashline, Ltd. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1996). 10.13 -- Stock Purchase Agreement dated October 25, 1996 by and among American Telecasting, Inc., Wartone Property Holdings, Ltd., Harleko Ltd., and Tarian Properties, Ltd. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1996). 10.14 -- Agreement for Purchase and Sale of Assets dated June 28, 1996 among Novner Enterprises, Inc., Alvin Novick, Phyllis Novick, American Telecasting of Cincinnati, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.15 -- Management Agreement dated as of June 28, 1996 between Novner Enterprises, Inc. and American Telecasting of Cincinnati, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.16 -- Agreement for Exchange of Assets dated July 10, 1996 among Heartland Wireless Communications, Inc., Heartland Wireless South Dakota Properties, Inc., Heartland Wireless Florida Properties, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.17 -- American Telecasting, Inc. 1990 Stock Option Program, As Amended (Effective April 25, 1996) (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996). 10.18 -- Form of Registration Rights Agreement between American Telecasting, Inc. and Stockholder (incorporated by reference to Exhibit 10.40 to the Company's Form S-1 Registration Statement filed on October 8, 1993). 11.1 -- Statement regarding computation of per share earnings. 21.1 -- Subsidiaries of American Telecasting, Inc. 23.1 -- Consent of Independent Public Accountants. 27.1 -- Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1996. 34 36 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Public Accountants.................. F-2 Consolidated Balance Sheets as of December 31, 1995 and 1996................................................... F-3 Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996....................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996........... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996....................... F-6 Notes to Consolidated Financial Statements................ F-7
F-1 37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To American Telecasting, Inc.: We have audited the accompanying consolidated balance sheets of American Telecasting, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Telecasting, Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Washington, D.C. February 21, 1997 (except with respect to the Facility and the BellSouth Transaction discussed in Notes 1 and 7, as to which the date is March 18, 1997) F-2 38 AMERICAN TELECASTING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, -------------------- 1995 1996 -------- -------- ASSETS Current Assets: Cash and cash equivalents................................. $ 32,514 $ 18,476 Trade accounts receivable, net of allowance for uncollectible accounts of $916 and $687, respectively........................................... 2,171 1,867 Notes receivable from officers and employees.............. 543 322 Prepaid expenses and other current assets................. 2,331 2,468 -------- -------- Total current assets.............................. 37,559 23,133 Property and equipment, net................................. 112,377 99,271 Deferred license and leased license acquisition costs, net....................................................... 143,006 139,537 Goodwill, net............................................... 16,030 15,163 Deferred financing costs, net............................... 5,268 4,704 Other assets, net........................................... 2,809 1,764 -------- -------- Total assets...................................... $317,049 $283,572 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses..................... $ 20,003 $ 15,022 Current portion of long-term obligations.................. 11,062 5,852 Customer deposits......................................... 605 397 -------- -------- Total current liabilities......................... 31,670 21,271 Deferred income taxes....................................... 6,131 2,834 Long-term obligations, net of current portion: 2004 Notes................................................ 116,864 135,484 2005 Notes................................................ 100,262 116,480 Notes payable............................................. 6,938 2,434 Capital lease obligations................................. 1,432 1,053 Minority interest and other............................... 16 903 -------- -------- Total long-term obligations, net of current portion......................................... 225,512 256,354 -------- -------- Total liabilities................................. 263,313 280,459 COMMITMENTS AND CONTINGENCIES Stockholders' Equity (Notes 2, 8 and 9): Preferred Stock, $.01 par value; 2,500,000 shares authorized, none issued and outstanding................ -- -- Series B Convertible Preferred Stock, $.01 par value; 500,000 shares authorized; 250,000 shares issued and 110,000 shares outstanding............................. -- 13,237 Class A Common Stock, $.01 par value; 30,000,000 shares authorized; 16,435,974 and 20,784,238 shares issued and outstanding, respectively.............................. 164 208 Class B Common Stock, $.01 par value; 10,000,000 shares authorized; no shares issued and outstanding........... -- -- Additional paid-in capital................................ 135,364 176,091 Common Stock warrants outstanding......................... 10,130 10,129 Accumulated deficit....................................... (91,922) (196,552) -------- -------- Total stockholders' equity........................ 53,736 3,113 -------- -------- Total liabilities and stockholders' equity........ $317,049 $283,572 ======== ========
See accompanying Notes to Consolidated Financial Statements. F-3 39 AMERICAN TELECASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, --------------------------------------- 1994 1995 1996 ----------- ----------- ----------- Revenues: Service and other..................................... $ 20,758 $ 46,189 $ 60,713 Installation.......................................... 871 1,312 1,319 ----------- ----------- ----------- Total revenues.......................................... 21,629 47,501 62,032 Costs and Expenses: Operating............................................. 13,128 26,021 36,029 Marketing............................................. 4,056 8,678 7,429 General and administrative............................ 9,430 19,192 18,827 Depreciation and amortization......................... 12,032 29,276 44,665 Impairment of wireless cable assets................... -- -- 21,271 ----------- ----------- ----------- Total costs and expenses................................ 38,646 83,167 128,221 ----------- ----------- ----------- Loss from operations.................................... (17,017) (35,666) (66,189) Interest expense........................................ (9,349) (24,473) (37,281) Interest income......................................... 2,062 2,178 1,106 Other income (expense), net............................. 16 (5) 687 ----------- ----------- ----------- Loss before income tax benefit.......................... (24,288) (57,966) (101,677) Income tax benefit...................................... 8,810 2,270 3,297 ----------- ----------- ----------- Loss before extraordinary charge and cumulative effect of change in accounting for installation costs........... (15,478) (55,696) (98,380) Extraordinary charge on early retirement of debt........ -- (11,541) -- Cumulative effect of change in accounting for installation costs, net of income taxes of $369 in 1995............ -- 602 -- ----------- ----------- ----------- Net loss................................................ (15,478) (66,635) (98,380) Dividend embedded in conversion of Series B Convertible Preferred Stock....................................... -- -- (6,250) ----------- ----------- ----------- Net loss applicable to Class A Common Stock............. $ (15,478) $ (66,635) $ (104,630) =========== =========== =========== Net income (loss) per share (pro forma for 1994 -- see Note 2): Loss per share applicable to Class A Common Stock before extraordinary charge and cumulative effect of accounting change............................. $ (1.07) $ (3.49) $ (5.78) Loss per share from extraordinary charge........... -- (0.72) -- Income per share from cumulative effect of accounting change................................ -- 0.04 -- ----------- ----------- ----------- Net loss per share applicable to Class A Common Stock............................................ $ (1.07) $ (4.17) $ (5.78) =========== =========== =========== Weighted average number of shares outstanding........... 14,445,405 15,977,377 18,095,961 =========== =========== ===========
See accompanying Notes to Consolidated Financial Statements. F-4 40 AMERICAN TELECASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
CONVERTIBLE CLASS A PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON ------------------ ------------------ PAID-IN STOCK ACCUMULATED SHARES PAR VALUE SHARES PAR VALUE CAPITAL WARRANTS DEFICIT TOTAL ------ --------- ------ --------- ---------- -------- ----------- -------- Balance, December 31, 1993.............. 2,014 $ 20 11,559 $115 $ 87,890 $ 840 $ (9,809) $ 79,056 Conversion of Series A Convertible Preferred Stock..................... (2,014) (20) 2,014 20 -- -- -- -- Issuance of Class A Common Stock pursuant to initial public offering, net of stock issuance costs of $217................................ -- -- 172 2 2,886 -- -- 2,888 Exercise of Class A Common Stock warrants............................ -- -- 225 2 2,062 (828) -- 1,236 Income tax benefit of deduction for income tax purposes on exercise of stock options....................... -- -- -- -- 491 -- -- 491 Exercise of Class A Common Stock options............................. -- -- 93 1 220 -- -- 221 Issuance of Class A Common Stock for acquisitions........................ -- -- 1,186 12 19,875 -- -- 19,887 Issuance of Class A Common Stock warrants............................ -- -- -- -- -- 5,490 -- 5,490 Deferred compensation pursuant to issuance of Class A Common Stock options............................. -- -- -- -- 52 -- -- 52 Net loss.............................. -- -- -- -- -- -- (15,478) (15,478) ------ -------- ------ ---- -------- ------- --------- -------- Balance, December 31, 1994.............. -- -- 15,249 152 113,476 5,502 (25,287) 93,843 Exercise of Class A Common Stock warrants............................ -- -- 3 -- 30 (12) -- 18 Exercise of Class A Common Stock options............................. -- -- 176 2 491 -- -- 493 Issuance of Class A Common Stock for acquisitions........................ -- -- 1,008 10 15,806 -- -- 15,816 Issuance of Class A Common Stock warrants............................ -- -- -- -- -- 10,130 -- 10,130 Amendment of 1994 Warrants............ -- -- -- -- 5,490 (5,490) -- -- Deferred compensation pursuant to issuance of Class A Common Stock options............................. -- -- -- -- 71 -- -- 71 Net loss.............................. -- -- -- -- -- -- (66,635) (66,635) ------ -------- ------ ---- -------- ------- --------- -------- Balance, December 31, 1995.............. -- -- 16,436 164 135,364 10,130 (91,922) 53,736 Exercise of Class A Common Stock warrants............................ -- -- 62 1 172 (1) -- 172 Exercise of Class A Common Stock options............................. -- -- 85 1 484 -- -- 485 Issuance of Class A Common Stock for acquisitions........................ -- -- 64 1 706 -- -- 707 Issuance of Class A Common Stock pursuant to public offering, net of issuance costs of $1,532.............. -- -- 1,700 17 19,913 -- -- 19,930 Issuance of Series B Convertible Preferred Stock, net of issuance costs of $1,233............................. 250 23,766 -- -- -- -- -- 23,766 Dividend embedded in conversion of Series B Convertible Preferred Stock................................. -- 6,250 -- -- -- -- (6,250) -- Conversion of Series B Convertible Preferred Stock....................... (140) (16,779) 2,274 23 16,860 -- -- 104 Conversion of note payable.............. -- -- 163 1 2,524 -- -- 2,525 Deferred compensation pursuant to issuance of Class A Common Stock options............................... -- -- -- -- 68 -- -- 68 Net loss................................ -- -- -- -- -- -- (98,380) (98,380) ------ -------- ------ ---- -------- ------- --------- -------- Balance, December 31, 1996.............. 110 $ 13,237 20,784 $208 $176,091 $10,129 $(196,552) $ 3,113 ====== ======== ====== ==== ======== ======= ========= ========
See accompanying Notes to Consolidated Financial Statements. F-5 41 AMERICAN TELECASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------------------- 1994 1995 1996 --------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................................ $ (15,478) $(66,635) $(98,380) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................ 12,032 29,276 44,665 Impairment of wireless cable assets.................. -- -- 21,271 Deferred income taxes................................ (8,810) (2,270) (3,297) Amortization of debt discount and deferred financing costs.............................................. 7,311 21,363 35,402 Minority interest income............................. -- -- (708) Extraordinary charge on early retirement of debt..... -- 11,541 -- Cumulative effect of change in accounting for installation costs, net of income taxes............ -- (602) -- Gain on disposition of wireless cable systems and assets............................................. -- -- (157) Other................................................ (79) 379 267 Changes in operating assets and liabilities, net of acquisitions: Trade accounts receivable.......................... (258) (906) 307 Prepaid expenses and other current assets.......... (768) 65 214 Other assets....................................... (13) (249) (247) Accounts payable and other current liabilities..... 3,476 4,387 (6,876) --------- -------- -------- Net cash used in operating activities........... (2,587) (3,651) (7,539) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments..................... (26,500) -- -- Maturities of short-term investments.................... 6,498 20,002 -- Collections of (and loans to) related parties and others............................................... (623) (170) 252 Purchases of property and equipment..................... (35,465) (49,342) (32,474) Additions to deferred license and leased license acquisition costs.................................... (6,217) (7,412) (12,492) Proceeds from disposition of wireless cable systems and assets............................................... -- -- 2,776 Net cash used in acquisitions........................... (52,588) (21,653) (1,956) --------- -------- -------- Net cash used in investing activities........... (114,895) (58,575) (43,894) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Common Stock, net of stock issuance costs....................................... 4,345 511 20,587 Proceeds from issuance of Series B Convertible Preferred Stock, net of stock issuance costs................... -- -- 23,766 Proceeds from issuance of Common Stock warrants......... 5,490 5,480 -- Proceeds from issuance of 2004 Notes.................... 91,185 -- -- Proceeds from issuance of 2005 Notes.................... -- 91,001 -- Borrowings under revolving credit facilities............ 925 24,600 200 Principal payments on revolving credit facilities....... (2,584) (35,429) (5,500) Increase in deferred financing costs.................... (3,413) (1,976) -- Contributions by minority interest holder............... -- -- 1,240 Principal payments on notes payable..................... (1,230) (2,359) (2,030) Principal payments on capital lease obligations......... (284) (417) (868) --------- -------- -------- Net cash provided by financing activities....... 94,434 81,411 37,395 --------- -------- -------- Net increase (decrease) in cash and cash equivalents.... (23,048) 19,185 (14,038) Cash and cash equivalents, beginning of year............ 36,377 13,329 32,514 --------- -------- -------- Cash and cash equivalents, end of year.................. $ 13,329 $ 32,514 $ 18,476 ========= ======== ========
See accompanying Notes to Consolidated Financial Statements. F-6 42 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS DESCRIPTION Organization American Telecasting, Inc. ("ATI") owns and operates a network of wireless cable television systems providing subscription television service to residential and commercial customers. ATI and its subsidiaries are collectively referred to herein as the "Company." As of December 31, 1995 and 1996, the Company owned and operated 38 wireless cable systems located throughout the United States (the "Developed Markets"). The Company also has significant wireless cable (microwave) frequency interests in 16 other U.S. markets (the "Undeveloped Markets"). Risks and Other Important Factors Since inception, the Company has focused principally on developing wireless cable systems to provide multiple channel television programming. During 1996, the Company's business strategy evolved to adapt to the significant regulatory and technological changes that have occurred recently in the telecommunications industry and to the Company's capital constraints. Management now believes that the most promising use of the Company's wireless assets may be to provide a variety of digital wireless services, instead of the traditional analog-based technology utilized by the Company to date. Such digital wireless services could include digital video (i.e., subscription television), high-speed Internet access and telephony services. While the Company has begun planning and testing of these digital wireless services, it has not yet introduced any of these services. The Company's ability to introduce these services on a commercial basis will depend on a number of factors, including the availability of sufficient capital, the success of the Company's development efforts, competitive factors (such as the introduction of new technologies or the entry of competitors with significantly greater resources than the Company), the level of consumer demand for such services, the availability of appropriate transmission and reception equipment on satisfactory terms, and the Company's ability to obtain the necessary regulatory changes and approvals. The Company expects that the market for any such additional services will be extremely competitive. Since early 1996, the Company has taken certain actions aimed at reducing its costs and conserving its capital. Such measures include reductions in the size of the Company's workforce and decreases in capital expenditures and discretionary expenses. During 1997, the Company does not plan to make the capital expenditures necessary to add enough subscribers to replace those subscribers who choose to stop receiving the Company's service. Moreover, at this time, the Company does not generally intend to further develop any of its Undeveloped Markets using analog technology. Thus, the Company anticipates that its analog customer base will decrease somewhat during 1997. As the Company's analog subscriber base decreases, its revenues are expected to decrease unless and until it is able to successfully introduce other revenue-producing wireless services, such as digital video, high-speed Internet access and telephony. The Company currently expects that its existing cash and investment balances, proceeds from the Facility (see Note 7) and cash generated from operations will be sufficient to finance its operations during 1997. Thereafter, additional financing will be required. If the Company's capital resources are not sufficient to finance its operations, either in 1997 or thereafter, the Company will be required to curtail its operations and development plans, which curtailment could involve, among other things, a complete cessation of new customer additions. Any proceeds received by the Company from the BellSouth Transaction (as defined below) will provide further resources to help finance the Company's operations and development plans. The Company will require significant additional capital to fully implement its digital strategy. To meet such capital requirements, the Company is pursuing opportunities to enter into strategic relationships or transactions with other providers of telecommunications services. Such relationships or transactions could involve, among other things, joint ventures, sales or exchanges of stock or assets, or loans to or investments in the Company by strategic partners. As of the date of this Report, except for the BellSouth Transaction, the F-7 43 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company has not reached any agreements or understandings with respect to such relationships or transactions and there can be no assurance that any such agreements or understandings will be reached. Interest payments on the Company's 2004 Notes and 2005 Notes will commence on December 15, 1999 and February 15, 2001, respectively. Interest payments in 1999, 2000, and 2001 are expected to be approximately $14.3 million, $28.5 million and $59.1 million, respectively. Recent Development On March 18, 1997, the Company entered into a definitive agreement with BellSouth Corporation and BellSouth Wireless Corporation ("BellSouth Wireless") providing for the sale of all of the Company's Florida and Louisville, Kentucky wireless cable assets (the "Southeastern Assets") to BellSouth Wireless (the "BellSouth Transaction"). Depending upon the number of wireless cable channel rights that are ultimately transferred to BellSouth Wireless, the purchase price will range from $67.9 million to $103.2 million. A first closing is expected to occur when all necessary third party and governmental consents to the assignment of a minimum number of channel positions in Orlando, Jacksonville, Daytona Beach, Ft. Myers, Miami, Lakeland, Bradenton and Louisville have been obtained, which the Company expects will occur prior to the end of the fourth quarter of 1997. The remainder of the Southeastern Assets will be sold upon the satisfaction of certain closing conditions that are specific to the markets involved, but in no event later than two years after the date of the first closing. The agreement contains customary conditions to closing, including the expiration of applicable waiting periods under the federal antitrust laws and the satisfaction of all applicable regulatory requirements. There can be no assurance that all of such conditions will be satisfied or that the BellSouth Transaction will be consummated. The Company also has granted to BellSouth Wireless an option to purchase for $9.0 million the Company's wireless cable channel rights in Yuba City, California and the Company's Yuba City and Sacramento, California BTA authorizations. The option can be exercised by BellSouth Wireless at any time within 18 months after the date of the agreement. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of ATI and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all short-term investments with original maturities of 90 days or less to be cash equivalents. As of December 31, 1995 and 1996, cash equivalents principally consisted of money market funds, commercial paper, federal government/agency debt securities, and other short-term, investment-grade, interest-bearing securities. The carrying amounts reported in the balance sheet for cash and cash equivalents approximate the fair values of those assets. F-8 44 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Long-Lived Assets Long-lived assets and identifiable assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed. Impairment is measured by comparing the carrying value to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual dispositions for each of the Company's markets. The Company considers relevant cash flow, estimated future operating results, trends and other available information including the fair value of frequency rights owned, in assessing whether the carrying value of the asset can be recovered. In the fourth quarter of 1996, after considering the Company's 1996 operating loss, its history of such operating losses and the expectation of future operating losses, changes in the Company's strategic direction, developments relating to previously scheduled industry transactions and ventures and certain industry factors, the Company evaluated the ongoing value of its wireless cable business in each Developed Market. Based on this valuation, the Company determined that assets with a carrying value of $95.1 million were impaired according to the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and wrote down the carrying value of such assets by $21.3 million to their fair value. An evaluation was made for each of the Company's Developed Markets individually, not for the Company's markets as a whole. Fair value was based on recent transactions in the wireless cable industry. The Company's estimates of anticipated gross revenues, the remaining estimated lives of tangible and intangible assets, or both, could be reduced significantly in the future due to changes in technology, regulation, available financing or competitive pressures in any of the Company's individual markets. As a result, the carrying amount of long-lived assets and intangibles including goodwill could be reduced materially in the future. Property and Equipment. Property and equipment are stated at cost. Depreciation and amortization, including amortization of assets acquired under capitalized lease agreements, are recorded on a straight-line basis for financial reporting purposes. Repair and maintenance costs are charged to expense when incurred. Renewals and betterments are capitalized. Subscriber installation costs are capitalized and amortized over a three year period, the approximate average subscription term of a subscriber. Prior to January 1, 1995, the Company expensed subscriber installation costs to the extent of installation revenues and capitalized installation costs in excess of installation revenues. The cumulative effect of this change in accounting method for the periods prior to January 1, 1995 was a reduction in the Company's net loss of approximately $602,000, net of deferred income taxes of approximately $369,000. The effect of this change on the Company's results of operations for the year ended December 31, 1995 was to decrease the net loss before cumulative effect of change in accounting method by approximately $668,000. Pro forma net loss and net loss per share for the years ended December 31, 1994 and 1995, assuming the change in accounting for installation costs was applied retroactively, were $(15,352,000) and $(1.07), and $(67,237,000) and $(4.21), respectively. Deferred License and Leased License Acquisition Costs. Deferred license and leased license acquisition costs include costs incurred to develop or acquire wireless cable licenses. Costs incurred to acquire or lease licenses issued by the Federal Communications Commission ("FCC") are deferred and are amortized ratably over useful lives of 20 years beginning with inception of service in each respective market, or charged to expense if development is not pursued. As of December 31, 1996, approximately $15.8 million of the Company's deferred license and leased license acquisition costs were not yet subject to amortization. Accumulated amortization related to deferred license and leased license acquisition costs approximated $7.7 million and $14.9 million at December 31, 1995 and 1996, respectively. F-9 45 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Goodwill. Goodwill is amortized on a straight-line basis for financial reporting purposes over a period of 20 years. Accumulated amortization related to goodwill was approximately $1.3 million and $2.2 million at December 31, 1995 and 1996, respectively. Deferred Financing Costs. Deferred financing costs represent fees and other costs incurred in connection with the issuance of long-term debt. These costs are amortized over the term of the related debt using the effective interest rate method. Other Assets. Other assets, net of accumulated amortization, consist of the following (in thousands):
DECEMBER 31, ---------------- 1995 1996 ------ ------ Covenants not-to-compete, net.............................. $1,890 $ 648 Long-term deposits......................................... 83 394 Other...................................................... 836 722 ------ ------ Other assets, net.......................................... $2,809 $1,764 ====== ======
Covenants not-to-compete are amortized over their respective terms, which is typically three years. Accumulated amortization related to covenants not-to-compete and other intangible assets was $2.5 million and $3.6 million as of December 31, 1995 and 1996, respectively. Revenue Recognition Monthly service fees are recognized in the period service is provided. Installation revenue is recognized upon origination of service to a customer to the extent of direct selling costs incurred. To date, direct selling costs have exceeded installation revenues. Operating Costs and Expenses Operating costs and expenses consist principally of programming fees, channel lease costs, tower rental and other costs of providing services. The Company capitalizes certain pre-launch costs for non-operating systems. These costs include tower and site rentals and channel lease payments. The total of such costs capitalized in 1994, 1995 and 1996 approximated $163,000, $411,000 and $445,000, respectively. Marketing and Direct Selling Costs Marketing and direct selling costs are expensed as incurred. Net Loss Per Share Net loss per share is computed on the weighted-average number of common shares outstanding for the respective periods. All Common Stock equivalents are excluded as they are antidilutive. Fully diluted loss per share is not presented as it would not materially differ from primary loss per share. Pursuant to the requirements of the Securities and Exchange Commission, Common Stock issued by the Company during the 12 months immediately preceding the Company's initial public offering (see Note 8), plus the number of Common Stock equivalent shares which became issuable during the same period, were treated as if they were outstanding for all periods presented prior to the offering using the Treasury Stock method. The effect of other Common Stock equivalents for periods prior to the offering have been excluded from the calculation as their effect would be antidilutive. Historical net loss per share and weighted-average number of shares outstanding were $(1.08) and 14,357,116 for the year ended December 31, 1994. The number of pro forma weighted-average shares outstanding is computed as described above and also gives F-10 46 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) effect to the conversion in January 1994 of all outstanding shares of Series A Convertible Preferred Stock into 2,014,098 shares of Common Stock. In 1997, the Financial Accounting Standards Board released SFAS No. 128, "Earnings Per Share." SFAS No. 128 requires dual presentation of basic and diluted earnings per share on the face of the income statement for all periods presented. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted earnings per share is computed similarly to fully diluted earnings per share pursuant to Accounting Principles Bulletin No. 15. SFAS No. 128 is effective for fiscal years ending after December 15, 1997, and when adopted, it will require restatement of prior years' earnings per share. Since the effect of outstanding options is antidilutive, they have been excluded from the Company's computation of net loss per share. Accordingly, management does not believe that SFAS No. 128 will have an impact upon historical net loss per share as reported. Reclassifications Certain amounts from the prior years' consolidated financial statements have been reclassified to conform with the 1996 presentation. Supplemental Cash Flow Disclosures Noncash investing and financing activities consisted of the acquisition of vehicles and equipment by acceptance of bank notes, capitalized leases and other financing arrangements totaling approximately $992,000, $1.9 million, and $604,000 during 1994, 1995 and 1996, respectively. Cash paid during 1994, 1995 and 1996 for interest approximated $2.0 million, $2.9 million and $2.0 million, respectively. As discussed in Notes 3 and 7, the Company acquired property and equipment, leased licenses, covenants not-to-compete and other assets in acquisitions for notes totaling $6.8 million, Class A Common Stock valued at $19.9 million and assumed liabilities of approximately $1.5 million during the year ended December 31, 1994; notes totaling $3.8 million, Class A Common Stock valued at $15.8 million, assumption of certain liabilities totaling $11.2 million during the year ended December 31, 1995, and Class A Common Stock valued at $707,000 during the year ended December 31, 1996. During 1994, 1995 and 1996, the Company acquired certain wireless cable channel rights for which the final purchase consideration of approximately $1.7 million, $1.1 million and $1.0 million, respectively, was payable upon the FCC's consent to the assignment of such licenses (see Note 6). Of such amounts, approximately $1.0 million remained payable at December 31, 1996. 3. ACQUISITIONS AND DIVESTITURES 1994 Acquisitions During 1994, the Company acquired wireless cable systems in Bend, Oregon (from Central Vision, Inc.), a total of seven operating wireless cable systems operating in Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin (the "FEN/WEN Group") (from Family Entertainment Network, Inc. and Wireless Entertainment Network, Inc.), Oklahoma City, Oklahoma and Wichita, Kansas (from Multimedia Cablevision, Inc.), and Lakeland, Florida (from People's Cable, Inc. -- "People's Cable"). In addition, the Company acquired wireless cable frequency rights in a number of other U.S. markets in connection with the acquisition of the FEN/WEN Group. The aggregate purchase price for these acquisitions of approximately $80.6 million was paid through a combination of cash ($53.4 million, of which approximately $6.8 million was funded from the proceeds of debt -- see Note 7), shares of ATI Common Stock (1,151,950 shares valued at approximately F-11 47 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $19.7 million), and assumption of certain liabilities (approximately $7.5 million, of which approximately $6.0 million was retired immediately subsequent to closing). In addition, the Company recognized a deferred income tax liability of approximately $5.0 million for the excess of the value allocated to certain of the assets acquired over their related tax basis. 1995 Acquisitions During 1995, the Company acquired wireless cable systems in Medford, Oregon (from Cardiff Communications Partners III), Sheridan, Wyoming (from Cardiff Communications Partners I), Redding, California (from the Cardiff Communications Partners IV), and Rapid City, South Dakota (from Rapid Choice TV, Inc.). Also during 1995, the Company acquired Fresno Wireless Cable Television, Inc. ("FWCTI") and a 58% ownership interest in Superchannels of Las Vegas, Inc. ("Superchannels"). FWCTI is the 65% general partner of Fresno MMDS Associates which owns wireless cable systems and frequency rights in the Fresno, Visalia and Merced, California markets. Superchannels operates a wireless cable system in the Las Vegas, Nevada market. The aggregate purchase price for these acquisitions of approximately $46.7 million was paid through a combination of cash ($16.5 million), notes ($3.8 million), shares of ATI Common Stock (approximately 964,000 shares valued at approximately $15.2 million), and assumption of certain liabilities (approximately $11.2 million). In addition, the Company recognized a deferred income tax liability of approximately $6.3 million for the excess of the value allocated to certain of the assets acquired over their related tax basis. In February 1996, $2.5 million of the notes issued in connection with the acquisition of the Las Vegas system were converted into 162,854 shares of ATI Common Stock. All of the Company's acquisitions have been accounted for as purchases for financial reporting purposes. The Company's consolidated statements of operations for the years ended December 31, 1994 and 1995 include the results of operations for each of the entities described above from their respective acquisition dates. The aggregate purchase prices for the acquisitions completed during 1994 and 1995 were allocated as follows (in thousands):
1994 1995 ------- -------- Deferred license and leased license acquisition costs....... $54,323 $ 33,999 Property and equipment...................................... 23,662 11,579 Goodwill.................................................... 5,019 6,335 Covenants not-to-compete.................................... 2,170 425 Cash, receivables and other assets.......................... 442 682 Deferred income taxes....................................... (5,019) (6,335) Assumed liabilities......................................... (1,685) (14,972) ------- -------- $78,912 $ 31,713 ======= ========
The unaudited pro forma information presented below for the year ended December 31, 1995 reflects the 1995 acquisitions of the Medford, Sheridan, Redding, Las Vegas and Rapid City systems and FWCTI as if each had occurred on January 1, 1995. These results are not necessarily indicative of future operating results or of what would have occurred had the acquisitions been consummated at that time (dollars in thousands, except per share amounts). Revenues.................................................... $ 52,979 Loss before extraordinary charge and cumulative effect of accounting change......................................... (57,939) Net loss.................................................... (68,878) Loss per share before extraordinary charge and cumulative effect of accounting change......................................... (3.55) Net loss per share.......................................... (4.22)
F-12 48 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During 1996, the Company acquired certain subscription television assets in Cincinnati, Ohio for aggregate consideration of approximately $2.2 million and wireless cable channel rights in various markets for aggregate consideration of $1.1 million. The Company also acquired the remaining interest in its Little Rock, Arkansas operating system for $707,000 in Class A Common Stock. Also during 1996, the Company sold its wireless cable systems in St. James, Minnesota and Yankton, South Dakota and its wireless cable channel assets in Sioux Falls, South Dakota for aggregate cash consideration totaling $3.1 million (of which approximately $355,000 is being held in escrow pending completion of certain post-closing events). On June 28, 1996 the Company entered into a definitive agreement to acquire wireless cable assets in Cincinnati, Ohio for approximately $3.0 million. The pro forma effects of 1996 acquisitions and divestitures on revenues, net loss and net loss per share as if such acquisitions and divestitures had been made as of the beginning of the year are not presented as they do not differ materially from historical results. During the years ended December 31, 1994 and 1995, the Company acquired wireless cable channel rights in various markets for aggregate consideration of $186,000 (Class A Common Stock) and $7.0 million (cash -- $6.3 million and Class A Common Stock valued at $653,000), respectively. The Company was involved in the bidding process for wireless cable channel authorizations in certain basic trading areas ("BTAs"), which was completed in March 1996. The Company was the highest bidder in 59 markets. In the aggregate, the Company's bids in these markets totaled approximately $10.1 million. Of such amount, a total of approximately $9.3 million has been paid. The remaining amount (approximately $800,000) is due upon the FCC's notification to the Company of the issuance of the remainder of its BTA licenses, which the Company expects will occur in 1997. 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following (in thousands):
DECEMBER 31, ---------------- 1995 1996 ------ ------ Miscellaneous receivables................................... $ 341 $ 859 Prepaid rent and other...................................... 512 731 Prepaid insurance........................................... 712 422 Prepaid programming and channel leases...................... 111 251 Equipment and other short-term deposits..................... 564 162 Accrued investment income................................... 91 43 ------ ------ Total prepaid expenses and other current assets... $2,331 $2,468 ====== ======
F-13 49 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands):
DECEMBER 31, ---------------------------------------- 1995 1996 LIFE -------- -------- ---------------- Subscriber premises equipment................ $ 58,674 $ 58,773 3-4 years Deferred installation costs.................. 42,665 28,631 3 years Transmission equipment and system construction costs......................... 34,505 39,278 10 years Office furniture and equipment............... 6,260 8,108 3-5 years Vehicles..................................... 3,276 3,827 3-4 years Land, building and leasehold improvements.... 1,248 1,780 Lesser of useful -------- -------- life or duration of lease Total property and equipment................. 146,628 140,397 Accumulated depreciation and amortization.... (34,251) (41,126) -------- -------- Property and equipment, net.................. $112,377 $ 99,271 ======== ========
During the fourth quarter of 1996, the Company prospectively revised the lives of its subscriber premise equipment to three to four years. As described in Note 2, this revision was a result of a change in the Company's strategic direction and certain industry factors. The revision decreased net income for the year ended December 31, 1996 by approximately $600,000. 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following (in thousands):
DECEMBER 31, ------------------ 1995 1996 ------- ------- Accounts payable............................................ $11,474 $ 6,996 Accrued payroll and related taxes........................... 1,721 2,114 Accrued programming......................................... 1,718 1,673 Accrued property and sales taxes............................ 1,484 1,173 Acquisition of channel rights payable....................... 1,140 1,070 Accrued interest and other.................................. 886 1,253 Deferred revenue............................................ 449 476 Accrued lease termination costs............................. 420 188 Accrued severance........................................... 711 79 ------- ------- Total accounts payable and accrued expenses................. $20,003 $15,022 ======= =======
7. LONG-TERM DEBT Senior Discount Notes On June 23, 1994, ATI issued Units (the "1994 Units Offering") consisting of Senior Discount Notes due 2004 (the "2004 Notes") which mature on June 15, 2004 and warrants to purchase Common Stock. The 1994 Units Offering resulted in net proceeds to the Company of approximately $100.1 million (including amounts attributable to the issuance of the 1994 Warrants (see Note 8) and before payment of underwriting discounts and other issuance costs aggregating approximately $4.4 million). On August 10, 1995, ATI issued Units (the "1995 Units Offering") consisting of Senior Discount Notes due 2005 (the "2005 Notes") which F-14 50 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) mature on August 15, 2005 and warrants to purchase Common Stock. The 1995 Units Offering resulted in net proceeds to the Company of approximately $94.9 million, including amounts attributable to the issuance of the 1995 Warrants (see Note 8), and after payment of underwriting discounts and other issuance costs aggregating approximately $5.1 million. The 2004 Notes bear interest at a rate of 14.5%, computed on a semi-annual bond equivalent basis. The aggregate principal balance at stated maturity of the 2004 Notes approximates $196.9 million. Cash interest will not be payable on the 2004 Notes prior to June 15, 1999. Commencing December 15, 1999, cash interest on the 2004 Notes will be payable on June 15 and December 15 of each year at a rate of 14.5% per annum. The issue price of the 2005 Notes represents a yield to maturity of 14.50% per annum computed on a semi-annual bond equivalent basis. Cash interest will not be payable on the 2005 Notes prior to August 15, 2000. Commencing February 15, 2001, cash interest on the 2005 Notes will be payable on February 15 and August 15 of each year at a rate of 14.50% per annum. The 2005 Notes have an aggregate principal balance at stated maturity of $201.7 million. Both the 2004 Notes and the 2005 Notes are effectively subordinated to all indebtedness of ATI's subsidiaries, including trade payables, and rank pari passu with all existing and future unsubordinated and unsecured indebtedness of ATI. Both the 2004 Notes and the 2005 Notes were issued pursuant to Indentures which contain certain restrictive covenants and limitations. Among other things, the Indentures limit the incurrence of additional debt, limit the making of restricted payments (as defined) including the declaration and/or payment of dividends, place limitations on dividends and other payments by ATI's subsidiaries, prohibit ATI and its subsidiaries from engaging in any business other than the transmission of video, voice and data and related businesses and services, and place limitations on liens, certain asset dispositions and merger/sale of assets activity. Pursuant to the Indentures, the Company may not incur additional debt, other than Permitted Debt (as defined), unless after giving effect to the incurrence of such debt and the receipt and application of the net proceeds thereof on a pro forma basis, the Company's consolidated debt to annualized operating cash flow (as defined) ratio would be less than 5.0 to 1.0 in the case of any such incurrence. Permitted Debt is defined as (a) the 2004 Notes and the 2005 Notes; (b) debt of up to $100.0 million in aggregate principal amount lent by a strategic equity investor (as defined), provided, that such debt (i) is subordinated in right of payment to the prior payment in full of all obligations (including principal, interest and premium, if any) of the Company under the 2004 Notes and the 2005 Notes and related Indentures, (ii) is not guaranteed by any of the Company's subsidiaries and is not secured by any lien on any property or asset of the Company or any subsidiary of the Company, and (iii) has no scheduled maturity of principal earlier than a date at least one year after the scheduled maturity of the 2004 Notes and the 2005 Notes; (c) debt of up to $35.0 million under one or more credit agreements, under other existing debt facilities, or to a seller, vendor or bank or other financial institution that has financed or refinanced the purchase or lease of property, materials or a business, not to exceed $17.5 million until the Company's number of basic subscribers exceeds 200,000; (d) any debt of the Company (other than debt described in clause (a), (b), or (c) above) in an amount outstanding not exceeding, at the time of incurrence, the product of the Company's number of basic subscribers in excess of 200,000 multiplied by (1) $375, if such debt is incurred prior to January 1, 1998, (2) $325, if such debt is incurred thereafter and prior to January 1, 1999, and (3) $275, if such debt is incurred thereafter, if the net proceeds of such debt are invested exclusively in the transmission of video, voice and data and related businesses and services conducted by the Company and its subsidiaries; and (e) replacements, renewals, refundings or extensions of any debt referred to in clauses (a) - (d) above, subject to certain restrictions. As a result of such limitations, the Company's additional borrowing capacity approximated $8.2 million at December 31, 1996. F-15 51 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The 2004 Notes and the 2005 Notes are redeemable, at the option of ATI at any time, in whole or in part, on or after June 15, 1999 and August 15, 2000, respectively, at specified redemption prices, plus accrued and unpaid interest, if any, to the date of redemption. The redemption prices are as follows:
YEAR 2004 NOTES 2005 NOTES ---- ---------- ---------- 1999................................................ 107.250% -- 2000................................................ 104.833% 107.250% 2001................................................ 102.417% 104.833% 2002................................................ 100.000% 102.417% 2003 and thereafter................................. 100.000% 100.000%
Both the 2004 Notes and the 2005 Notes are subject to mandatory redemption provisions in the event of a change of control (as defined) of ATI. Upon the occurrence of such an event, each holder of the 2004 Notes will have the right to require ATI to repurchase all of such holder's 2004 Notes at 101% of the accreted value (as defined) thereof, or, in the case of any such repurchase on or after June 15, 1999, 101% of the principal amount at stated maturity thereof plus accrued and unpaid interest, if any, to the date of repurchase. Similarly, in the event of a change of control of ATI, each holder of the 2005 Notes will have the right to require ATI to repurchase all of such holder's 2005 Notes at 101% of the accreted value (as defined) thereof, or, in the case of any such repurchase on or after August 15, 2000, 101% of the principal amount at stated maturity thereof plus accrued and unpaid interest, if any, to the date of repurchase. In addition, in the event of a sale by ATI prior to August 15, 1998 of at least $10 million of its capital stock to a strategic equity investor, up to a maximum of 35% of the aggregate accreted value of outstanding 2005 Notes may be redeemed at ATI's option within 30 days after such sale from the net cash proceeds thereof at 113.50% of accreted value to the date of redemption; provided that there remain outstanding 2005 Notes having an aggregate principal amount at maturity equal to at least 65% of the aggregate principal amount at maturity of all 2005 Notes originally issued. Future debt service payments on the 2004 Notes and the 2005 Notes representing interest only, for the next five years are as follows (in thousands):
YEAR 2004 NOTES 2005 NOTES TOTAL ---- ---------- ---------- ------- 1997...................................... $ -- $ -- $ -- 1998...................................... -- -- -- 1999...................................... 14,273 -- 14,273 2000...................................... 28,546 -- 28,546 2001...................................... 28,546 30,518 59,064
Fresno Facility During 1996, the Fresno Partnership maintained a revolving credit facility (the "Fresno Facility") with a bank that provided for borrowings for the Fresno, Visalia and Merced systems. As of December 31, 1996, no amounts were available for borrowing under the Fresno Facility. The Fresno Facility was required to be fully assigned to ATI by March 31, 1997. All amounts due to the bank under the Fresno Facility were repaid by ATI in February 1997 with proceeds from the Facility (as defined below). Outstanding borrowings under the Fresno Facility bore interest at the banks' prime rate plus 2.25% (10.5% at December 31, 1996). Interest expense relating to this facility during the year ended December 31, 1996 totaled $763,000. The facility was secured by the assets of the Fresno, Visalia and Merced systems. The Fresno Facility also contained various financial convenants and other restrictive covenants that, among other things, prohibited the payment of dividends. As of September 30 and December 31, 1996, the Fresno Partnership was not in compliance with certain of the restrictive covenants of the Fresno Facility. F-16 52 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Credit Facility On February 26, 1997, the Company entered into a $17,000,000 credit facility (the "Facility") with Banque Indosuez, New York Branch (the "Bank"). The term of the Facility is up to twelve months. The loan must be repaid earlier than the specified termination date and certain mandatory prepayments must be made with proceeds from debt issuances or certain asset sales, including the BellSouth Transaction. The Facility bears interest at a rate of 12.5%, which rate shall increase by 0.50% per quarter. Borrowings under the Facility are secured by a security interest in favor of the Bank in substantially all of the assets of ATI and its subsidiaries. The Facility is further secured by a pledge of the stock of substantially all of ATI's subsidiaries as well as a pledge of the note due to the Company from its Fresno subsidiary under the Fresno Facility. The Company paid the Bank a commitment fee of $340,000. At closing, the Company paid an additional fee of $340,000 and reimbursed the Bank for its out of pocket expenses incurred in conjunction with the making of the loan. During the term of the Facility, the Company is required to pay to the Bank a commitment commission on the unused loan balance at the annual rate of 0.50%. At closing, the Company also delivered 4,500 bond appreciation rights ("BARs") and an option to exercise 141,667 debt warrants or 141,667 equity warrants. The debt warrants give the holder the right to increase the principal amount of the loan by $6.00 per warrant, or the right to require the Company to purchase the debt warrant for $6.00 per warrant. The debt warrants are exercisable or puttable during a five-day period beginning on the earlier of one year from the date of issuance, or notice that payment in full of the Facility has occurred or will occur shortly. The equity warrants give the holder the right to purchase up to 141,667 shares of the Company's Class A Common Stock for a price of $3.281 per share. Pursuant to the option agreement relating to the warrants, the equity warrants become exercisable only to the extent that the holder elects not to exercise or put the debt warrants or, if the holder elects to put the debt warrants to the Company, the Company fails to make payment therefor within the time required. Amounts payable in connection with the BARs are based upon the appreciation in price of $4.5 million face value of the Company's 2004 Notes. The BARs are exercisable after the earlier of June 15, 1999 or the occurrence of an Event of Default under the 2004 Notes. The payment due upon exercise of each BAR is equal to the market price of the 2004 Notes on the closing date less $290. The net value of the BARs is payable to holders of the BARs in cash. The Company has deposited $1.0 million in escrow to satisfy certain interest obligations under the Facility. Retired Facilities Interest expense related to retired revolving credit facilities approximated $982,000, $1.6 million and $27,000 during the years ended December 31, 1994, 1995 and 1996, respectively. The following table summarizes the book and fair values of the Company's debt facilities at December 31, 1996 (dollars in thousands). Fair values for the Company's 2004 Notes and 2005 Notes are based on quoted market prices. The fair value of the Company's Fresno Facility and notes payable are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest approximates its fair value.
BOOK VALUE FAIR VALUE ---------- ---------- 2004 Notes.................................................. $135,484 $ 76,779 2005 Notes.................................................. 116,480 74,629 Fresno Facility............................................. 2,950 2,762 Notes payable............................................... 4,455 3,462 -------- -------- $259,369 $157,632 ======== ========
F-17 53 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future maturities of amounts outstanding under the Company's long-term debt facilities as of December 31, 1996 are summarized as follows (in thousands):
REVOLVING 2004 2005 CREDIT NOTES YEAR ENDING DECEMBER 31, NOTES NOTES FACILITIES PAYABLE TOTAL ------------------------ -------- -------- ---------- ------- -------- 1997................................ $ -- $ -- $2,950 $2,026 $ 4,976 1998................................ -- -- -- 2,314 2,314 1999................................ -- -- -- 44 44 2000................................ -- -- -- 46 46 2001................................ -- -- -- 25 25 Thereafter.......................... 196,869 201,700 -- -- 398,569 Unamortized discount................ (61,385) (85,220) -- -- (146,605) -------- -------- ------ ------ -------- Total.......................... $135,484 $116,480 $2,950 $4,455 $259,369 ======== ======== ====== ====== ========
8. COMMON STOCK, STOCK OPTIONS AND WARRANTS Stock Option Plan The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options is equal to the market price of the underlying stock on the date of the grant, no compensation expense is recognized. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting and Disclosure of Stock-Based Compensation," which established an alternative method of expense recognition for stock-based compensation awards to employees based on fair values. The Company elected not to adopt SFAS No. 123 for expense recognition purposes. The Company maintains a stock option plan reserving 1,525,000 shares of Class A Common Stock to be issued to officers and key employees under terms and conditions to be set by the Company's Board of Directors. The options vest over periods of up to three years and expire eight years from the date of issuance. As of December 17, 1996, the Company repriced options for all exempt employees at the fair market value on that date. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1995 and 1996, respectively: risk-free interest rates of 6.31% during each period; dividend yields of 0.0% during each period; volatility factors of the expected market price of the Company's common stock of .61 and .64, and a weighted-average expected life of the option of four years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The weighted average fair value of options granted during 1995 and 1996 was $7.43 and $3.91, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma net loss and pro forma net loss per share applicable to Class A Common Stock as if the Company had used the fair value accounting provisions of F-18 54 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS No. 123 were $67.0 million and $4.19 and $105.7 million and $5.84 for the years ended December 31, 1995 and 1996, respectively. A summary of the Company's stock option activity, and related information for the years ended December 31, 1994, 1995 and 1996 are as follows:
1994 1995 1996 ------------------------ ------------------------- ------------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE ------- -------------- -------- -------------- -------- -------------- Options outstanding at beginning of year............... 574,000 $ 3.49 559,000 $ 6.16 696,000 $ 9.55 Granted.............. 85,000 21.68 390,000 13.02 752,000 9.12 Exercised............ (92,500) 17.75 (176,500) 15.47 (85,000) 15.53 Forfeited............ (7,500) 2.69 (76,500) 18.91 (628,200) 13.76 ------- -------- -------- Options outstanding at end of year..... 559,000 $ 6.16 696,000 $ 9.55 734,800 $ 5.96 ======= ======== ======== Exercisable at end of year............... 330,500 $ 2.77 249,250 $ 4.79 178,000 $ 2.69 ======= ======== ========
Exercise prices for options outstanding as of December 31, 1996, are as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------------ ------------------------------------- NUMBER OUTSTANDING WEIGHTED AVERAGE WEIGHTED NUMBER EXERCISABLE WEIGHTED RANGE OF AS OF DECEMBER 31, REMAINING AVERAGE AS OF DECEMBER 31, AVERAGE EXERCISE EXERCISE PRICES 1996 CONTRACTUAL LIFE EXERCISE PRICE 1996 PRICE - --------------- ------------------ ---------------- -------------- ------------------ ---------------- $ 2.00-$ 2.00 110,000 1.82 $ 2.00 110,000 $ 2.00 2.69- 2.69 50,000 2.33 2.69 50,000 2.69 5.50- 5.50 22,500 4.73 5.50 15,000 5.50 6.88- 6.88 538,500 7.96 6.88 -- 0.00 13.75- 13.75 5,800 6.95 13.75 1,800 13.75 14.25- 14.25 1,200 6.22 14.25 1,200 14.25 15.00- 15.00 6,800 7.32 15.00 -- 0.00 ------- ------- $ 2.00-$15.00 734,800 6.54 $ 5.96 178,000 $ 2.69 ======= =======
Warrants In conjunction with the 1995 Units Offering described in Note 7, ATI issued 201,700 warrants (the "1995 Warrants") to purchase an aggregate of 943,956 shares of ATI's Common Stock at an exercise price of $12.65 per share, subject to adjustment under certain circumstances. Warrant holders may exercise the 1995 Warrants at any time on or after August 10, 1996 and on or prior to August 10, 2000. The 1995 Warrants will terminate and become void at the close of business on August 10, 2000. Approximately $5.5 million of the proceeds from the 1995 Units Offering was allocated to the 1995 Warrants. As of December 31, 1996, no 1995 Warrants had been exercised. In conjunction with the 1994 Units Offering described in Note 7, ATI issued 915,000 warrants (the "1994 Warrants") to purchase an equal number of shares of ATI's Common Stock. The 1994 Warrants have an exercise price of $12.68 per share. Warrant holders may exercise the 1994 Warrants for cash at any time after June 23, 1995 and on or prior to June 23, 1999. The 1994 Warrants will terminate and become void at the close of business on June 23, 1999. As described in Note 7, the unamortized debt discount (approximately $5.1 million) for amounts ascribed to the 1994 Warrants was written-off in August 1995 upon execution of the F-19 55 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Supplemental Indenture. The 1994 Warrants, as amended, were valued at approximately $4.6 million. As of December 31, 1996, 1994 Warrants for the purchase of 100 shares had been exercised. During the year ended December 31, 1996, additional warrants for the purchase of 62,286 shares of Common Stock were exercised at a price of $2.74 per share while warrants for the purchase of 61,284 shares at a price of $4.67 per share expired unexercised. 9. SERIES B CONVERTIBLE PREFERRED STOCK During August and October 1996, the Company completed private placements of a total of 250,000 shares of Series B Convertible Preferred Stock, resulting in net proceeds to the Company of $23.8 million. The shares of Series B Convertible Preferred Stock have a preferential, cumulative 5% dividend and are non-voting. Each share of Series B Preferred Stock is convertible, at the option of the holder, into that number of shares of Common Stock that is determined by dividing (a) the sum of (i) the original issuance price for each such share of Series B Preferred Stock plus (ii) the amount of all accrued but unpaid dividends on each share of Series B Preferred Stock so converted, by (b) the Conversion Price (as defined herein) in effect at the time of conversion. The "Conversion Price" at any given time is equal to 80% of the prevailing market price of the Class A Common Stock, provided that the Conversion Price cannot exceed $12.50 or be less than $2.00. Accordingly, the Company recognized the discount on the conversion as a dividend in the amount of $6,250,000. During 1996, 140,000 shares of Series B Convertible Preferred Stock were converted into a total of 2,273,785 shares of the Company's Class A Common Stock at conversion prices ranging from $4.33 to $7.87. Aggregate dividends paid or payable to holders of the Series B Convertible Preferred Stock totaled approximately $201,000 and are reflected in the accompanying statements of operations as interest expense. As of December 31, 1996, 110,000 shares of Series B Convertible Preferred Stock were outstanding. 10. LEASES Channel Lease Commitments The Company has entered into various agreements to lease FCC channel authorizations to provide wireless cable services. Certain of these lease agreements provide buy-out options to the Company based upon the number of subscribers at the time of such buy-out. The leases typically provide for five-year minimum terms and renewals thereafter at the option of the Company. The Company's obligations under certain of the leases are subject to receipt by the lessor of all necessary FCC approvals to begin providing service. Channel lease expense during 1994, 1995 and 1996 approximated $951,000, $1.9 million and $2.6 million, respectively. As of December 31, 1996, aggregate minimum annual channel lease payments are summarized as follows (in thousands): 1997........................................................ $1,443 1998........................................................ 1,203 1999........................................................ 990 2000........................................................ 728 2001........................................................ 579 Thereafter.................................................. 2,053 ------ Total....................................................... $6,996 ======
The Company assigned certain of its channel licenses to a group affiliated with the Company in November 1993 and entered into agreements to lease those channels for an initial term of five years, renewable at the Company's option, for an unlimited number of one-year terms thereafter. Annual lease payments F-20 56 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) required to be paid by the Company in connection with the aforementioned channel leases were nominal. The majority of such licenses were reassigned to the Company during 1996. Operating Leases The Company leases various office, warehouse and transmission tower space and certain office equipment, furniture and vehicles. Rent expense during 1994, 1995 and 1996 was approximately $1.2 million, $2.4 million and $2.7 million, respectively. Future minimum commitments as of December 31, 1996 under these leases are as follows (in thousands): 1997........................................................ $ 2,762 1998........................................................ 2,408 1999........................................................ 1,818 2000........................................................ 1,469 2001........................................................ 858 Thereafter.................................................. 1,892 ------- Total....................................................... $11,207 =======
Capital Leases The Company leases certain vehicles and office equipment under noncancelable capital leases. Equipment capitalized under such leases as of December 31, 1995 and 1996 was approximately $3.1 million and $2.2 million, respectively. Future minimum payments for capital leases as of December 31, 1996 are approximately $1,051,000, $896,000, $225,000, $15,000 and $1,000 for the years ending December 31, 1997 through 2001, respectively, including interest of approximately $251,000. 11. COMMITMENTS AND CONTINGENCIES Seattle Agreement Pursuant to a consulting agreement, the Company issued 10% of the Common Stock of American Telecasting of Seattle, Inc., to a third party, and is required to issue up to an additional 5% in the event that a certain subscriber level is achieved in the Seattle system once it becomes operational. Programming Agreements The Company has entered into a series of noncancelable agreements to purchase entertainment programming for rebroadcast which expire through 2005. The agreements generally require monthly payments based upon the number of subscribers to the Company's systems, subject to certain minimums. Such expenses totaled approximately $5.9 million, $14.4 million and $19.3 million in 1994, 1995 and 1996, respectively. Litigation In February 1994, a complaint was filed by Fresno Telsat, Inc. ("Fresno Telsat") in the Superior Court of the State of California for the County of Monterey against a director and officer of the Company, the Company, and other named and unnamed defendants. The complaint seeks compensatory damages (in an unspecified amount but estimated by the plaintiff to be no less than $5 million) and exemplary damages against all defendants, costs, and other relief. The complaint alleges, among other claims, that all defendants, including the Company, participated in a conspiracy to misappropriate corporate opportunities belonging to Fresno Telsat. Although the ultimate outcome of this matter cannot be predicted, management believes, based on its review of this claim and discussion with legal counsel, that the resolution of this matter will not have a material impact on the Company's financial position or future results of operations. F-21 57 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On January 12, 1996, Videotron (Bay Area) Inc. filed a complaint against ATI in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. The Complaint alleges that ATI has caused certain entities from which ATI leases channels and airtime for its Bradenton and Lakeland, Florida wireless cable markets (the "ATI Lessors") to actively oppose Videotron's FCC applications to increase broadcast power in Videotron's Tampa, Florida wireless cable system (the "Tampa market") in violation of a Non-Interference Agreement between Videotron and ATI (the "Non-Interference Agreement"). The Complaint seeks injunctive relief directing ATI to perform all acts, services and undertakings required under the Non-Interference Agreement, including but not limited to using reasonable best efforts to cause the ATI Lessors not to object to Videotron's attempt to increase broadcast power in the Tampa market and to enter into certain non-interference agreements with respect thereto. In the alternative, the Complaint seeks damages for breach of the Non-Interference Agreement (in an unspecified amount but exceeding $15,000). Recently, in responding to written interrogatories, Videotron estimated its damages to be approximately $113.5 million. Although the ultimate outcome of this litigation cannot be predicted at this time, management of ATI believes, based upon its review of the Complaint and after consultation with counsel, that resolution of this matter will not have a material adverse impact on the Company's financial position or future results of operations. In addition, the Company is occasionally a party to legal actions arising in the ordinary course of its business, the ultimate resolution of which cannot be ascertained at this time. However, in the opinion of management, resolution of such matters will not have a material adverse effect on the Company. 12. INCOME TAXES As of December 31, 1996, the Company had net operating loss carryforwards ("NOLs") for Federal income tax purposes of approximately $156.6 million. The NOLs expire in years 2003 through 2011. The use of the NOLs is subject to statutory and regulatory limitations regarding changes in ownership. SFAS No. 109 requires that the tax benefit of NOLs for financial reporting purposes be recorded as an asset. To the extent that management assesses the realization of deferred tax assets to be less than "more likely than not," a valuation reserve is established. The temporary differences which give rise to deferred tax assets and liabilities as of December 31, 1995 and 1996, are as follows (in thousands):
DECEMBER 31, -------------------- 1995 1996 -------- -------- Deferred tax assets: Net operating loss carryforwards.......................... $ 41,123 $ 59,494 Interest expense not currently deductible................. 9,758 22,278 Other..................................................... 1,881 664 -------- -------- Total gross deferred tax assets............................. 52,762 82,436 Deferred tax liabilities: Basis differences attributable to purchase accounting (Choice TV Group, People's Cable and FWCTI -- see Note 3)..................................................... (16,643) (20,897) Property and equipment, principally due to differences in depreciation and capitalized installation costs........ (14,964) (9,654) -------- -------- Total deferred tax liabilities.............................. (31,607) (30,551) Less valuation reserve...................................... (27,286) (54,719) -------- -------- Net deferred tax liability.................................. $( 6,131) $( 2,834) ======== ========
F-22 58 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The income tax benefit for the years ended December 31, 1995 and 1996 is comprised of the following (in thousands):
YEAR ENDED DECEMBER 31, ---------------- 1995 1996 ------ ------ Currently Payable: Federal................................................... $ -- $ -- State..................................................... -- -- Deferred: Federal................................................... 1,907 2,769 State..................................................... 363 528 ------ ------ $2,270 $3,297 ====== ======
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax benefit for the years ended December 31, 1995 and 1996 is as follows:
YEAR ENDED DECEMBER 31, -------------- 1995 1996 ---- ---- Tax at U.S. statutory rates................................. 35% 35% Effect of graduated rates................................... (1) (1) State income taxes, net of federal tax benefit.............. 4 4 Losses not benefited for financial reporting purposes....... (32) (26) Other, net.................................................. (2) (9) --- --- 4% 3% === ===
13. BENEFIT PLANS The Company sponsors a defined contribution profit sharing plan, the "American Telecasting, Inc. 401(K) Retirement Plan" (the "Plan"). Substantially all of the Company's employees are eligible to participate in the Plan, which commenced existence on September 1, 1994. Company contributions to the Plan are based on a percentage of employee's contributions, subject to certain maximum limits. The cost of the Plan for the years ended December 31, 1994, 1995 and 1996 approximated $52,000, $249,000 and $122,000, respectively. The Company also sponsors an employee stock ownership plan, the "American Telecasting, Inc. Associate Stock Purchase Plan" (the "Stock Purchase Plan"). Generally, all full-time employees who have been employed by the Company for at least one year are eligible to participate in the Stock Purchase Plan. The purchase price of each share of the Company's Class A Common Stock purchased by Stock Purchase Plan participants is 90% of the closing price of the Class A Common Stock on the last day of each calendar quarter. The shares are purchased in the open market and the Company pays ten percent of the purchase price and all administrative costs. An aggregate of 250,000 shares of the Company's Class A Common Stock may be sold pursuant to the Stock Purchase Plan. As of December 31, 1996, 245,764 additional shares may be sold pursuant to the Stock Purchase Plan. Employer contributions and administrative costs paid by the Company related to the Stock Purchase Plan aggregated $16,000 and $22,000 during the years ended December 31, 1995 and 1996, respectively. F-23 59 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. RELATED PARTY TRANSACTIONS As of December 31, 1995 and 1996, the Company had loans in the form of demand promissory notes to officers, employees and others totaling $543,000 and $322,000, respectively. Such notes generally bear interest at rates ranging from the prime rate plus 1.0% to the prime rate plus 1.25% and are due on demand. 15. QUARTERLY RESULTS OF OPERATIONS The following summarizes the Company's unaudited quarterly results of operations for 1996 and 1995 (dollars in thousands, except per share amounts):
THREE MONTHS ENDED ------------------------------------------------ MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------- -------- ------------ ----------- Year Ended December 31, 1996: Total revenues.......................... $ 15,423 $ 15,422 $ 15,456 $ 15,731 Loss from operations.................... (10,419) (10,111) (11,360) (34,299) Net loss................................ (18,749) (18,396) (20,212) (41,023) Net loss applicable to Class A Common Stock................................ (18,749) (18,396) (20,212) (47,273) Net loss per share applicable to Class A Common Stock......................... $ (1.13) $ (1.06) $ (1.09) $ (2.38) Year Ended December 31, 1995: Total revenues.......................... $ 9,444 $ 10,987 $ 13,009 $ 14,061 Loss from operations.................... (6,146) (6,744) (8,146) (14,630) Loss before extraordinary charge and cumulative effect of accounting change............................... (7,711) (10,764) (14,351) (22,870) Net loss................................ (7,109) (10,764) (25,892) (22,870) Loss per share before extraordinary charge and cumulative effect of accounting change.................... $ (0.51) $ (0.68) $ (0.88) $ (1.39) Net loss per share...................... (0.47) (0.68) (1.58) (1.39)
During the fourth quarter of 1996, the Company recognized an impairment loss on its wireless cable assets of approximately $21.3 million and a preferred dividend of approximately $6.3 million relating to its Series B Convertible Preferred Stock. During the fourth quarter of 1995, the Company recognized approximately $1.3 million related to certain severance, lease termination and other costs. The total of net loss per share for the 1996 and 1995 quarters does not equal net loss per share for the respective years as per share amounts for each quarter and for the year are computed based on their respective discrete periods. F-24 60 AMERICAN TELECASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 16. VALUATION AND QUALIFYING ACCOUNTS (DOLLARS IN THOUSANDS)
ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING OF COSTS AND END OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD ------------ ---------- ------------- ---------- For the Year ended December 31, 1994 Deducted from asset accounts: Allowance for uncollectible accounts........................... $156 $ 986(2) $ 598 $544 ==== ====== ====== ==== For the Year ended December 31, 1995 Deducted from asset accounts: Allowance for uncollectible accounts........................... $544 $2,714(3) $2,342 $916 ==== ====== ====== ==== For the Year ended December 31, 1996 Deducted from asset accounts: Allowance for uncollectible accounts........................... $916 $2,322 $2,551 $687 ==== ====== ====== ====
- --------------- (1) Uncollectible accounts written off, net of recoveries. (2) Includes additions of $155 attributable to purchase accounting. (3) Includes additions of $287 attributable to purchase accounting. F-25 61 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN TELECASTING, INC. By: /s/ ROBERT D. HOSTETLER ---------------------------------- Robert D. Hostetler President, Chief Executive Officer and Director Date: March 25, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 25, 1997:
SIGNATURE TITLE --------- ----- By: /s/ DONALD R. DEPRIEST Chairman of the Board and Director ------------------------------------------------- Donald R. DePriest By: /s/ ROBERT D. HOSTETLER President, Chief Executive Officer and ------------------------------------------------- Director (Principal Executive Officer) Robert D. Hostetler By: /s/ RICHARD F. SENEY Vice Chairman of the Board, Secretary and ------------------------------------------------- Director Richard F. Seney By: /s/ DAVID K. SENTMAN Senior Vice President, Chief Financial Officer ------------------------------------------------- and Treasurer (Principal Financial Officer) David K. Sentman By: /s/ FRED C. PATTIN, JR. Controller (Principal Accounting Officer) ------------------------------------------------- Fred C. Pattin, Jr. By: /s/ MITCHELL R. HAUSER Director ------------------------------------------------- Mitchell R. Hauser By: /s/ JAMES S. QUARFORTH Director ------------------------------------------------- James S. Quarforth By: /s/ CARL A. ROSBERG Director ------------------------------------------------- Carl A. Rosberg
62 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 3.1 -- Certificate of Designation for Series B Convertible Preferred Stock of American Telecasting, Inc. dated August 6, 1996 (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on August 7, 1996). 3.2 -- Amendment to Restated Certificate of Incorporation of American Telecasting, Inc. dated April 24, 1996 (incorporated by reference to Exhibit 3.1(i) to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 3.3 -- Restated Certificate of Incorporation of American Telecasting, Inc., dated April 27, 1995 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995). 3.4 -- Amended and Restated By-Laws of American Telecasting, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1995). 4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A filed on December 6, 1993). 4.2 -- Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 filed on April 26, 1996). 4.3 -- Specimen Class B Common Stock Certificate. 4.4 -- Specimen Series B Convertible Preferred Stock Certificate. 4.5 -- Supplemental Indenture dated as of August 10, 1995 between American Telecasting, Inc. and First Trust National Association, Trustee, supplementing and amending the Indenture dated as of June 23, 1994 (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.6 -- Indenture dated as of June 23, 1994 between American Telecasting, Inc. and First Trust National Association, Trustee (incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 4.7 -- Form of Senior Discount Note due 2004 (included within Exhibits 4.5 and 4.6). 4.8 -- Supplemental Warrant Agreement dated as of August 10, 1995 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.9 -- Warrant Agreement dated as of June 23, 1994 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 4.10 -- Form of Warrant (included within Exhibits 4.8 and 4.9). 4.11 -- Collateral and Disbursement Agreement dated as of June 23, 1994 between First Trust National Association and American Telecasting, Inc. (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the period ended December 31, 1994). 63 EXHIBIT NO. DESCRIPTION 4.12 -- Indenture dated as of August 10, 1995 between American Telecasting, Inc., as Issuer, and First Trust National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.13 -- Form of Senior Discount Note due 2005 (included within Exhibit 4.12). 4.14 -- Warrant Agreement dated as of August 10, 1995 between American Telecasting, Inc. and First Union National Bank of North Carolina, as warrant agent (incorporated by reference to Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 4.15 -- Form of Warrant (included within Exhibit 4.14). 4.16 -- Registration Rights Agreement dated as of August 10, 1995 by and among American Telecasting, Inc. and Dillon Read & Co., Inc. and CS First Boston Corporation (incorporated by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.1 -- Stock Purchase and Sale Agreement dated as of June 7, 1995 by and between Bruce Merrill and Virginia Merrill and their successors in trust, as trustees of the Merrill Revocable Trust dated August 20, 1982 and American Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.2 -- Binding Letter Agreement dated as of July 6, 1995 by and between Red Rock Communications, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995). 10.3 -- Management Agreement dated as of February 3, 1996 between Fresno MMDS Associates and American Telecasting Development, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.4 -- Standard Commercial Lease Agreement, dated as of September 18, 1995, between Tech Center VI Associates, L.P., as Lessor, and American Telecasting, Inc., as Lessee (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.5 -- Employment Agreement effective as of January 4, 1996 between American Telecasting, Inc. and Robert D. Hostetler (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on 10-Q for the period ended March 31, 1996). 10.6 -- Employment Agreement dated August 10, 1995 between American Telecasting, Inc. and David K. Sentman (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995). 10.7 -- First Amendment to Amended and Restated Revolving Credit Agreement dated as of June 30, 1996 among Fresno MMDS Associates, First Union National Bank of North Carolina, Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc.; related Subordination Agreement dated as of June 30, 1996 by American Telecasting, Inc. and Fresno MMDS Associates in favor of First Union National Bank of North Carolina; related Assignment Acceptance and Intercreditor Agreement dated as of July 18, 1996 among First Union National Bank of North Carolina as agent and Fresno MMDS Associates (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 64 EXHIBIT NO. DESCRIPTION 10.8 -- Side agreement between Fresno Telsat, Inc. and American Telecasting, Inc. dated July 18, 1996 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 10.9 -- Amended and Restated Revolving Credit Agreement between Fresno MMDS Associates, First Union National Bank of North Carolina, Fresno Telsat, Inc. and Fresno Wireless Cable Television, Inc. dated as of September 30, 1994; related Amended and Restated Revolving Credit Note by Fresno MMDS Associates in favor of First Union National Bank of North Carolina; related Pledge and Security Agreement dated as of September 30, 1994 between Fresno MMDS Associates and First Union National Bank of North Carolina; related Collateral Assignment and Security Agreement dated as of September 30, 1994 by and between FMA Licensee Subsidiary, Inc. and First Union National Bank of North Carolina (incorporated by reference to Exhibit 10.21 to the Company's Form S-4 Registration Statement filed on September 22, 1995). 10.10 -- Credit Agreement dated as of February 26, 1997, among American Telecasting, Inc. and Banque Indosuez, New York Branch, as Agent, and the lending institutions listed therein (the "Banks"); related Option Agreement dated as of February 26, 1997 among American Telecasting, Inc. and Indosuez CM II, Inc.; related Bond Appreciation Rights Certificate dated February 26, 1997; related Securities Pledge Agreement dated as of February 26, 1997 in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related Securities Pledge Agreement dated as of February 26, 1997 made by American Telecasting of Green Bay, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related General Security Agreement dated as of February 26, 1997 made by certain subsidiaries of American Telecasting, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks; related Registration Rights Agreement dated as of February 26, 1997 among American Telecasting, Inc. and the holders of the warrants to purchase an aggregate of 141,667 shares of the Class A Common Stock of American Telecasting, Inc.; related Securities Pledge Agreement dated as of February 26, 1997 made by American Telecasting, Inc. in favor of Banque Indosuez, New York Branch, as pledgee, assignee and secured party, in its capacity as collateral agent for the Banks. 10.11 -- Form of Underwriting Agreement dated as of May 21, 1996 among Alex. Brown & Sons Incorporated, Dillon, Read & Co. Inc., and American Telecasting, Inc. (incorporated by reference to Exhibit 1.1 to the Company's Registration Statement on Form S-3 filed on April 10, 1996). 10.12 -- Stock Purchase Agreement dated as of August 6, 1996 by and among American Telecasting, Inc., Museum Assets Ltd., and Ashline, Ltd. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on 10-Q for the period ended September 30, 1996). 10.13 -- Stock Purchase Agreement dated October 25, 1996 by and among American Telecasting, Inc., Wartone Property Holdings, Ltd., Harleko Ltd., and Tarian Properties, Ltd. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on 10-Q for the period ended September 30, 1996). 10.14 -- Agreement for Purchase and Sale of Assets dated June 28, 1996 among Novner Enterprises, Inc., Alvin Novick, Phyllis Novick, American Telecasting of Cincinnati, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 65 EXHIBIT NO. DESCRIPTION 10.15 -- Management Agreement dated as of June 28, 1996 between Novner Enterprises, Inc. and American Telecasting of Cincinnati, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 10.16 -- Agreement for Exchange of Assets dated July 10, 1996 among Heartland Wireless Communications, Inc., Heartland Wireless South Dakota Properties, Inc., Heartland Wireless Florida Properties, Inc. and American Telecasting, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 10.17 -- American Telecasting, Inc. 1990 Stock Option Program, As Amended (Effective April 25, 1996) (incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on 10-Q for the period ended June 30, 1996). 10.18 -- Form of Registration Rights Agreement between American Telecasting, Inc. and Stockholder (incorporated by reference to Exhibit 10.40 to the Company's Form S-1 Registration Statement filed on October 8, 1993). 11.1 -- Statement regarding computation of per share earnings. 21.1 -- Subsidiaries of American Telecasting, Inc. 23.1 -- Consent of Independent Public Accountant. 27.1 -- Financial Data Schedule. EX-4.3 2 SPECIMEN CLASS B COMMON STOCK CERTIFICATE 1 EXHIBIT 4.3 NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF SHARES 0 DELAWARE CLASS B COMMON AMERICAN TELECASTING, INC. TOTAL AUTHORIZED ISSUE 43,000,000 SHARES 30,000,000 Class A Common Shares 10,000,000 Class B Common Shares 3,000,000 Preferred Shares With A Par Value of $0.01 Each With A Par Value of $0.01 Each With A Par Value of $0.01 Each THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. This is to Certify that is the owner of fully paid and non-assessable CLASS B COMMON shares of AMERICAN TELECASTING, INC. transferable only on the books of the Corporation by the holder hereof in person or by the duly authorized Attorney upon surrender of this certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated SECRETARY PRESIDENT
2 The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian ------------------------------- TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants in common Act --------------------------- (State)
Additional abbreviations may also be used though not in the above list. For value received hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated 19 In presence of ----------------------------- - ----------------------------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. EX-4.4 3 SPECIMEN SERIES B CONVERT. PREF. STOCK CERTIFICATE 1 EXHIBIT 4.4 NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF SHARES 0 DELAWARE SERIES B CONVERTIBLE PREFERRED AMERICAN TELECASTING, INC. TOTAL AUTHORIZED ISSUE 3,500,000 SHARES 500,000 Series B Convertible Preferred Shares 3,000,000 Preferred Shares With A Par Value of $0.01 Each With A Par Value of $0.01 Each THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. This is to Certify that is the owner of fully paid and non-assessable PREFERRED shares of American Telecasting, Inc. transferable only on the books of the Corporation by the holder hereof in person or by the duly authorized Attorney upon surrender of this certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated SECRETARY PRESIDENT
2 The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian ------------------------------- TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants in common Act --------------------------- (State)
Additional abbreviations may also be used though not in the above list. For value received hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) - ------------------------------------------------------------------------ - ------------------------------------------------------------------------ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated 19 In presence of ----------------------------- - ----------------------------- NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. EX-10.10 4 CREDIT AGREEMENT DATED FEBRUARY 26, 1997 1 ================================================================================ CREDIT AGREEMENT among AMERICAN TELECASTING, INC. and BANQUE INDOSUEZ, NEW YORK BRANCH, AS AGENT, and THE LENDING INSTITUTIONS LISTED HEREIN and THE LENDING INSTITUTIONS LISTED HEREIN ----------------------------- Dated as of February 26, 1997 ----------------------------- $17,000,000 ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02. Minimum Amount of Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.03. Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.04. Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.06. Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.08. Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.09. Total Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.10. Commitment Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.01. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.02. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.03. Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.04. Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.01. Conditions Precedent to the Effective Date . . . . . . . . . . . . . . . . . . . . . 9 3.02. Conditions Precedent to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4. Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . 14 4.01. Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.02. Corporate Power and Authority; Business . . . . . . . . . . . . . . . . . . . . . . . 15 4.03. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.04. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.05. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.06. Governmental Approvals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.07. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.08. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.09. True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.10. Financial Condition; Financial Statements; Projections . . . . . . . . . . . . . . . 17 4.11. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.12. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.14. Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Page ---- 4.15. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.16. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.17. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.18. Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.19. Indebtedness Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.20. Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.21. Business, System Agreements and Other Material Agreements . . . . . . . . . . . . . . 24 4.22. Tower Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.01. Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 5.02. Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.04. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.05. Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.06. Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.07. ERISA 32 5.08. Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.09. End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . 33 5.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.11. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.12. Environmental Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 5.13. Equal Security for Loans and Notes; No Further Negative Pledges . . . . . . . . . . . 34 5.14. Pledge of Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.15. Channel Lessor Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.16. Tower Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.17. Pledge of Las Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.18. Debt Warrant Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.01. Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.02. Amendments or Waivers of Certain Documents . . . . . . . . . . . . . . . . . . . . . 36 6.03. Liens 36 6.04. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.05. Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.06. Prepayments of Indebtedness, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.07. Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.08. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.09. Issuance of Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.10. Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.11. Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 6.12. ERISA 42 6.13. Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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Page ---- 6.14. Additional System Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 7. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.01. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.02. Representations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.03. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.04. Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.05. Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.06. ERISA 45 7.07. Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 7.08. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 7.09. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 7.10. Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 9. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.01. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9.02. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.03. Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.04. Reliance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.05. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.06. Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . 66 9.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.08. The Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . 67 9.09. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.10. Resignation by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.01. Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.02. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 10.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 10.04. Benefit of Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 10.05. No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.06. Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 10.07. Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.08. Governing Law; Submission to Jurisdiction; Venue . . . . . . . . . . . . . . . . . . 73 10.09. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.10. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.11. Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 10.12. Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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Page ---- 10.13. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.14. Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.16. Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 10.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 ANNEX I - List of Banks ANNEX II - Bank Addresses ANNEX 3.01(J) - Summary of Corporate Insurance Policies ANNEX 3.01(M) - Consent Exceptions ANNEX 4.05 - Certain Expenditures ANNEX 4.17(a) - Options ANNEX 4.17(b) - Schedule of Subsidiaries ANNEX 4.19 - Outstanding Indebtedness ANNEX 4.21(a) - System ANNEX 4.21(b) - System Exceptions ANNEX 5.15 - Certain Markets ANNEX 6.10 - Certain Assets Disposition EXHIBIT A - Form of Note EXHIBIT B-1 - Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP EXHIBIT B-2 - Form of Opinion of McDermott, Will & Emery EXHIBIT B-3 - Form of FCC Counsel Opinion EXHIBIT B-4 - Form of Local Colorado Counsel Opinion EXHIBIT C-1 - Form of General Security Agreement EXHIBIT C-2 - Form of Securities Pledge Agreement EXHIBIT D-1 - Form of Notice of Assignment EXHIBIT D-2 - Form of Assignment and Assumption Agreement EXHIBIT E - Form of Notice of Borrowing EXHIBIT F - Form of Officers' Solvency Certificate EXHIBIT G - Form of Escrow Agreement EXHIBIT H - Form of Subsidiary Guarantee EXHIBIT I - Form of Management Subordination Agreement EXHIBIT J - Form of Channel Lessor Consent EXHIBIT K - Form of FCC Opinion
-iv- 6 CREDIT AGREEMENT, dated as of February 26, 1997, among American Telecasting, Inc., a Delaware corporation (the "Borrower" or "ATel"), the lending institutions listed in Annex I (each a "Bank" and, collectively, the "Banks") and the New York branch of Banque Indosuez ("Indosuez") as the agent and collateral agent for the Banks (in such capacity, the "Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 8 are used herein as so defined. W I T N E S S E T H : WHEREAS, ATel desires to enter into the Loan Facility which, among other things, provides for the making of Loans to ATel pursuant to the terms and conditions of this Credit Agreement; and WHEREAS, the Banks are willing to make available the Loan Facility provided for in this Credit Agreement. NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01. Commitments. Subject to and upon the terms and conditions herein set forth, each Bank severally agrees at any time and from time to time on and after the Effective Date and prior to the Loan Commitment Termination Date, to make a Loan or Loans to ATel, which Loans shall be drawn under the Loan Facility, as set forth below. Such Loans are herein referred to as the "Loans." 1.02. Minimum Amount of Each Borrowing. The minimum aggregate principal amount of a Borrowing of Loans shall be $500,000 and, if greater, shall be in integral multiples of $100,000. 1.03. Notice of Borrowings. Whenever ATel desires that the Banks make Loans under the Loan Facility it shall give the Agent at the Agent's Office prior to 10:00 A.M. (New York time) at least one Business Day's written notice (or telephonic notice promptly confirmed in writing) of each such Borrowing. Each such notice, which shall be substantially in the form of Exhibit E hereto (each a "Notice of Borrowing"), shall be irrevocable, shall be deemed a representation by ATel that all conditions precedent to such Borrowing have been satisfied and shall specify (i) the aggregate principal amount in U.S. dollars of the Loans to be made pursuant to such Borrowing and 7 - 2 - (ii) the date of Borrowing (which shall be a Business Day). The Agent shall as promptly as practicable give each Bank written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof and of the other matters covered by the Notice of Borrowing. 1.04. Disbursement of Funds. (a) No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing, each Bank will make available to the Agent in New York its pro rata portion of each Borrowing requested to be made on such date in the manner provided below. (b) Each Bank shall make available all amounts it is to fund under any Borrowing on or after the Effective Date in immediately available funds to the Agent to the account specified therefor by the Agent or if no account is so specified at the Agent's Office and the Agent will make such funds available to ATel by depositing to the account specified therefor by ATel or if no account is so specified to its account at the Agent's Office the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Bank prior to the date of any such Borrowing that such Bank does not intend to make available to the Agent its portion of the Borrowing or Borrowings to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Borrowing, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to ATel a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank and the Agent has made available same to ATel, the Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify ATel, and ATel shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Bank or ATel, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to ATel to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to (x) if paid by such Bank, the Federal Funds Rate or (y) if paid by ATel, the then applicable rate of interest, calculated in accordance with Section 1.07, for the respective Loans. The Agent shall also be entitled to recover from any Bank an amount equal to any other losses incurred by the Agent as a result of the failure of such Bank to provide such amount as provided in this Credit Agreement. 8 - 3 - (c) Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitment hereunder or to prejudice any rights which ATel may have against any Bank as a result of any default by such Bank hereunder. 1.05. Notes. (a) ATel's obligation to pay the principal of and interest on all the Loans made to it by each Bank shall be evidenced by a promissory note (each, a "Note" and, collectively, the "Notes") duly executed and delivered by ATel substantially in the form of Exhibit A hereto, with blanks appropriately completed in conformity herewith. (b) The Note of ATel issued to each Bank shall (i) be executed by ATel, (ii) be payable to the order of such Bank and be dated the Effective Date, (iii) be in a stated principal amount equal to the Loan Commitment of such Bank and be payable in the aggregate principal amount of the Loans evidenced thereby, (iv) mature, with respect to each Loan evidenced thereby, on the Final Maturity Date, (v) be subject to mandatory prepayment as provided in Section 2.02, (vi) bear interest as provided in Section 1.07 and (vii) be entitled to the benefits of this Credit Agreement and the other applicable Credit Documents. (c) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation shall not affect ATel's obligations hereunder or under the other applicable Credit Documents in respect of such Loans. 1.06. Pro Rata Borrowings. All Borrowings under this Agreement shall be loaned by the Banks pro rata on the basis of their Loan Commitments. No Bank shall be responsible for any default by any other Bank in its obligation to make Loans hereunder and each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. 1.07. Interest. (a) The unpaid principal amount of each Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum of 12.50%, which rate shall increase by 0.50% on each February 16, May 16, August 16 and November 16, commencing May 16, 1997. 9 - 4 - (b) Following the occurrence and during the continuance of any Event of Default under Section 7.01 hereof or with respect to any breach of the covenants set forth in Section 5 or Section 6 hereof, each Loan (including overdue principal and, to the extent permitted by law, overdue interest in respect of any Loan) shall bear interest at the rate of interest applicable thereto plus 2%. (c) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable quarterly in arrears on each February 15, May 15, August 15 and November 15 beginning on May 15, 1997. 1.08. Capital Requirements. If any Bank shall have determined that the adoption or effectiveness after the Effective Date of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank or such Bank's parent with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (including in each case any such change proposed or published prior to the date hereof), has or would have the effect of reducing the rate of return on such Bank's or such Bank's parent's capital or assets as a consequence of such Bank's obligations hereunder to a level below that which such Bank or such Bank's parent could have achieved but for such adoption, effectiveness or change or as a consequence of an increase in the amount of capital required to be maintained by such Bank (including in each case, without limitation, with respect to any Bank's Commitment or any Loan), then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), ATel shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's parent, as the case may be, for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.08, will give prompt written notice thereof to ATel, which notice shall set forth in reasonable detail the basis of the calculation of such additional amounts, although any delay in giving any notice shall not release or diminish any of ATel's obligations to pay additional amounts pursuant to this Section 1.08. 1.09. Total Loan Commitments. The aggregate amount of the Total Loan Commitments is $17,000,000. Anything con- 10 - 5 - tained in this Credit Agreement to the contrary notwithstanding, in no event shall the aggregate principal amount of all Loans of any Bank at any time exceed such Bank's portion of the Total Loan Commitments. 1.10. Commitment Commission. ATel agrees to pay the Agent a commitment commission ("Commitment Commission") for the account of each Bank for the period from and including the Effective Date to but not including the date the Total Loan Commitments have been terminated, computed at a rate equal to .50% per annum on the daily average Unutilized Commitment of such Bank. Accrued Commitment Commission shall be due and payable in arrears on the fifteenth day of each February, May, August and November commencing on the fifteenth day of May 1997 and on the Loan Commitment Termination Date. SECTION 2. Payments. 2.01. Voluntary Prepayments. ATel shall have the right to prepay Loans in whole or in part from time to time, without premium or penalty, on the following terms and conditions: (i) ATel shall give the Agent at the Agent's Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans and the amount of such prepayment, which notice shall be given by ATel at least one Business Day prior to the date of such prepayment and which notice shall promptly be transmitted by the Agent to each of the Banks; and (ii) each partial prepayment shall be in an aggregate principal amount of at least $100,000 and integral multiples of $100,000 in excess of that amount. All payments made under this Section 2.01 shall reduce the Total Loan Commitments on a pro rata basis. 2.02. Mandatory Prepayments. (A) Requirements: (a) ATel shall prepay the outstanding principal amount of the Loans on any date on which the aggregate outstanding principal amount of such Loans (after giving effect to any other repayments or prepayments on such day) exceeds the Total Loan Commitments in the amount of such excess. (b) On the day following the receipt thereof by ATel, an amount equal to 100% of the proceeds received by ATel in Cash or Cash Equivalents (net of underwriting discounts and commissions and other costs and expenses di- 11 - 6 - rectly associated therewith) of the sale after the Effective Date of equity securities shall be applied as provided in Section 2.02(B). (c) On the day following receipt thereof by ATel, an amount equal to 100% of any insurance proceeds received (net of direct expenses of recovery, including reasonable and customary legal fees), less any portion of such proceeds not in excess of $100,000 that is promptly applied to repair or replace the damaged property in respect of which such proceeds were received (provided that, if the damaged property constituted Collateral, any such replacement property shall be made subject to the Lien of the Security Documents), shall be applied as provided in Section 2.02(B). (d) On the day following the receipt thereof by ATel, an amount equal to 100% of any tax refund made to ATel (net of direct expenses of recovery, including reasonable and customary legal fees) shall be applied as provided in Section 2.02(B). (B) Application: With respect to each prepayment of Loans required by Section 2.02(A), ATel shall give the Agent two Business Days' notice. All prepayments shall include payment of accrued interest on the principal amount so prepaid and shall be applied to the payment of interest before application to principal. All payments required under this Section 2.02 shall reduce the Total Loan Commitments on a pro rata basis. 2.03. Method and Place of Payment. (a) Except as otherwise specifically provided herein, all payments under this Credit Agreement shall be made to the Agent, for the ratable account of the Banks entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds in lawful money of the United States of America to the account specified therefor by the Agent or if no account has been so specified at the Agent's Office, it being understood that written notice by ATel to the Agent to make a payment from the funds in ATel's account at the Agent's Office shall constitute the making of such payment to the extent of such funds held in such account. The Agent will thereafter cause to be distributed on the same day (if payment is actually received by the Agent in New York prior to 1:00 P.M. (New York time) on such day) funds relating to the payment of principal or interest or fees ratably to the Banks entitled to receive any such payment in accordance with the terms of this Credit Agreement. If and to the extent that any such distribution 12 - 7 - shall not be so made by the Agent in full on the same day (if payment is actually received by the Agent prior to 1:00 P.M. (New York time) on such day), the Agent shall pay to each Bank its ratable amount thereof and each such Bank shall be entitled to receive from the Agent, upon demand, interest on such amount at the Federal Funds Rate for each day from the date such amount is paid to the Agent until the date the Agent pays such amount to such Bank. (b) Any payments under this Credit Agreement which are made by ATel later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 2.04. Net Payments. (a) All payments by ATel to or for the account of any Bank or the Agent under any Credit Document shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments (after deduction or withholding for or on account of any present or future taxes, levies, imposts, duties or similar charges imposed by any government or any political subdivision or taxing authority thereof on the payment to or for the account of any Bank or the Agent under any Credit Document, other than any tax on or measured by the income of a Bank (including any franchise or similar tax so measured) pursuant to the income tax laws of the United States or of the jurisdiction in which it is incorporated or organized or the jurisdiction where such Bank's lending office is located (collectively, such non-excluded taxes hereinafter referred to as "Taxes")) shall not be less than the amounts otherwise specified to be paid under any Credit Document. A Bank to which additional amounts are payable will provide ATel with a certificate setting forth in sufficient detail the calculation and amount of such additional amounts payable to such Bank under this Section 2.04(a). With respect to each deduction or withholding for or on account of any Taxes, ATel shall promptly furnish to each Bank such certificates, receipts and other documents as may be required (in the reasonable judgment of such Bank) to establish any tax credit to which such Bank may be entitled. (b) Without prejudice to the provisions of clause (a) of this Section 2.04, if any Bank, or the Agent on its behalf, is required by law to make any payment on account 13 - 8 - of Taxes on or in relation to any sum received or receivable under any Credit Document by such Bank, or the Agent on its behalf, ATel will promptly indemnify such person against such Tax payment, together with any interest and penalties payable or incurred in connection therewith, computed in a manner consistent with clause (a) of this Section 2.04 upon receipt of a certificate by such Bank providing in sufficient detail the calculation and amount of such payments. (c) Each Bank organized under the laws of a jurisdiction outside the United States, on or contemporaneously with the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by ATel (but only so long as such Bank remains lawfully able to do so), shall provide ATel with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of the withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 2.04(a). (d) For any period with respect to which a Bank has failed to provide ATel with the appropriate form pursuant to Section 2.04(c) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 2.04(a) or 2.04(b) with respect to Taxes imposed by the United States; provided, however, that should a Bank which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required hereunder, ATel shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (e) If ATel is required to pay additional amounts to or for the account of any Bank pursuant to this Section 2.04, then such Bank will change the jurisdiction of its lending office so as to eliminate or reduce any such additional payment 14 - 9 - which may thereafter accrue if such change is not, in the sole judgment of such Bank, disadvantageous to such Bank. SECTION 3. Conditions Precedent. 3.01. Conditions Precedent to the Effective Date. The effectiveness of this Agreement on the Effective Date is subject to the satisfaction of the following conditions: (A) Officer's Certificate. On the Effective Date, the Agent shall have received a certificate dated such date signed by an appropriate officer of ATel on behalf of ATel stating that all of the applicable conditions set forth in Sections 3.01 and 3.02 (in each case disregarding any reference therein that such condition be deemed satisfactory by the Agent and/or the Required Banks) have been satisfied or waived as of such date. (B) Opinions of Counsel. On the Effective Date, the Agent shall have received an opinion or opinions addressed to each of the Banks and dated the Effective Date, each in form and substance satisfactory to the Agent, from (i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel to ATel, which opinion shall address the matters contained in Exhibit B-1 hereto, (ii) McDermott, Will & Emery, which opinion shall address the matters contained in Exhibit B-2 hereto, (iii) Gurman, Blask & Freedman, special FCC counsel to ATel, which opinion shall address the matters contained in Exhibit B-3 hereto, and (iv) local Colorado counsel to ATel, which opinion shall address the matters contained in Exhibit B-4 hereto. (C) Corporate Proceedings. All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by the Credit Documents shall be satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all certificates, documents and papers, including records of corporate proceedings and governmental approvals, if any, which the Agent reasonably may have requested from ATel in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. Without limiting the foregoing, the Agent shall have received (i) resolutions of the Board of Directors of ATel or any other Credit Party approving and authorizing such documents and actions as are contemplated hereby in form and substance satisfactory to the Agent including without 15 - 10 - limitation the execution and delivery of all Credit Documents, certified by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment, and (ii) signature and incumbency certificates of officers of ATel or any Credit Party executing instruments, documents or agreements required to be executed in connection with this Credit Agreement. (D) Organizational Documentation, etc. On or prior to the Effective Date, the Banks shall have received copies of a true and complete certified copy of the following documents of ATel, the provisions of which shall be reasonably satisfactory to the Agent and the Required Banks: (1) Its Articles of Incorporation, which shall be certified and be accompanied by a good standing certificate from the Secretary of State of the State of Delaware and good standing certificates from the jurisdictions in which it is qualified to do business as a foreign corporation, each to be dated a recent date prior to the Effective Date; (2) Its By-laws, certified as of the Effective Date by its corporate secretary. (E) Subsidiaries. On or prior to the Effective Date, the Banks shall have received a true and complete certified copy of the corporate organizational documents of each Credit Party other than ATel, accompanied by a good standing certificate of the Secretary of State of each such entity's jurisdiction of organization. (F) Notes. There shall have been delivered to the Agent for the account of each of the Banks the Notes executed by ATel in the amount and maturity and as otherwise provided herein. (G) Escrow. ATel shall have deposited $1 million with the Escrow Agent pursuant to the terms of the Escrow Agreement. (H) Certain Fees. All costs, fees and expenses (including, without limitation, reasonable legal fees and expenses) payable to Indosuez by ATel on or before the Effective Date pursuant to the letter agreement between ATel and Indosuez dated January 15, 1997 (the "Letter") shall have been paid in full and ATel shall have paid or have caused to be paid the commitment and other fees and ex- 16 - 11 - penses (including, without limitation, reasonable legal fees and expenses) contemplated hereby and/or in connection with the other Credit Documents. (I) Financial Statements, etc. Prior to the Effective Date, the Agent shall have received financial statements including a balance sheet and statements of income and retained earnings and cash flow of ATel for the fiscal years ended December 31, 1995 and 1996 (which shall have been audited by Arthur Andersen). ATel shall have delivered to the Agent financial projections for fiscal year 1997 with respect to ATel, accompanied by a statement by ATel that such projections are based on assumptions believed by ATel in good faith to be reasonable as to the future financial performance of ATel, reasonably satisfactory to the Agent. (J) Insurance. Set forth on Annex 3.01(J) is a summary of all insurance policies maintained by ATel and its Subsidiaries, and the insurance coverage provided for ATel and its Subsidiaries by such insurance policies shall be reasonably satisfactory to the Agent. On or prior to the Effective Date, there shall have been delivered to the Agent the insurance certificates required under the Security Documents. (K) Indebtedness, etc. ATel and its Subsidiaries shall have outstanding no Indebtedness other than the Indebtedness (the "Existing Indebtedness") set forth on Annex 4.19. (L) Security Documents; Guarantees. The Security Documents shall have been duly executed and delivered by the parties thereto and there shall have been delivered to the Collateral Agent (i) stock certificates representing all Pledged Securities which are equity securities, together with executed and undated stock powers and/or assignments in blank, and the Fresno Note, (ii) evidence of the filing (or of the making of arrangements to file contemporaneously with the Effective Date) of appropriate financing statements under the provisions of the UCC or other applicable laws, rules or regulations in each of the offices where such filing is necessary or appropriate and to grant the Collateral Agent a perfected first priority Lien in such Collateral superior to and prior to the rights of all third persons other than Prior Liens relating to such Collateral and subject to no other Liens except Liens which are expressly permitted under the appli- 17 - 12 - cable Security Document to the full extent required by the Security Documents and this Agreement to be perfected on or contemporaneously with the Effective Date, (iii) UCC, tax lien and judgment searches naming the Borrower and each other Credit Party or debtor in each state jurisdiction in which any Collateral of such debtor is located and for which notices of security interests or other liens therein may be filed, none of which shall encumber the Collateral except for Prior Liens or with respect to which provision satisfactory to the Agent has been made to effect their release or subordination and (iv) such other security and other documents as may be necessary or, in the opinion of Agent, desirable to perfect the Liens created, or purported or intended to be created, by the Security Documents. Each of the Guarantors shall have executed a Guarantee and a Guarantor Subordination Agreement. (M) Consents, Etc. Except as set forth on Annex 3.01(M) hereto, all governmental and third-party approvals and consents (including, without limitation, all approvals and consents required in connection with any environmental statutes, rules or regulations), if any, in connection with the transactions contemplated by the Credit Documents, and otherwise referred to herein or therein to be completed on or before the Effective Date shall have been obtained and remain in effect. There shall not exist any judgment, order, injunction or other restraint issued or filed with respect to the making of the Loans hereunder. (N) Solvency. On or before the Effective Date, the Banks shall have received the Officers' Solvency Certificate, in form and substance satisfactory to the Agent and the Required Banks. (O) Capitalization and Corporate Structure. The corporate and capital structure of ATel shall be reasonably satisfactory to the Agent in all respects. ATel shall have no Subsidiaries other than the Subsidiaries set forth on Annex 4.17. (P) Partial Discharge of Fresno Note. All principal amounts, prepayment charges, if any, accrued interest, and fees, charges and other obligations of Fresno MMDS Associates to any party other than ATel in respect of the Fresno Note shall have been paid and discharged in full, and the Agent shall have received the originals or copies authenticated to its satisfaction of (i) duly executed discharge letter and receipts evidencing payment in full of all 18 - 13 - amounts due thereunder, (ii) duly executed releases and UCC-3 Termination Statements satisfactory in form and substance to the Agent, effectively releasing and discharging all Liens incurred by each Credit Party other than Fresno MMDS Associates in connection with such Fresno Note, in proper form for filing or recording, as applicable, (iii) duly executed amendments to any financing statements naming Fresno MMDS Associates as debtor in connection with such Fresno Note substituting ATel as secured party thereunder for any party other than ATel, satisfactory in form and substance to the Agent, and (iv) such other documents as the Agent may reasonably request in order to evidence the discharge of such Fresno Note and the release or amendments of the Liens in connection therewith. (Q) Equity Documents. The Option Agreements, the Debt Warrants, the Equity Warrants, the Bond Appreciation Rights and the Registration Rights Agreement shall have been duly executed and delivered by the parties thereto. All of the certificates, legal opinions and other documents and papers referred to in this Section 3.01, unless otherwise specified, shall be delivered to the Agent at the Agent's Office (or such other location as may be specified by the Agent) for the account of each of the Banks and in sufficient counterparts for each of the Banks and shall be satisfactory in form and substance to the Agent. 3.02. Conditions Precedent to All Loans. The obligation of the Banks to make all Loans is subject, at the time of each such Loan, to the satisfaction of the following conditions: (A) Effectiveness. This Agreement shall have become effective as provided in Section 10.10. (B) No Default; Representations and Warranties. At the time of the making of each Loan and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of such Loan, unless such representation and warranty expressly indicates that it is being made as of any other specific date in which case on and as of such other date. 19 - 14 - (C) Adverse Change, etc. Since December 31, 1996, nothing shall have occurred or become known which the Required Banks or the Agent shall have determined has a Materially Adverse Effect. (D) Margin Rules. On the date of each Borrowing of Loans, neither the making of any Loan nor the use of the proceeds thereof will violate the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. The acceptance of the proceeds of each Borrowing of Loans shall constitute a representation and warranty by ATel to each of the Banks that all of the applicable conditions specified in Section 3.02 (in each case disregarding any reference therein that such condition be deemed satisfactory by the Agent and/or the Required Banks) have been satisfied or waived. All of the certificates, legal opinions and other documents and papers requested by the Agent, unless otherwise specified, shall be delivered to the Agent at the Agent's Office (or such other location as may be specified by the Agent) for the account of each of the Banks and in sufficient counterparts for each of the Banks and shall be reasonably satisfactory in form and substance to the Agent. SECTION 4. Representations, Warranties and Agreements. In order to induce the Banks to enter into this Agreement and to make the Loans provided for herein, ATel makes the following representations and warranties to, and agreements with, the Banks, all of which shall survive the execution and delivery of this Agreement and the making of the Loans (with the execution and delivery of this Agreement and the making of each Loan thereafter being deemed to constitute a representation and warranty that the matters specified in this Section 4 are true and correct in all material respects as of the date of each such Loan unless such representation and warranty expressly indicates that it is being made as of any specific date): 4.01. Corporate Status. Each Credit Party (i) is a duly organized and validly existing corporation in good standing under the laws of its respective jurisdiction of incorporation; (ii) has the corporate or other organizational power and authority and has obtained with respect to its present business, and prior to any part of ATel's network being installed or becoming operational will obtain, all requisite governmental licenses, authorizations, consents and approvals to own and op- 20 - 15 - erate its property and assets and to transact the business in which it is engaged and presently proposes to engage, except for those governmental licenses, authorizations, consents or approvals the failure of which to be so obtained would not have a Materially Adverse Effect; and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified would have a Materially Adverse Effect. 4.02. Corporate Power and Authority; Business. Each Credit Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. Each Credit Party has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such entity enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.03. No Violation. Neither the execution, delivery and performance by each Credit Party of the Credit Documents to which it is a party nor compliance with the terms and provisions thereof, nor the consummation of the transactions contemplated therein (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of such Credit Party pursuant to the terms of any indenture, mortgage, deed of trust, material agreement or other material instrument to which such Credit Party is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the charter or by-laws of such Credit Party, except where such contravention, conflict, inconsistency, breach, default, creation, imposition, obligation or violation would not have a Materially Adverse Effect. ATel and its Subsidiaries have all easements, licenses and rights of way necessary to conduct 21 - 16 - their business except where failure to have the same will not have a Materially Adverse Effect. 4.04. Litigation. There are no actions, judgments, suits or proceedings pending or, to ATel's knowledge, threatened with respect to ATel or its Subsidiaries that are likely, individually or in the aggregate, to have a Materially Adverse Effect. 4.05. Use of Proceeds. (a) The proceeds of all Loans to be made to ATel hereunder shall be utilized to repay outstanding Indebtedness of ATel or its Subsidiaries and for general corporate purposes, including to finance the working capital requirements of ATel or its Subsidiaries, or for any of the capital expenditures and acquisitions of channel rights set forth on Annex 4.05 hereto. $1 million of the initial Borrowing hereunder shall be deposited with the Escrow Agent under the terms of the Escrow Agreement. (b) Neither the making of any Loan hereunder, nor the use of the proceeds thereof, will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 4.06. Governmental Approvals, etc. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any third party or any governmental or public body or authority, or by any subdivision thereof, including but not limited to any radio, television or other license, permit, certificate or approval granted or issued by the FCC or any other Governmental Authority (including without limitation any MDS, MMDS, ITFS, business radio, earth station operational fixed service, local MDS, or experimental licenses or permits issued by the FCC) (other than those orders, consents, approvals, licenses, authorizations or validations which have previously been obtained or made and except for filings to perfect security interests granted pursuant to the Security Documents, all of which will be accomplished on or prior to the Closing Date), is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or the transactions contemplated therein or (ii) the legality, validity, binding effect or enforceability of any Credit Document; provided, however, to the extent the performance of any Credit Document or the transactions contemplated therein involves a transfer of control 22 - 17 - or assignment of any license, permit, certificate or other authorization issued by the FCC, then FCC approval may be required prior to such transfer of control or assignment. At the time of the making of the Loans, there does not exist any judgment, order, injunction or other restraint issued or filed with respect to the making of loans or the performance by the Credit Parties of their respective obligations under the Credit Documents. 4.07. Investment Company Act. ATel is not, nor will it be after giving effect to the transactions contemplated hereby, an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 4.08. Public Utility Holding Company Act. ATel is not, nor will be after giving effect to the transactions contemplated hereby, a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.09. True and Complete Disclosure. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of ATel in writing to any Bank for purposes of or in connection with this Credit Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of ATel in writing to any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information not misleading at such time in light of the circumstances under which such information was provided. The projections and pro forma financial information contained in such materials are based on good faith estimates and assumptions believed by ATel to be reasonable at the time made, it being recognized by the Banks that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ materially from the projected results. There is no fact known to ATel which materially and adversely affects the business, operations, property, assets, nature of assets, liabilities, condition (financial or otherwise) or prospects of ATel and its Subsidiaries, taken as a whole, which has not been disclosed herein or in such other documents, certificates and written statements furnished to the Banks. 4.10. Financial Condition; Financial Statements; Projections. (a) ATel and its Subsidiaries are not entering 23 - 18 - into the arrangements contemplated hereby and by the other Credit Documents, nor intends to make any transfer or incur any obligations hereunder or thereunder, with actual intent to hinder, delay or defraud either present or future creditors. On and as of the Effective Date, on a pro forma basis after giving effect to all Indebtedness incurred and Liens created, or to be created, by ATel and its Subsidiaries in connection herewith, (w) ATel does not expect that final judgments against ATel or its Subsidiaries in actions for money damages with respect to pending or threatened litigation will be rendered at a time when, or in an amount such that, ATel and its Subsidiaries, on a consolidated basis, will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered and the cash available to ATel or its Subsidiaries, after taking into account all other anticipated uses of the cash of ATel or its Subsidiaries (including the payments on or in respect of debts (including its Contingent Obligations)); (x) ATel and its Subsidiaries will not have incurred nor intends to, nor believes that they will, incur debts beyond their ability to pay such debts as such debts mature (taking into account the timing and amounts of cash to be received by ATel and its Subsidiaries from any source, and of amounts to be payable on or in respect of debts of ATel and its Subsidiaries and the amounts referred to in the preceding clause (w)); (y) ATel and its Subsidiaries, on a consolidated basis, after taking into account all other anticipated uses of the cash of ATel and its Subsidiaries, anticipates being able to pay all amounts on or in respect of debts of ATel and its Subsidiaries when such amounts are required to be paid; and (z) ATel and its Subsidiaries, on a consolidated basis, will have sufficient capital with which to conduct its present and proposed business and the property of ATel and its Subsidiaries does not constitute unreasonably small capital with which to conduct its present or proposed business. For purposes of this Section 4.10, "debt" means any liability on a claim, and "claim" means a (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. On the date of each Borrowing (and after giving effect to all Borrowings as of such date), the representations set forth in this Section 24 - 19 - 4.10(a) shall be true and correct with respect to ATel and its Subsidiaries on such date. (b) ATel has heretofore delivered to the Banks the financial statements set forth in Section 3.01(I). All the financial statements referred to in the preceding sentence were prepared in accordance with GAAP consistently applied, except in the case of interim financial statements for normal year-end adjustments and the absence of footnote disclosures. Such financial statements fairly present in all material respects the financial position of ATel for each of the periods covered thereby. Except as disclosed to the Banks prior to the Effective Date, since December 31, 1996 no event or events have occurred that could reasonably be expected to have a Materially Adverse Effect. (c) There have heretofore been delivered to the Banks pro forma consolidated income projections for ATel, pro forma consolidated balance sheet projections for ATel and pro forma consolidated cash flow projections for ATel, all for the fiscal year ending December 31, 1997 (the "Projected Financial Statements"). The Projected Financial Statements present a good faith estimate of the consolidated financial information contained therein at the date thereof. (d) As of the Effective Date, except as fully reflected or reserved against in the financial statements and the notes thereto described in Section 4.10(b), there were no liabilities or obligations with respect to ATel or its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, would reasonably be expected to be material to ATel. As of the Effective Date, ATel does not know of any basis for the assertion against ATel or its Subsidiaries of any liability or obligation of any nature whatsoever that is not fully reflected in the financial statements described in Section 4.10(b) or (c) which, either individually or in the aggregate, could reasonably be expected to be material to ATel and its Subsidiaries, taken as a whole. 4.11. Security Interests. The Security Documents, once executed and delivered, create, as security for the obligations purported to be secured thereby, a valid and enforceable perfected first priority security interest in and Lien in favor of the Collateral Agent for the benefit of the Banks on all of the Collateral, superior to and prior to the rights of all third persons other than Prior Liens relating to such Collateral and subject to no other Liens except Liens which are 25 - 20 - expressly permitted under the applicable Security Document, except to the extent otherwise provided therein. As of the Effective Date and thereafter, each Credit Party has (or on and after the time it executes each Security Document, will have) good and marketable title to all items of Collateral covered by such Security Document free and clear of all Liens except any Prior Lien relating to such Collateral or other Liens which are expressly permitted under the applicable Security Document. Other than as contemplated in Section 3.01(L), no filings or recordings are required in order to perfect the security interests created under the Security Documents except for filings or recordings required in connection with the Security Documents which shall have been made prior to or contemporaneously with the execution and delivery thereof or have been otherwise made. 4.12. Tax Returns and Payments. ATel has filed all material tax returns required to be filed by it and has paid all material taxes and assessments payable by it which have become due, other than those not yet delinquent and except for those being diligently contested in good faith and by appropriate proceedings. ATel has provided adequate tax reserves in accordance with GAAP. ATel knows of no proposed tax assessment against it that could reasonably be expected to have a Materially Adverse Effect. 4.13. ERISA. (A) Each of ATel and the ERISA Affiliates is in compliance in all material respects with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all employee benefit plans, Pension Plans and Multiemployer Plans currently maintained by ATel or any of its ERISA Affiliates. (B) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan which resulted or could reasonably be expected to result in a material liability to ATel or any ERISA Affiliate. (C) As of the Effective Date, neither ATel nor any ERISA Affiliate maintains or contributes to any Title IV Plan or Multiemployer Plan. Neither ATel nor any ERISA Affiliate has incurred or reasonably expects to incur any material withdrawal liability under Section 4201 et seq. of ERISA to any Multiemployer Plan or any employee benefit plan of the type described in Sections 4063 and 4064 of ERISA or in Section 413(c) of the Code. 26 - 21 - (D) Neither ATel nor any ERISA Affiliate has incurred any accumulated funding deficiency (whether or not waived) with respect to any Pension Plan. (E) Neither ATel nor any ERISA Affiliate has or reasonably expects to become subject to a Lien in favor of any Pension Plan under Section 302(f) or 307 of ERISA or Section 401(a)(29) or 412(n) of the Code. As used in this Section 4.13, the term "accumulated funding deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of the Code, and the term "employee benefit plan" has the meaning specified in Section 3(3) of ERISA. 4.14. Patents, etc. ATel and its Subsidiaries have obtained all material patents, trademarks, service marks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, that are necessary for the operation of their respective businesses as presently conducted and as proposed to be conducted. 4.15. Compliance with Laws, etc. ATel (i) is in compliance with all laws and regulations, including without limitation those relating to pollution and environmental control, equal employment opportunity and employee safety, in all jurisdictions in which it is presently doing business, including all FCC rules and regulations, and rules and regulations of the U.S. Copyright Office, and (ii) will comply and cause each of its Subsidiaries to comply with all such laws and regulations which may be imposed in the future in jurisdictions in which it or such Subsidiary may then be doing business, other than those noncompliances in clauses (i) and (ii) above which would not have a Materially Adverse Effect. 4.16. Properties. ATel and each of its Subsidiaries have good and marketable title to and beneficial ownership of all their respective material properties owned by them, including after the Effective Date all property reflected in the most recent balance sheet referred to in Section 4.10(b) and except as sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business, free and clear of all Liens, other than, with respect to property constituting Collateral, Prior Liens and other liens expressly permitted under the applicable Security Document, and with respect to property not constituting Collateral, Permitted Encumbrances. ATel, and each Subsidiary thereof, holds all material licenses, certificates of occupancy or operation and similar certificates and clearances of municipal and other authorities necessary to own 27 - 22 - and operate its properties in the manner and for the purposes currently operated by such party. ATel, and each of its Subsidiaries, has easements or rights-of-way adequate for the operations and maintenance of its transmission and distribution lines. There are no actual, threatened or alleged defaults of a material nature with respect to any leases of real property under which ATel, or any of its Subsidiaries, is lessor or lessee. 4.17. Securities. (a) The Common Stock of ATel is duly authorized, issued and delivered and is fully paid, nonassessable and free of preemptive rights. Except as set forth on Annex 4.17(a), there are not, as of the Effective Date, any existing options, warrants, calls, subscriptions, convertible or exchangeable securities, rights, agreements, commitments or arrangements for any person to acquire any capital stock of ATel or any other securities convertible into, exchangeable for or evidencing the right to subscribe for any such capital stock. (b) ATel has no Subsidiaries other than as set forth on Annex 4.17(b). Except as set forth on Annex 4.17(a), there are not, as of the Effective Date, any existing options, warrants, calls, subscriptions, convertible or exchangeable securities, rights, agreements, commitments or arrangements for any person to acquire any interest of any direct or indirect Subsidiary of ATel or any other securities convertible into, exchangeable for or evidencing the right to subscribe for any such interest. 4.18. Collective Bargaining Agreements. Neither ATel nor any of its Subsidiaries has, as of the date hereof, any collective bargaining or similar agreements between or applicable to ATel and its Subsidiaries and any union, labor organization or other bargaining agent in respect of the employees of ATel or its Subsidiaries. 4.19. Indebtedness Outstanding. Set forth on Annex 4.19 hereto is a list and description of all Indebtedness of ATel and its Subsidiaries that will be outstanding immediately prior to the Effective Date. Annex 4.19 identifies which portions of such Indebtedness will be repaid with the proceeds of the Loans. 4.20. Environmental Protection. Except as would not have a Materially Adverse Effect, (A) ATel and each of its Subsidiaries have obtained all permits, licenses and other authorizations 28 - 23 - (collectively "Authorizations") which are required with respect to the operation of the business of ATel and its Subsidiaries, in each case taken as a whole, under any Environmental Law and each such Authorization is in full force and effect. (B) ATel and each of its Subsidiaries are in compliance with all terms and conditions of the Authorizations specified in subsection 4.20(A) above, and is also in compliance with all other requirements contained in any Environmental Laws applicable to it and its business, assets, operations and properties, including without limitation those arising under the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the Federal Water Pollution Control Act, as amended, the Federal Clean Air Act, as amended, the Toxic Substances Control Act, and the FCC rules and regulations pertaining to radio frequency (RF) radiation. (C) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter or request for information pending or, to ATel's knowledge, threatened against ATel or any of its Subsidiaries under any Environmental Law. (D) Neither ATel nor any of its Subsidiaries has received notice that it has been identified as a potentially responsible party under CERCLA or RCRA or any comparable state law nor has ATel or any of its Subsidiaries received any notification that any hazardous substances or any pollutant or contaminant, as defined in CERCLA and its implementing regulations, or any toxic substance, hazardous waste, hazardous constituents, hazardous materials, asbestos or asbestos containing material, petroleum, including crude oil and any fractions thereof, or other wastes, chemicals, substances or materials regulated by any Environmental Laws (collectively "Hazardous Materials") that it or any of their respective predecessors in interest has used, generated, stored, treated, handled, transported or disposed of, has been found at any site at which any governmental agency or private party is conducting a remedial investigation or other action pursuant to any Environmental Law. 29 - 24 - (E) There have been no releases (i.e., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) of Hazardous Materials by ATel or any of its Subsidiaries on, upon, into or from any of its properties, except in compliance with law. To the knowledge of ATel, there have been no such releases on, upon, under or into any real property in the vicinity of any of its properties that, through soil, surface water or groundwater migration or contamination, may be located on, in or under its properties. (F) To the knowledge of ATel, there is no asbestos or asbestos containing material in, on or at any of its properties or any facility or equipment of ATel or any of its Subsidiaries that is required to be removed or remediated pursuant to any Environmental Law. (G) To the knowledge of ATel, no properties of ATel or any of its Subsidiaries are (i) listed or proposed for listing on the National Priorities List under CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any governmental authority. (H) There are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with any Environmental Law, or which may give rise to any common law or legal liability, including, without limitation, liability under CERCLA or similar state or local laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport, shipping or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials. 4.21. Business, System Agreements and Other Material Agreements. (a) Annex 4.21(a) attached hereto accurately and completely lists, with respect to the System, all System Agreements and other material agreements with respect to the System (copies of which have been delivered to the Banks) presently in effect in connection with the present or anticipated conduct of the business of the Credit Parties. 30 - 25 - (b) Except as disclosed on Annex 4.21(b) hereto, (i) the Credit Parties have obtained and possess all System Agreements, patents, copyrights, certificates of confirmation, licenses, permits, trademarks, and trade names, or rights thereto, necessary to conduct its business substantially as proposed to be conducted (except where the failure to obtain any of the foregoing would be reasonably likely not to have a Materially Adverse Effect), and, to the Credit Parties' knowledge, the Credit Parties are not in violation of any valid rights of others with respect to any of the foregoing; (ii) each of the foregoing is in full force and effect, has been validly assigned to, or issued in the name of, the Credit Parties, the Credit Parties have fulfilled and performed all of their material obligations with respect thereto, and the Credit Parties know of the occurrence of no event, investigation or threatened investigation which permits, or after passage of time or giving of notice or both would permit, revocation or termination of any of the foregoing; (iii) all consents necessary to the assignment of the System Agreements to the Credit Parties have been approved by final orders of all Governmental Authorities and other Persons as to which all applicable administrative and judicial appeal, review and reconsideration periods have expired other than those which would not, individually or in the aggregate, materially diminish the value of any market; (iv) no other license, permit or franchise is necessary to the operation by the Credit Parties of the System as now conducted or proposed to be conducted other than those which would not, individually or in the aggregate, materially diminish the value of any market; and (v) the Credit Parties have obtained and possess all licenses, leases, conduit use, equipment rental and microwave or satellite relay agreements necessary for the operation of each System as required by the System Agreements other than those which would not, individually or in the aggregate, materially diminish the value of any market. (c) Except as disclosed on Annex 4.21(b) hereto, as of the Closing Date (1) each System Agreement listed under Annex 4.21(a) hereto is in full force and effect and no other approval, application, filing, registration, consent or other action of any Governmental Authority (except for FCC requirements) is required to enable the Credit Parties to operate under any such System Agreement other than those which would not, individually or in the aggregate, materially diminish the value of any market, (2) none of the Credit Parties nor, to the Credit Parties' knowledge, any other Person has received any notice from any Governmental Authority or other Person with respect to any 31 - 26 - breach of any covenant under, or any default with respect to, any such System Agreement or with respect to any breach of any covenant under, or any default with respect to, any license or permit issued to the licensor or lessor to such System Agreement. 4.22. Tower Registration. Except as to the matters which would not, individually or in the aggregate, materially diminish the value of any market, ATel has timely registered, and has filed with the FCC all required information and reports pertaining to, any towers which it owns and on which are located any transmission or reception antennas, regardless of whether those antennas are owned by ATel or its Subsidiaries or by any other person or entity operating a facility licensed by the FCC. SECTION 5. Affirmative Covenants. ATel covenants and agrees that on the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated and the Loans together with interest, fees and all other Obligations incurred hereunder are paid in full: 5.01. Information Covenants. ATel will furnish or cause to be furnished to each Bank: (a) As soon as available and in any event within 90 days after the close of each fiscal year of ATel, the consolidated balance sheets of ATel and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of operations, of stockholders' equity and of cash flows for such fiscal year, setting forth comparative consolidated figures for the preceding fiscal year, and an unqualified report on such consolidated balance sheets and financial statements by independent certified public accountants of recognized national standing. (b) As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of ATel, commencing with the fiscal quarter ending on March 31, 1997, the consolidated balance sheet of ATel and its Subsidiaries as at the end of such quarterly period and the related consolidated statements of operations, of stockholders' equity and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative consolidated figures for the related periods in the prior fiscal year, subject to normal year-end audit adjustments. 32 - 27 - (c) As soon as practicable and in any event within 30 days after the end of the first full month ending after the Closing Date, (i) the consolidated balance sheet of ATel as at the end of such period and (ii) the related statements of income and cash flows of ATel, in each case for such fiscal month and for the period from the beginning of the then current fiscal year to the end of such fiscal month, setting forth in comparative form the corresponding periods of the prior fiscal year. (d) Together with each delivery of consolidated financial statements of ATel together with its Subsidiaries pursuant to subsection (a) above, a written statement by the independent public accountants giving the report thereon (i) stating that their audit examination has included a review of such terms of Sections 5, 6, 7 and 8 of this Agreement which solely relate to accounting matters but without having conducted any special auditing procedures in connection therewith, (ii) stating whether, in connection with their audit examination, any condition or event which constitutes a Default or Event of Default has come to their attention, and if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of their audit examination, and (iii) stating that based on their audit examination nothing has come to their attention which causes them to believe that as of the end of such fiscal year of ATel there existed a Default or an Event of Default related to the breach of any covenant set forth in Section 5 or 6 which solely relates to accounting matters or, if a Default or Event of Default so existed, describing such Default or Event of Default. (e) On or prior to the commencement of each fiscal year, budgets of ATel and its Subsidiaries in reasonable detail for each month of such fiscal year, as customarily prepared by management for its internal use, setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. Together with each delivery of financial statements pursuant to Sections 5.01(a), (b) and (c), a comparison of the current year to date financial results against the budgets required to be submitted pursuant to this subsection (e) shall be presented. 33 - 28 - (f) At the time of the delivery of the financial statements provided for in Sections 5.01(a) and (b), a certificate of the chief financial officer, controller, chief accounting officer or other Authorized Officer of ATel to the effect that no Default or Event of Default exists, or, if any Default or Event of Default does exist, specifying the nature and extent thereof. (g) Promptly upon receipt thereof, a copy of each annual "management letter" submitted to ATel by its independent accountants in connection with any annual audit made by them of the books of ATel or any of its Subsidiaries. (h) Promptly upon their becoming available, copies of all consolidated financial statements, reports, notices and proxy statements sent or made available generally by ATel or any Subsidiary of ATel to its security holders as security holders, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by ATel or any of its Subsidiaries with any securities exchange or with the SEC and of all press releases and other statements made available generally by ATel or any Subsidiary of ATel to the public concerning material developments in the business of ATel and its Subsidiaries. (i) Promptly upon any officer of ATel or any of its Subsidiaries obtaining knowledge (w) of any condition or event which constitutes a Default or Event of Default, or becoming aware that any Bank has given any notice or taken any other action with respect to a claimed Default or Event of Default under this Agreement, (x) that any Person has given any notice to ATel or any Subsidiary of ATel or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 7.04, or (y) of a material adverse change in the business, operations, properties, assets, nature of assets, condition (financial or otherwise) or prospects of ATel and its Subsidiaries taken as a whole, an Officers' Certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed Default, Event of Default, event or condition, or material adverse change, and what action ATel has taken, is taking and proposes to take with respect thereto. 34 - 29 - (j) (i) Promptly upon any officer of ATel or its Subsidiaries obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting ATel or any of its Subsidiaries or any property of ATel or any of its Subsidiaries not previously disclosed to the Banks, which action, suit, proceeding, governmental investigation or arbitration seeks (or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which seek) recovery from ATel or any of its Subsidiaries aggregating $100,000 or more (exclusive of claims covered by insurance policies of ATel or any of its Subsidiaries unless the insurers of such claims have disclaimed coverage or reserved the right to disclaim coverage on such claims), ATel shall give notice thereof to the Banks and provide such other information as may be reasonably available to enable the Banks and their counsel to evaluate such matters; (ii) as soon as practicable and in any event within 45 days after the end of each fiscal quarter, ATel shall provide a quarterly report to the Banks covering the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration (not previously reported) against or affecting ATel or any of its Subsidiaries or any property of ATel or any of its Subsidiaries not previously disclosed to the Banks, which action, suit, proceedings, governmental investigation or arbitration seeks (or in the case of multiple actions, suits, proceedings, governmental investigations or arbitrations arising out of the same general allegations or circumstances which seek) recovery from ATel or any of its Subsidiaries aggregating $100,000 or more (exclusive of claims covered by insurance policies of ATel or any of its Subsidiaries unless the insurers of such claims have disclaimed coverage or reserved the right to disclaim coverage on such claims), and shall provide such other information at such time as may be reasonably available to enable the Banks and their counsel to evaluate such matters; (iii) in addition to the requirements set forth in clauses (i) and (ii) of this Section 5.01(j), ATel upon request shall promptly give notice of the status of any action, suit, proceeding, governmental investigation or arbitration covered by a report delivered to the Banks pursuant to clause (i) or (ii) above to the Banks and provide such other information as may be reasonably available to it to enable the Banks and their counsel to evaluate such matters and (iv) promptly upon any officer of ATel or any of its Subsidiaries obtaining 35 - 30 - knowledge of any material dispute in respect of or the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration in respect of any material contract of ATel or any of its Subsidiaries, ATel shall give notice thereof to the Banks and shall provide such other information as may be reasonably available to enable the Banks and their counsel to evaluate such matters; provided, however, that ATel shall not be obligated to provide any information pursuant to this Section 5.01(j) to the extent that to do so would, in the reasonable opinion of counsel for ATel, waive or otherwise cause to be inoperative an attorney-client or similar privilege that is reasonably expected to be asserted in such action, suit, proceeding, governmental investigation or arbitration. (k) To the extent reasonably requested by the Agent, as soon as practicable and in any event within ten days of the later of such request and the making of any such amendment or waiver, copies of amendments or waivers with respect to Indebtedness of ATel or any of its Subsidiaries, any Leases to which any of such Persons is a party. (l) Advance notice of any purchase or sale of the capital stock of either Fresno MMDS Associates or Superchannels of Las Vegas, Inc. (m) With reasonable promptness, such other information and data with respect to ATel or any of its Subsidiaries or any other similar entity in which ATel or any Subsidiary has an investment, as from time to time may be reasonably requested by any Bank. 5.02. Books, Records and Inspections. ATel will, and will cause each of its Subsidiaries to, keep true books of records and accounts in which full and correct entries will be made of all their business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP. ATel will, and will cause each of its Subsidiaries to, permit, upon reasonable prior notice to the chief financial officer, controller or any other Authorized Officer of ATel, officers and designated representatives of the Agent or any Bank to visit and inspect any of the properties or assets of ATel and any of its Subsidiaries in whomsoever's possession (subject to obtaining any required third party consents, which ATel shall use its reasonable best efforts to obtain), and to examine the books of account of ATel and any of its Subsidiaries and discuss the affairs, finances 36 - 31 - and accounts of ATel and of any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants (in the presence of such officers), all at such reasonable times and intervals and to such reasonable extent as the Agent or any Bank may reasonably request. 5.03. Maintenance of Property; Insurance. (a) ATel and each Subsidiary will exercise commercially reasonable efforts to maintain or cause to be maintained in good repair, working order and condition (subject to normal wear and tear) all properties used in its businesses and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof and will maintain and renew as necessary to operate its business in the ordinary course all easements, rights-of-way, licenses, permits and other clearances necessary to use and occupy such properties of ATel and each Subsidiary, as the case may be, including without limitation all licenses, permits and other authorizations or registrations issued by the FCC. (b) ATel and each Subsidiary will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations to the extent that such types and such amounts of insurance are available at commercially reasonable rates. ATel or each Subsidiary, as applicable, will furnish to each Bank, upon reasonable request, information as to the insurance carried. 5.04. Payment of Taxes. All material taxes, assessments and governmental charges or levies imposed upon ATel or any of its Subsidiaries will be paid and discharged; provided that no such tax, assessment, charge, levy or claim shall be required to be paid to the extent that it is being diligently contested in good faith and by appropriate proceedings. 5.05. Corporate Franchises. ATel will do, and will cause each Subsidiary to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence, rights and authority, except where such failure to keep in full force and effect such rights and authority would not have a Materially Adverse Effect. 37 - 32 - 5.06. Compliance with Statutes, etc. ATel will, and will cause each Subsidiary to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) other than non-compliance which could not reasonably be expected to have a Materially Adverse Effect. 5.07. ERISA. ATel will furnish to each of the Banks: (a) promptly upon ATel knowing or having reason to know of the occurrence of any (i) Termination Event, or (ii) "prohibited transaction," within the meaning of Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, which in the case of all such events described in clause (i) or (ii) results or could reasonably be expected to result in a liability of ATel or its ERISA Affiliates in the aggregate in excess of $100,000, a written notice specifying the nature thereof, what action ATel or its ERISA Affiliates have taken, are taking or propose to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor, PBGC or Multiemployer Plan sponsor with respect thereto. (b) with reasonable promptness copies of (i) all notices received by ATel or any of its ERISA Affiliates of PBGC's intent to terminate any Title IV Plan or to have a trustee appointed to administer any Title IV Plan, the notice of which event is required pursuant to the preceding paragraph (a); (ii) upon the request of the Agent each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by ATel or any of its ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (iii) upon the request of the Agent, the most recent actuarial valuation report for each Title IV Plan; and (iv) all notices received by ATel or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA, the notice of which event is required pursuant to the preceding paragraph (a). 5.08. Performance of Obligations. ATel will, and will cause each of its Subsidiaries to, perform in all material 38 - 33 - respects all of its obligations under the terms of each mortgage, indenture, security agreement, other debt instrument and material contract by which it is bound or to which it is a party, except where such nonperformance would not have a Materially Adverse Effect. 5.09. End of Fiscal Years; Fiscal Quarters. ATel will, for financial reporting purposes, and will cause each of its Subsidiaries to, have its (i) fiscal years end on December 31, and (ii) fiscal quarters end on or about March 31, June 30, September 30 and December 31. 5.10. Use of Proceeds. All proceeds of the Loans shall be used as provided in Section 4.05. 5.11. Security Interests. ATel and its Subsidiaries shall perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement) for filing in any appropriate jurisdiction under the provisions of the UCC, local law or any statute, rule or regulation of any applicable jurisdiction which are necessary in order to maintain or confirm in favor of the Collateral Agent for the ratable benefit of the Banks a valid and perfected Lien on the Collateral (including all assets of ATel acquired after the Effective Date which would have constituted Collateral as of the Effective Date), subject to no Liens except for any Prior Lien relating to such Collateral or other Liens which are expressly permitted under the applicable Security Document. ATel shall, as promptly as practicable after the filing of any financing statements referred to below, deliver to the Collateral Agent acknowledgment copies of, or copies of lien search reports confirming the filing of, financing statements duly filed under the UCC of all jurisdictions as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the Lien created, or purported or intended to be created, by the Security Documents. 5.12. Environmental Events. (i) ATel will promptly give notice to the Agent upon becoming aware (a) of any violation of any Environmental Law, (b) of any inquiry, proceeding, investigation or other action, including a request for information or a notice of potential environmental liability from any federal, state or local environmental agency, or (c) of the discovery of the release of any Hazardous Material at, on, under or from any of its properties or any facility or equipment in excess of reportable or allowable standards or levels under any Environmental Law, or in a manner and/or 39 - 34 - amount which could reasonably be expected to result in liability under any Environmental Law, in each case which would have a Materially Adverse Effect. (ii) In the event of the presence of any Hazardous Material on any of its properties which is in violation of, or which could reasonably be expected to result in liability under, any Environmental Law, in each case which would have a Materially Adverse Effect, ATel or any of its Subsidiaries, upon discovery thereof, shall take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to mitigate and eliminate any such adverse effect, and shall keep the Agent informed of their actions and the results. 5.13. Equal Security for Loans and Notes; No Further Negative Pledges. (a) If ATel shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired and whether or not such property or assets constitutes Collateral, other than Prior Liens relating to such Collateral or other Liens which are expressly permitted under the applicable Security Document, (unless prior written consent to the creation or assumption thereof shall have been obtained from the Agent and the Required Banks), it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured as long as any such Indebtedness shall be secured; provided that this covenant shall not be construed as consent by the Agent and the Required Banks to any violation by ATel of the provisions of Section 6.03. (b) Except with respect to prohibitions against other encumbrances on specific property encumbered to secure payment of particular Indebtedness permitted hereunder (which Indebtedness relates solely to the acquisition or improvement of such specific property), ATel shall not enter into any agreement prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 5.14. Pledge of Additional Collateral. Subject to Section 5.13(b), promptly, and in any event within 30 days after the acquisition of assets of the type that would have constituted Collateral (if the person acquiring such assets had executed an appropriate Security Document on the Effective Date) at the Effective Date (the "Additional Collateral"), ATel will take all necessary action, including delivering to the Agent an amended Annex 4.21(a) to this Credit Agreement and 40 - 35 - amended schedules to the Security Agreements, and the filing of appropriate financing statements under the provisions of the UCC, applicable foreign, domestic or local laws, rules or regulations in each of the offices where such filing is necessary or appropriate to grant to the Collateral Agent a perfected Lien in such Collateral pursuant to and to the full extent required by the Security Agreements and this Agreement. All actions taken by the parties in connection with the pledge of Additional Collateral, including, without limitation, costs of counsel for the Agent, shall be for the account of ATel, which shall pay all sums due on demand. 5.15. Channel Lessor Consents. The Credit Parties shall use commercially reasonable efforts to (i) on or before September 1, 1997 obtain Channel Lessor Consents with respect to its rights under non-assignable channel leases in the markets set forth on Column A on Annex 5.15 and deliver to the Agent an opinion of Gurman, Blask & Freedman or other counsel reasonably acceptable to the Agent, substantially in the form of Exhibit K with respect to the markets on Column B on Annex 5.15 and (ii) on or before December 1, 1997 (a) transfer all licenses relating to Systems held by any Credit Party that conducts business in the markets set forth on Column B on Annex 5.15 to a separate Subsidiary, which shall hold no other Collateral and (b) deliver to the Agent an opinion of Gurman, Blask & Freedman, or other FCC counsel reasonably acceptable to the Agent, substantially in the form of Exhibit K with respect to the markets on Column A on Annex 5.15. All Channel Lessor Consents shall be satisfactory to the Agent in form and substance. 5.16. Tower Registration. ATel shall file on a timely basis all information, reports or applications required to register with the FCC any towers that it owns on which are located any reception facilities owned by any entity. 5.17. Pledge of Las Vegas. At the Agent's request, ATel will take all necessary action to deliver to the Agent a first priority perfected security interest in the capital stock owned by ATel and its Subsidiaries of SuperChannels of Las Vegas, Inc., including, at the request of the Agent, a first priority perfected security interest in all of the capital stock of a newly formed subsidiary, which shall own all the capital stock of Superchannels of Las Vegas, Inc. owned by ATel and its subsidiaries. 5.18. Debt Warrant Exercise. Upon the exercise of any of the Debt Warrants in accordance with their terms and to 41 - 36 - the extent permitted by ATel's contractual obligations, the holders of such Debt Warrants shall be deemed a Bank hereunder and to own a Loan and a Loan Commitment in a principal amount equal to the amount of Debt Warrants exercised and ATel shall issue to such holder a Note in accordance with Section 1.05. SECTION 6. Negative Covenants. ATel hereby covenants and agrees that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated and the Loans together with interest, fees and all other Obligations incurred hereunder are paid in full: 6.01. Changes in Business. ATel will not, and will not permit any of its Subsidiaries to, materially alter the character of its businesses from that conducted by ATel or such Subsidiary at the Effective Date. 6.02. Amendments or Waivers of Certain Documents. ATel will not, and will not permit any of its Subsidiaries to, amend or otherwise change the terms of any Indebtedness in a manner adverse to the Banks without the prior written consent of the Required Banks. 6.03. Liens. ATel will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien upon or with respect to any item constituting Collateral except for the Lien of the Security Documents relating thereto, the Prior Liens applicable thereto and other Liens expressly permitted by such Security Documents. ATel will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of ATel or such Subsidiary which does not constitute Collateral, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets or assign any right to receive income, or file or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, except the following (collectively referred to as "Permitted Encumbrances"): (a) Liens upon real or tangible personal property acquired by ATel or its Subsidiaries after the date hereof; provided that (i) any such Lien is created solely for the purpose of securing Indebtedness representing, or incurred to finance, the cost of the item of property subject thereto, (ii) the principal amount of the Indebtedness does not exceed 42 - 37 - 100%, of the fair value (as determined in good faith by the board of directors of ATel) of the respective property at the time it was so acquired, (iii) such Lien does not extend to or cover any other property other than such item of property (and any renewal thereof, accession thereto or proceeds from the sale thereof) and (iv) the incurrence of such Indebtedness secured by such Lien is permitted by Section 6.04; (b) Liens of warehousemen, mechanics, materialmen, workers, repairmen, common carriers, landlords and other similar Liens arising by operation of law or otherwise, not waived in connection herewith, for amounts that are not yet due and payable or which are being diligently contested in good faith by ATel by appropriate proceedings; (c) Attachment or judgment Liens individually or in the aggregate not in excess of $25,000 (exclusive of (i) any amounts that are duly bonded to the reasonable satisfaction of the Agent or (ii) any amount adequately covered by insurance as to which the insurance company has not disclaimed or disputed in writing its obligations for coverage); (d) Liens for taxes, assessments or other governmental charges not yet due and payable or which are being diligently contested in good faith by ATel by appropriate proceedings; (e) Deposits or pledges to secure obligations under workmen's compensation, social security or similar laws, or under unemployment insurance; (f) Deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of business; (g) Easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of ATel or any Subsidiary; (h) Liens previously existing on property acquired hereafter (other than Collateral) and assumed by ATel or any of its Subsidiaries in connection with such acquisition; 43 - 38 - (i) Liens arising from precautionary UCC-1 financing statement filings regarding operating leases entered into in the ordinary course of business; (j) Liens created by leases or subleases granted to third Persons by ATel or any of its Subsidiaries not interfering in any material respect with the business of ATel or any such Subsidiary; and (k) Extensions and renewals of the foregoing permitted Liens; provided that the aggregate amount of such extended or renewed Liens is not increased and such extended or renewed Liens are on terms and conditions no more restrictive than the terms and conditions of the Liens being extended or renewed. 6.04. Indebtedness. ATel will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to the Credit Documents; provided that the aggregate Indebtedness incurred pursuant to this Agreement shall in no event exceed the Total Loan Commitments; (b) $500,000 of Indebtedness, including Indebtedness incurred to finance the cost of the acquisition of real or personal tangible property (including Capital Leases); provided that such Indebtedness shall not exceed 100% of the fair value of such property; and provided, further, that such Indebtedness is not secured by any Lien other than a Lien referred to in clause (a) of Section 6.03; (c) Contingent Obligations permitted under Section 6.11; (d) Existing Indebtedness; (e) Indebtedness of a Wholly Owned Subsidiary of ATel to ATel; provided that such Indebtedness is held by ATel and the note evidencing such Indebtedness is pledged to the Collateral Agent; (f) up to $750,000 of Indebtedness of Fresno MMDS Associates to ATel; provided that such Indebtedness is held by ATel and the note evidencing such Indebtedness is pledged to the Collateral Agent; and 44 - 39 - (g) up to 250,000 of Indebtedness of American Telecasting of Seattle, Inc. to ATel; provided that the proceeds of such Indebtedness are used to purchase equipment, such Indebtedness is held by ATel and the note evidencing such Indebtedness is pledged to the Collateral Agent. 6.05. Advances, Investments and Loans. ATel will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to any Person, except: (a) investments in Cash and Cash Equivalents; (b) receivables owing to them and advances to customers and suppliers, in each case if created, acquired or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (c) to a Credit Party, in the ordinary course of business consistent with past practice; (d) investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (e) investments up to $1,300,000 in Superchannels of Las Vegas, Inc.; provided that the proceeds of such investment is used to pay accounts payable incurred in connection with the purchase of equipment; (f) general payroll loans and advances to Fresno MMDS Associates and Superchannels of Las Vegas, Inc. made in the ordinary course of business consistent with past practices; provided that such loans and advances do not exceed, with respect to Fresno MMDS Associates, the amount specified in Section 6.04(f) together with any Indebtedness incurred pursuant to Section 6.04(f), and, with respect to Superchannels of Las Vegas, Inc., the amount specified in Section 6.05(e) together with any investments made pursuant to Section 6.05(c); (g) investments and loans made pursuant to Section 6.04(f) and (g); and 45 - 40 - (h) additional loans, advances and/or investments of a nature not contemplated by the foregoing clauses (a) through (d); provided that all loans, advances and investments made pursuant to this clause (g) shall not exceed $50,000 in the aggregate at any time outstanding; and provided, further, that all Securities or other instruments evidencing such loans, investments or advances shall be pledged pursuant to an appropriate Security Document in the event that such Securities or other instruments shall have been acquired for aggregate consideration in excess of $25,000. 6.06. Prepayments of Indebtedness, etc. ATel will not: (a) after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms or provisions, to the extent any such amendment or modification would be adverse to the issuer thereof or to the interests of the Banks, of any of the Indebtedness (or any agreement relating thereto) of the type described in Section 6.04(b) or (d); (b) make (or give any notice in respect of) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before such Indebtedness is due for the purpose of paying such Indebtedness when due) or exchange of any such Indebtedness; and/or (c) amend, modify or change any of its respective organizational documents, or any agreement entered into by ATel with respect to its capital stock, or enter into any new agreement with respect to capital stock of ATel the result of which is reasonably likely to be adverse to the interest of the Banks. 6.07. Dividends, etc. ATel will not, and will not permit any of its Subsidiaries to, declare or pay any dividends or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for any consideration, any shares of any class of its capital stock now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or make any loans or advances to Affiliates of ATel, or set aside any funds for any of the foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of ATel or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing, "Dividends"), except that (i) any Subsidiary of ATel may pay Dividends to ATel and (ii) any Subsidi- 46 - 41 - ary of ATel may pay to ATel any amounts required for the payment of any taxes payable (x) by ATel or (y) by ATel and/or its Subsidiaries on a consolidated, combined or unitary basis; provided that, with respect to both (i) and (ii) above, no Default or Event of Default exists at the time of and after giving effect to any such payment. 6.08. Transactions with Affiliates. ATel will not, and will not permit any Subsidiary to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate of ATel other than on terms and conditions substantially as favorable to ATel or such Subsidiary as would be obtainable by ATel or such Subsidiary at the time in a comparable arm's-length transaction with an Affiliate; provided that the foregoing restrictions shall not apply to transactions between ATel and any of its Wholly-Owned Subsidiaries. 6.09. Issuance of Subsidiary Stock. ATel will not permit any of its Subsidiaries directly or indirectly to issue, sell, assign, pledge or otherwise encumber or dispose of any shares of its capital stock or other securities (or warrants, rights or options to acquire capital stock or convertible securities or other equity securities) of such Subsidiary other than to ATel or a Wholly Owned Subsidiary of ATel. 6.10. Disposition of Assets. ATel will not, and will not permit any of its Subsidiaries to, sell, lease, assign, transfer or otherwise dispose of all or any part of its interest in any asset other than (i) Inventory in the ordinary course of business, (ii) excess, obsolete or worn-out property disposed of in the ordinary course of business, (iii) commercially reasonable dispositions of assets; provided however, that (x)(a) such dispositions are for fair market value, (b) at least 80% of the consideration for such dispositions is in the form of Cash or Cash Equivalent and is used to pay down the Loans, and (c) the consideration for such disposition that is not in the form of Cash or Cash Equivalent is pledged to the Collateral Agent, or (y)(a) such dispositions are Systems for fair market value and are not in excess of 50,000 number of line of site homes in any single transaction and 300,000 number of line of site homes in the aggregate, (b) the consideration for such dispositions that is in the form of Cash or Cash Equivalents is used to pay down the loans, and (c) the consideration for such dispositions that is not in the form of Cash or Cash Equivalents is pledged to the Collateral Agent, or (z)(a) the consideration received is assets of equal or greater value than the greater of the fair market value or 47 - 42 - the liquidation value of the assets disposed, (b) the Collateral Agent consents to such asset disposition, which consent will not be unreasonably withheld, and (c) the value of the Collateral as a whole has not adversely been affected, (iv) the disposition of assets listed on Annex 6.10; provided however, that with respect to the dispositions listed under column A thereof, the consideration for such disposition is used to pay down the Loans and pays the Obligations in full, and (v) other dispositions of assets that do not constitute Collateral; provided, however, that (a) such other dispositions are for fair market value, (b) at least 75% of the consideration for such other dispositions is in the form of Cash or Cash Equivalents and (c) such consideration is either (1) reinvested in the business of ATel or its Subsidiaries or (2) used to pay down the Loans. To the extent any asset sale permitted by this Section 6.10 shall include Collateral, such asset shall be released upon satisfaction of the applicable conditions of this Section 6.10 and the applicable General Security Agreement. 6.11. Contingent Obligations. ATel will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or become or be liable with respect to any Contingent Obligation except: (i) guarantees resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) damage bonds currently existing or required to proceed with new construction incurred in the ordinary course of business; and (iii) other Contingent Obligations not to exceed $25,000 outstanding at any one time. 6.12. ERISA. ATel will not, and will not permit any of its ERISA Affiliates to: (i) engage in any transaction in connection with which ATel or any of its ERISA Affiliates could be subject to either a tax imposed by Section 4975(a) of the Code or the corresponding civil penalty assessed pursuant to Section 502(i) of ERISA, which penalties and taxes for all such transactions could reasonably be expected to be in an aggregate amount in excess of $100,000; (ii) permit to exist any accumulated funding deficiency, for which a waiver has not been obtained from the 48 - 43 - Internal Revenue Service, with respect to any Pension Plan; (iii) permit to exist any failure to make contributions or any unfunded benefits liability which creates, or with the passage of time would create, a statutory lien or requirement to provide security under ERISA or the Code in favor of the PBGC or any Pension Plan, Multiemployer Plan or other entity; (iv) permit the sum of the amount of unfunded benefit liabilities (determined in accordance with Statement of Financial Accounting Standards No. 35) under all Title IV Plans (excluding each Title IV Plan with an amount of unfunded benefit liabilities of zero or less) to exceed $100,000 for a period in excess of twelve months; or (v) fail to make any payment to any Multiemployer Plan that it or any of its ERISA Affiliates may be required to make under such Multiemployer Plan, any agreement relating to such Multiemployer Plan, or any law pertaining thereto. (vi) As used in this Section 6.12, the term "accumulated funding deficiency" has the meaning specified in Section 302 of ERISA and Section 412 of the Code, and the term "amount of unfunded benefit liabilities" has the meaning specified in Section 4001(a)(18) of ERISA. 6.13. Sale or Discount of Receivables. ATel will not, nor will it permit any of its Subsidiaries to, sell, with or without recourse, or discount (other than in connection with trade discounts in the ordinary course of business consistent with past practice) or otherwise sell for less than the face value thereof, notes or accounts receivable. 6.14. Additional System Agreements. No Credit Party shall enter into any System Agreement after the Closing Date unless such System Agreement shall be assignable by its terms as Pledged Collateral pursuant to the General Security Agreements; provided that this Section 6.14 shall not apply to System Agreements which are unassignable in their entirety pursuant to the Communications Act of 1934, as amended, and the rules and regulations promulgated thereunder. 49 - 44 - SECTION 7. Events of Default. Upon the occurrence and during the continuance of any of the following specified events (each an "Event of Default"): 7.01. Payments. ATel shall (i) default in the payment when due of any principal of the Loans, (ii) default, and such default shall continue for two or more Business Days, in the payment when due of any interest on the Loans or under any other Credit Document or (iii) fail to pay any other amounts owing hereunder for five days after receiving notice thereof; or 7.02. Representations, etc. Any written representation, warranty or statement made or deemed made by ATel herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 7.03. Covenants. ATel shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 5.13, 5.14 or 5.15 or Section 6 hereof or (b) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement or any Security Agreement (other than those referred to in Section 7.01, 7.02 or clause (a) of this Section 7.03) and such default shall continue unremedied for a period of at least thirty days after ATel has actual knowledge of such default; or 7.04. Default Under Other Agreements. (a) ATel shall (i) default in any payment with respect to any Indebtedness (other than Obligations) having a principal amount in excess of $25,000 individually or $50,000 in the aggregate, for ATel and its Subsidiaries, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created, (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become due prior to its stated maturity or (iii) any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit any other party to any such agreement to cause, the termination of 50 - 45 - such agreement or the imposition of a monetary penalty in excess of $25,000 or a material limitation on ATel's rights under such agreement; or (b) any Indebtedness of ATel or any of its Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment (but not including any prepayment required by reason of sale of assets, excess cash flow, change of control or other customary mandatory prepayment events), prior to the stated maturity thereof. 7.05. Bankruptcy, etc. ATel or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against ATel or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of ATel or any of its Subsidiaries; or ATel or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to ATel or any of its Subsidiaries; or there is commenced against ATel or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or ATel or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or ATel or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or ATel or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by ATel or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 7.06. ERISA. (i) Any "reportable event" as described in Section 4043 of ERISA or the regulations thereunder (excluding those events for which the requirement for notice has been waived by the PBGC) which could reasonably be expected to result in the termination of any Title IV Plan shall have occurred or a condition described in Section 4042 of ERISA shall exist by reason of which the PBGC would be entitled to cause the termination of a Title IV Plan or to obtain the appointment by the appropriate United States District Court of a trustee to administer or liquidate any Title IV Plan; or 51 - 46 - (ii) A trustee shall be appointed by a United States District Court to administer any Title IV Plan; or (iii) The PBGC shall institute proceedings to terminate any Title IV Plan or to appoint a trustee to administer any Title IV Plan; or (iv) ATel or any of its ERISA Affiliates shall become liable to the PBGC or any other party under Section 4062, 4063 or 4064 of ERISA with respect to any Title IV Plan; or (v) ATel or any of its ERISA Affiliates shall become liable to any Multiemployer Plan under Section 4201 et seq. of ERISA; if the sum of each of ATel's and its ERISA Affiliates' various liabilities (such liabilities to include, without limitation, any liability to the PBGC or to any other party under Section 4062, 4063 or 4064 of ERISA with respect to any Title IV Plan, or to any Multiemployer Plan under Section 4201 et seq. of ERISA, and to be calculated after giving effect to the tax consequences thereof) as a result of such events listed in subclauses (i) through (v) above exceeds $500,000 and is unpaid for a period of 45 days; or 7.07. Security Documents. The Security Documents shall cease to be in full force and effect in all material respects, or shall cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby, in favor of the Collateral Agent, superior to and prior to the rights of all third Persons other than Prior Liens subject to such Collateral and subject to no other Liens except for Liens which are expressly permitted under the applicable Security Document; or 7.08. Guarantees. The Guarantees (prior to their termination in accordance with the terms thereof) or any provisions thereof shall cease to be in full force or effect in all material respects, or any Guarantor thereunder or Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such Guarantee or any Guarantor shall default in the due performance or observance of any term, covenant or agreement for the payment of money on its part to be performed or observed pursuant to any Guarantee; or 7.09. Judgments. One or more judgments or decrees shall be entered against ATel or any of its Subsidiaries involving a liability of $25,000 or more in the case of any one 52 - 47 - such judgment or decree and $50,000 or more in the aggregate for all such judgments and decrees for ATel and its Subsidiaries (in either case in excess of the amount covered by insurance as to which the insurance company has acknowledged coverage) and any such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or 7.10. Ownership. (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have beneficial ownership of all shares that such person has a right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the capital stock or voting power of ATel; (ii) individuals who constituted the Board of Directors of ATel on the Effective Date (together with any new directors whose proposal for election by the shareholders of ATel was approved by a vote of 51% of the directors of ATel then still in office who either were directors on the Effective Date or whose election or nomination for election was previously so approved) shall cease for any reason to constitute a majority of the members of the Board of Directors of ATel still in office; (iii) any "person" or "group" (as defined in clause (i) above) shall have the right to designate or ability to appoint or nominate a majority of the members of the Board of Directors of ATel; (iv) ATel conveys, transfers or leases all or substantially all of its assets to any Person other than a wholly owned Subsidiary of ATel; or (v) the approval by stockholders of ATel of any plan or proposal for the liquidation, dissolution or winding up of ATel; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent shall, upon the written request of the Required Banks, by written notice to ATel, take any or all of the following actions, without prejudice to the rights of the Agent or any Bank to enforce its claims against ATel, except as otherwise specifically provided for in this Agreement (provided that, if an Event of Default specified in Section 7.05 shall occur, with respect to ATel, the result which would occur upon the giving of written notice by the Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Loan Commitments terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately and any accrued and unpaid Commitment Commission shall forthwith become due and payable without any other notice of 53 - 48 - any kind; (ii) declare the principal of and accrued interest in respect of all Loans and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by ATel; and/or (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or all of the remedies created pursuant to the Security Documents. If an Event of Default is cured or waived in accordance with the terms of this Agreement, it ceases (and, if waived, pursuant to the terms, and to the extent, of such waiver). SECTION 8. Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Additional Collateral" has the meaning provided in Section 5.15. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and executive officers of such Person), controlled by, or under direct or indirect common control with such Person; provided that neither Indosuez nor any Affiliate of Indosuez shall be deemed to be an Affiliate of ATel. A Person shall be deemed to control a corporation for the purposes of this definition if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agent" means Indosuez, or any successor thereto appointed in accordance herewith, in its capacity as agent and collateral agent for the Banks. "Agent's Office" means the office of the Agent located at 1211 Avenue of the Americas, New York, New York 10036, or such other office in New York as the Agent may hereafter designate in writing as such to the other parties hereto. "Asset Sale" means the sale, transfer or other disposition, to the extent consummated after the Effective Date, by ATel or any Subsidiary of ATel to any Person other than ATel or 54 - 49 - any Wholly-Owned Subsidiary of ATel of any asset of ATel or such Subsidiary (other than sales, transfers or other business dispositions of Inventory in the ordinary course of business and/or of excess, obsolete or worn-out property disposed of in the ordinary course of business and/or sales, transfers or dispositions in compliance with Section 6.10(iii)(z)). "ATel" means American Telecasting, Inc., a Delaware corporation. "Authorized Officer" means any senior officer of ATel, designated as such in writing to the Agent by ATel, to the extent acceptable to the Agent. "Bank" has the meaning provided in the first paragraph of this Agreement in Section 10.04 and any other party that becomes a Bank pursuant to Section 5.18. "Bankruptcy Code" has the meaning provided in Section 7.05. "Board of Directors" of any Person means the board of directors or similar entity of such Person. "Bond Appreciation Rights" means the Bond Appreciation Rights Certificate relating to the Senior Discount Notes 2004 dated the date hereof and executed by ATel. "Borrower" means ATel. "Borrowing" means the incurrence pursuant to a Notice of Borrowing and to the Loan Facility of a Loan by ATel from all of the Banks on a pro rata basis on a given date. "BTA" means "basic trading area," as defined by the FCC. "BTA Licenses" means BTA licenses issued by the FCC for wireless cable channel authorizations in BTAs. "Business Day" means any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close. "Capital Lease" of any Person means any Lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is, or is required to 55 - 50 - be, accounted for as a capital lease on the balance sheet of that Person, together with any renewals of such leases (or entry into new leases) on substantially similar terms. "Capitalized Lease Obligations" of any Person means all obligations under Capital Leases of such Person or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash" means money, currency or a credit balance in a Deposit Account. "Cash Equivalents" means (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than three years from the date of acquisition, (ii) marketable direct obligations issued by any State of the United States of America or any local government or other political subdivision thereof rated (at the time of acquisition of such security) at least AA by Standard & Poor's Corporation ("S&P") or the equivalent thereof by Moody's Investors Service, Inc. ("Moody's") having maturities of not more than one year from the date of acquisition, (iii) U.S. dollar denominated time deposits, certificates of deposit and bankers' acceptances of (x) any Bank, (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (z) any bank whose short-term commercial paper rating (at the time of acquisition of such security) by S&P is at least A-1 or the equivalent thereof or by Moody's is at least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each case with maturities of not more than six months from the date of acquisition, (iv) commercial paper and variable or fixed rate notes issued by any Bank or Approved Bank or by the parent company of any Bank or Approved Bank and commercial paper and variable rate notes issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating (at the time of acquisition of such security) of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long-term unsecured debt rating (at the time of acquisition of such security) of at least AA or the equivalent thereof by S&P or the equivalent thereof by Moody's and in each case maturing within one year after the date of acquisition and (v) repurchase agreements with any Bank or any primary dealer maturing within one year from the date of acquisition that are fully collateralized by investment instruments that would oth- 56 - 51 - erwise be Cash Equivalents; provided that the terms of such repurchase agreements comply with the guidelines set forth in the Federal Financial Institutions Examination Council Supervisory Policy -- Repurchase Agreements of Depository Institutions With Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985. "Change of Control" has the meaning assigned to that term in Section 7.10. "Channel Lessor Consent" means a Channel Lessor Consent substantially in the form of Exhibit J hereto. "Closing Date" means the date of initial funding of the Loans. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means all of the Pledged Collateral and Pledged Securities. "Collateral Agent" means Indosuez in its capacity as collateral agent for the Banks. "Commitment" means, with respect to each Bank, such Bank's Loan Commitment. "Common Stock" means the common stock, $.01 par value, of ATel. "Compliance Certificate" means a certificate issued pursuant to Section 5.01(f) signed by a chief financial officer, controller, chief accounting officer or other Authorized Officer of ATel. "Confidential Information" means information delivered to a Bank by or on behalf of ATel in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled when received by such Bank as being confidential information, provided that such term does not include information (i) that was publicly known or otherwise known to the Bank prior to the time of such disclosure, (ii) that subsequently becomes publicly known through no act or omission by the Bank or any Person acting on the Bank's behalf, (iii) that otherwise becomes known to the Bank other than through disclo- 57 - 52 - sure by ATel, or (iv) that constitutes financial statements delivered to the Bank that are otherwise publicly available. "Contingent Obligations" means, as to any Person, without duplication, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the maximum amount that such Person may be obligated to expend pursuant to the terms of such Contingent Obligation or, if such Contingent Obligation is not so limited, the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Credit Agreement" means this Credit Agreement, as the same may after its execution be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Credit Documents" means (i) this Credit Agreement, (ii) each Note, (iii) the Security Documents, (iv) the Escrow Agreement, (v) the Management Subordination Agreement and (vi) the Guarantees. "Credit Party" means at all times ATel and each Subsidiary thereof that pledges any stock, grants any Lien or issues any guarantee pursuant to any Credit Document. 58 - 53 - "Currency Protection Agreement" shall mean any foreign exchange contract, currency swap agreement, or other financial agreements or arrangements designed to protect ATel against fluctuations in currency values. "Debt Warrants" means the aggregate of 141,667 Debt Warrants to purchase $6.00 Principal amount of Loan dated the date hereof and executed by ATel. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Dividends" has the meaning provided in Section 6.07. "Dollars" means United States Dollars. "Effective Date" has the meaning provided in Section 10.10. "Environmental Laws" means the common law and all federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in effect, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous constituent substances or wastes, including, without limitation, petroleum, including crude oil or any fraction thereof, any petroleum product or any other Hazardous Materials, into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials, (iii) underground storage tanks, and related piping, and emissions, discharges, releases or threatened releases therefrom, and (iv) human exposure to radio frequency (RF) radiation. "Equity Warrants" means the aggregate of 141,667 Warrants to purchase shares of Class A Common Stock dated the date hereof and executed by ATel. 59 - 54 - "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" means any entity, whether or not incorporated, which is under common control or would be considered a single employer with ATel within the meaning of Section 414(b), (c) or (m) of the Code and regulations promulgated under those sections or within the meaning of section 4001(b) of ERISA and regulations promulgated under that section. "Escrow Agent" means Banque Indosuez, New York Branch. "Escrow Agreement" means the Escrow Agreement dated as of the Closing Date between ATel and the Escrow Agent, substantially in the form of Exhibit G hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Event of Default" has the meaning provided in Section 7. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" has the meaning set forth in Section 3.01(k). "FCC" means the Federal Communications Commission or any Governmental Authority which succeeds to the duties and functions presently performed by such Commission. "Federal Funds Rate" means on any one day the weighted average of the rate on overnight Federal funds transactions with members of the Federal Reserve System only arranged by Federal funds brokers as published as of such day by the Federal Reserve Bank of New York, or if not so published, the rate then used by first class banks in extending overnight loans to other first class banks. "Final Maturity Date" means the one year anniversary of the Closing Date. "Financing Proceeds" means the Cash (other than Net Cash Proceeds) received by ATel, directly or indirectly, from 60 - 55 - any financing transaction of whatever kind or nature, including without limitation from any incurrence of Indebtedness, any mortgage or pledge of an asset or interest therein (including a transaction which is the substantial equivalent of a mortgage or pledge), from the sale of tax benefits, from a lease to a third party and a pledge of the lease payments due thereunder to secure Indebtedness, from the formation of a joint venture arrangement, from an exchange of assets and a sale of the assets received in such exchange, or any other similar arrangement or technique whereby ATel obtains Cash in respect of an asset, net of direct costs associated therewith. "Fresno Note" means the note issued by Fresno MMDS Associates in the principal amount of $8,500,000 in connection with the Amended and Restated Revolving Credit Agreement between Fresno MMDS Associates and First Union National Bank of North Carolina dated as of September 30, 1994. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Effective Date, it being understood and agreed that determinations in accordance with GAAP for purposes of Section 6, including defined terms as used therein, are subject (to the extent provided therein) to Section 10.07(a). "General Security Agreements" means and includes the General Security Agreements executed and delivered by ATel and the Guarantors substantially in the form of Exhibit C-1 hereto and any other general security agreements delivered pursuant to Section 5.11 or 5.14. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee" means the guarantee by the Guarantors of all of the Obligations of the Borrower hereunder, substantially in the form of Exhibit H hereto. "Guarantor" means each of the Subsidiaries of ATel other than Superchannels of Las Vegas, Inc., Fresno MMDJ Associates, FMA License Subsidiary, Inc., and American Telecasting of Seattle, Inc. "Governmental Licenses" shall have the meaning set forth in the General Security Agreements. 61 - 56 - "Hazardous Materials" has the meaning provided in Section 4.20. "Indebtedness" of any Person means, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed by such first Person, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all obligations of such Person under Currency Protection Agreements and Interest Rate Agreements and (viii) all Contingent Obligations of such Person; provided that Indebtedness shall not include trade payables, accrued expenses, accrued dividends and accrued income taxes, in each case arising in the ordinary course of business. "Indosuez" means Banque Indosuez, New York Branch. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate futures contract, interest rate option contract or other similar agreement or arrangement to which ATel is a party, designed to protect ATel or any of its Subsidiaries against fluctuations in interest rates. "Inventory" means all of the inventory of ATel including without limitation: (i) all raw materials, work in process, parts, components, assemblies, supplies and materials used or consumed in ATel's business; (ii) all goods, wares and merchandise, finished or unfinished, held for sale or lease or leased or furnished or to be furnished under contracts of service; and (iii) all goods returned or repossessed by ATel. "ITFS" means Instructional Television Fixed Service, a class of television service licensed by the FCC for the primary transmission of instructional and cultural material to receiving stations and which may also be leased for wireless cable operations. "Lease" means any lease, sublease, franchise agreement, license, occupancy or concession agreement. 62 - 57 - "License Agreements" means, collectively, the instruments and agreements pursuant to which the Credit Parties have been granted the rights and privileges (excluding FCC licenses but including any other Governmental Licenses) to construct and operate the System indicated on Annex 4.21(a). "Lien" means any mortgage, pledge, security interest, encumbrance, lien, claim, hypothecation, assignment for security or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan Commitment" means, with respect to each Bank, the amount set forth below such Bank's name on the signature pages hereto directly below the column entitled " Loan Commitment," as the same may be reduced from time to time pursuant to Sections 2.02 and/or 7, and as the same may be increased in accordance with the terms of the Debt Warrant and Section 5.18 hereof. "Loan Commitment Termination Date" means the Business Day immediately preceding the Final Maturity Date. "Loan Facility" means the credit facility evidenced by the Total Loan Commitment. "Loans" has the meaning provided in Section 1.01. "Management Subordination Agreement" means a Management Subordination Agreement substantially in the form of Exhibit I hereto. "Materially Adverse Effect" means, (i) with respect to ATel, any materially adverse effect with respect to the operations, business, properties, assets, nature of assets, liabilities (contingent or otherwise), financial condition or prospects of ATel, taken as a whole, or (ii) any fact or circumstance (whether or not the result thereof would be covered by insurance) as to which singly or in the aggregate there is a reasonable likelihood of (y) a materially adverse change described in clause (i) with respect to ATel, or (z) the inability of ATel to perform in any material respect its obligations hereunder or under any of the other Credit Documents or the inability of the Banks to enforce in any material respect their rights purported to be granted hereunder or under any of the other Credit Documents or the Obligations (including realizing on the Collateral). 63 - 58 - "MDS" means Multipoint Distribution Service, an omnidirectional, one way domestic transmission service licensed by the FCC, rendered on microwave frequencies from a single fixed transmitter location simultaneously to multiple receiving facilities used primarily for the distribution of television entertainment programming. "MMDS" means Multichannel Multipoint Distribution Service, an omnidirectional, one way domestic transmission service licensed by the FCC rendered on microwave frequencies from a single fixed transmitter location simultaneously to multiple receiving facilities used primarily for the distribution of television entertainment programming. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA with respect to which either ATel or its respective ERISA Affiliates is or has been required to contribute. "Net Cash Proceeds" means with respect to any Asset Sale in excess of $50,000, the aggregate cash payments received by ATel from such Asset Sale, net of direct expenses of sale; provided that, with respect to taxes, expenses shall only include taxes to the extent that taxes are payable in cash in the current year or in the next succeeding year with respect to the current year as a result of such Asset Sale; provided that Net Cash Proceeds shall not include any amounts or items included in the definition of Financing Proceeds or Net Financing Proceeds. "Net Financing Proceeds" means Financing Proceeds, net of direct expenses of the transaction and net of taxes (including income taxes) currently paid or payable in cash as a result thereof in the current year or in the next succeeding year with respect to the current year as a result of the transaction generating Net Financing Proceeds. "Notes" has the meaning provided in Section 1.05. "Notice of Borrowing" has the meaning provided in Section 1.03. "Obligations" means all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document or secured by any Security Document. 64 - 59 - "Officers' Certificate" means, as applied to any corporation, a certificate executed on behalf of such corporation by its Chairman of the Board (if an officer) or its President or one of its Vice Presidents and by its Chief Financial Officer or its Treasurer or any Assistant Treasurer; provided that every Officers' Certificate with respect to compliance with a condition precedent to the making of any Loan hereunder shall include (i) a statement that the officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto, (ii) a statement that, in the opinion of the signers, they have made or have caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such condition has been complied with, and (iii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "Officers' Solvency Certificate" means the Officers' Solvency Certificate in the form set forth as Exhibit F hereto. "Option Agreement" means the Option Agreements dated as of the date hereof and executed by ATel. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Pension Plan" means any pension plan as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which is or has been maintained by or to which contributions are or have been made by ATel or any of its ERISA Affiliates. "Permitted Encumbrances" has the meaning provided in Section 6.03. "Person" means any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Pledge Agreements" means and includes the Securities Pledge Agreements substantially in the form of Exhibit C-2 hereto executed by ATel and the appropriate Subsidiaries of ATel, and any other securities pledge agreements delivered pursuant to Section 5.11 or 5.14. "Pledged Collateral" means all the Pledged Collateral as defined in each of the General Security Agreements. 65 - 60 - "Pledged Securities" means all the Pledged Collateral as defined in each of the Pledge Agreements. "Prior Liens" means Liens which pursuant to the terms of any Security Document are permitted to be prior to the Lien of such Security Document. "Projected Financial Statements" has the meaning provided in Section 4.10(c). "Real Property" means all right, title and interest of ATel or any of its Subsidiaries (including, without limitation, any leasehold estate) in and to a parcel of real property owned or operated by ATel or any of its Subsidiaries together with, in each case, all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof and executed by ATel and the holders thereof. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. 66 - 61 - "Required Banks" means at any time Banks holding at least 51% of the Total Loan Commitments held by Banks; provided that for the purposes of Section 3, the requirement that any document, agreement, certificate or other writing is to be satisfactory to the Required Banks shall be satisfied if (x) such document, agreement, certificate or other writing was delivered in its final form to the Banks prior to the Effective Date (or if amended or modified thereafter, the Agent has reasonably determined such amendment or modification not to be material), (y) such document, agreement, certificate or other writing is satisfactory to the Agent and (z) Banks holding more than 33-1/3% of the Total Loan Commitments held by Banks have not objected in writing to such document, agreement, certificate or other writing to the Agent prior to the Effective Date. "SEC" means the Securities and Exchange Commission or any successor thereto. "SEC Regulation D" means Regulation D as promulgated under the Securities Act, as the same may be in effect from time to time. "Secured Parties" has the meaning specified in the Security Documents. "Securities" means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "Security Documents" means each of the Pledge Agreements, the General Security Agreements and any other documents utilized to pledge as Collateral for the Obligations or any property or assets of ATel of whatever kind or nature. "State and Local Real Property Disclosure Requirements" means any state or local laws requiring notification of the buyer of real property, or notification, registration, or filing to or with any state or local agency, prior to the sale of any Real Property or transfer of control of an entity, of the actual or threatened presence or release into the environment, or the use, disposal, or handling of Hazardous Materials on, at, under, or near the real property to be sold or the entity for which control is to be transferred. 67 - 62 - "Subsidiary" of any Person means and includes (i) any corporation 50% or more of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has a 50% or more equity interest at the time. "System" means, collectively, the MMDS, MDS, ITFS and other similar television distribution and reception systems (including any non-video service provided over such facilities) constructed and operated, or to be constructed and operated, by the Credit Parties to provide a wireless cable service pursuant to the System Agreements and all rights incident or appurtenant to such System Agreements. "System Agreements" means, collectively, all material instruments, leases, licenses, permits and agreements of the Credit Parties, now existing or hereafter acquired or obtained, relative to the construction and operation of the System. "Taxes" has the meaning provided in Section 2.04. "Termination Event" means (i) a "reportable event" described in Section 4043 of ERISA or in the regulations thereunder (excluding events for which the requirement for notice of such reportable event has been waived by the PBGC) with respect to a Title IV Plan, or (ii) the withdrawal of ATel or any of its ERISA Affiliates from a Title IV Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a Title IV Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings by the PBGC to terminate a Title IV Plan or to appoint a trustee to administer a Title IV Plan, or (v) any other event or condition which might constitute reasonable grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan, or (vi) the complete or partial withdrawal (within the meaning of Sections 4203 and 4205, respectively, of ERISA) of ATel or any of its ERISA Affiliates from a Multiemployer Plan, or (vii) the insolvency or reorganization (within the meaning of Sections 4245 and 4241, respectively, of ERISA) or termination of any Multiemployer Plan, or 68 - 63 - (viii) the failure to make any payment or contribution to any Pension Plan or Multiemployer Plan or the making of any amendment to any Pension Plan which could result in the imposition of a lien or the posting of a bond or other security. "Title Company" means such title insurance company or abstract company as shall be designated by the Agent. "Title IV Plan" means any plan (other than a Multiemployer Plan) described in Section 4021(a) of ERISA, and not excluded under Section 4021(b) of ERISA, which is or has been maintained by, or to which contributions are or have been made by, ATel or any of its ERISA Affiliates. "Total Loan Commitments" means the sum of the Loan Commitments of each of the Banks, which shall not exceed $17,000,000, unless permitted by ATel's then outstanding contractual obligations. "UCC" means the Uniform Commercial Code as in effect in the State of New York. "Unutilized Commitment" for any Bank at any time means the unutilized Loan Commitment of such Bank. "Voting Stock" means, with respect to any Person, capital stock entitled to vote in the election of directors or equivalent persons of such Person. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors' or nominees' qualifying shares, is owned directly or indirectly by such Person. "Written" or "in writing" means any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. SECTION 9. The Agent. 9.01. Appointment. Each Bank hereby irrevocably designates and appoints Indosuez as Agent (such term to include the Agent acting as Collateral Agent or in any other representative capacity under any other Credit Document) of such Bank to act as specified herein and in the other Credit Documents and each such Bank hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this 69 - 64 - Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Credit Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such upon the express conditions contained in this Section 9. Notwithstanding any provision to the contrary elsewhere in this Credit Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or otherwise exist against the Agent. The provisions of this Section 9 are solely for the benefit of the Agent and the Banks, and ATel shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Credit Agreement, the Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for ATel. 9.02. Delegation of Duties. The Agent may execute any of its duties under this Credit Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 9.03. 9.03. Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Credit Agreement (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties by ATel, any Subsidiary of ATel or any of their respective officers contained in this Credit Agreement, any other Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Credit Agreement or any other Document or for any failure of ATel or any Subsidiary of ATel or any of their respective officers to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions 70 - 65 - of, this Credit Agreement, or to inspect the properties, books or records of ATel or any Subsidiary of ATel. The Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement or any Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Banks or by or on behalf of ATel to the Agent or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 9.04. Reliance by the Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to ATel), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement and the other Credit Documents in accordance with a request of the Required Banks (or to the extent specifically provided in Section 10.12, all the Banks), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 9.05. Notice of Default. The Agent shall not be deemed to have knowledge of the occurrence of any Default or Event of Default, other than a default in the payment of principal or interest on the Loans hereunder unless it has received notice from a Bank or ATel referring to this Credit Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the 71 - 66 - Agent receives such a notice, the Agent shall give prompt notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 9.06. Non-Reliance on Agent and Other Banks. Each Bank expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of ATel or any Subsidiary of ATel, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of ATel and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Credit Agreement and the other agreements contemplated hereby. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of ATel and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of ATel or any of its Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.07. Indemnification. The Banks agree to indemnify the Agent in its capacity as such or in any other representative capacity under any other Credit Document ratably according to their aggregate Commitments, from and against any and all 72 - 67 - liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Credit Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by ATel or any of its Subsidiaries; provided that no Bank shall be liable to the Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 9.07 shall survive the payment of all Obligations. 9.08. The Agent in Its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with ATel, its Subsidiaries and other Affiliates of ATel as though the Agent were not the Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Agent shall have the same rights and powers under this Credit Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent in its individual capacity. 9.09. Successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, the term "Agent" shall include such successor agent effective upon its appointment, and the resigning Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Credit Agreement. After the retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Credit Agreement. 73 - 68 - 9.10. Resignation by Agent. (A) The Agent may resign from the performance of all its functions and duties hereunder at any time by giving 15 Business Days' prior written notice to ATel and the Banks. Such resignation shall take effect upon the acceptance by a successor Agent of appointment pursuant to subsections B and C below or as otherwise provided below. (B) Upon any such notice of resignation of the Agent, the Required Banks shall appoint a successor Agent acceptable to ATel and which shall be an incorporated bank or trust company or other qualified financial institution with operations in the United States and total assets of at least $1 billion. (C) If a successor Agent shall not have been so appointed within said 15 Business Day period, the resigning Agent with the consent of ATel shall then appoint a successor Agent (which shall be an incorporated bank or trust company or other qualified financial institution with operations in the United States and total assets of at least $1 billion) who shall serve as Agent until such time, if any, as the Required Banks appoint a successor Agent as provided above. (D) If no successor Agent has been appointed pursuant to subsection B or C by the 20th Business Day after the date such notice of resignation was given by the resigning Agent, such Agent's resignation shall become effective and the Required Banks shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Required Banks appoint a successor Agent as provided above. SECTION 10. Miscellaneous. 10.01. Payment of Expenses, etc. ATel agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all out-of-pocket costs and expenses of the Agent (including, without limitation, the reasonable fees and disbursements of Cahill Gordon & Reindel and communications legal counsel) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and of the Agent, and, following the occurrence of a Default, each of the Banks in connection with any amendment, waiver or consent relating to the Credit Documents and with the enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and dis- 74 - 69 - bursements of counsel for the Agent, and, following the occurrence of a Default, each of the Banks) with prior notice to ATel of the engagement of any counsel and the fees and expenses of any appraisers or any consultants or other advisors engaged with prior notice to ATel of any such engagement with respect to environmental or other matters; (ii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify each Bank, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses (including, without limitation, any and all losses, liabilities, claims, damages or expenses arising under Environmental Laws) incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any Bank is a party thereto) related to the entering into and/or performance of any Document or the use of the proceeds of any Loans hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). 10.02. Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to ATel or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of ATel against and on account of the Obligations and liabilities of ATel to such Bank under this Credit Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of ATel purchased by such Bank pursuant to Section 10.06(b), and all other claims of any nature or description arising out of or connected with this Credit Agree- 75 - 70 - ment or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 10.03. Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to ATel, to American Telecasting, Inc., 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919, Attention: President, with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, N.W., Suite 450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.; if to any Bank, at its address specified for such Bank on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective two days after being deposited in the mails, when delivered to the telegraph company, cable company or overnight courier, as the case may be, or when sent by telex or telecopier, except that notices and communications to the Agent shall not be effective until received by the Agent. 10.04. Benefit of Credit Agreement. (a) This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, all future holders of the Notes, and their respective successors and assigns; provided (A) that ATel may not assign or transfer any of its interests hereunder without the prior written consent of the Banks; and (B) that the rights of each Bank to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth below in this Section 10.04; provided that nothing in this Section 10.04 shall prevent or prohibit any Bank from (i) pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank and (ii) granting participations in or assignments of such Bank's Loans, Notes and/or Commitments hereunder to (x) its parent company and/or (y) any Affiliate of such Bank that is at least 50% owned by such Bank or its parent company and/or (z) an entity managed by one of the persons specified in clauses (x) or (y) above. (b) Each Bank shall have the right to transfer, assign or grant participations in all or any part of its remain- 76 - 71 - ing Loans, Notes and/or Commitments hereunder on the basis set forth below in this clause (b). Each Bank may furnish any information concerning ATel in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants). (A) Assignments. Each Bank, with the written consent of the Agent, which shall not be unreasonably withheld, which shall be evidenced on the notice in the form of Exhibit D-1 hereto, may assign pursuant to an Assignment Agreement substantially in the form of Exhibit D-2 hereto all or a portion of its Loans, Notes and/or Commitments hereunder pursuant to this clause (b)(A) to (x) one or more Banks or (y) one or more accredited investors (as defined in SEC Regulation D). Any assignment pursuant to this clause (b)(A) will become effective five Business Days after the Agent's receipt of (i) a written notice in the form of Exhibit D- 1 hereto from the assigning Bank and the assignee Bank and (ii) a processing and recordation fee of $2,000 from the assigning Bank in connection with the Agent's recording of such sale, assignment, transfer or negotiation; provided that such fee shall only be payable if the assignment is between a Bank and a party that is not a Bank prior to the assignment. ATel shall issue new Notes to the assignee in conformity with Section 1.05 and the assignor shall return the old Notes to ATel. Upon the effectiveness of any assignment in accordance with this clause (b)(A), the assignee will become a "Bank" for all purposes of this Credit Agreement and the other Credit Documents and, to the extent of such assignment, the assigning Bank shall be relieved of its obligations hereunder with respect to the Commitments being assigned. The Agent shall maintain at its address specified in Annex II hereto a copy of each Assignment Agreement delivered to and accepted by it and a register in which it shall record the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent demonstrable error, and ATel, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by ATel, the Agent or any Bank at any reasonable time and from time to time upon reasonable prior notice. (B) Participations. Each Bank may transfer, grant or assign participations in all or any part of such Bank's 77 - 72 - Loans, Notes and/or Commitments hereunder pursuant to this clause (b)(B) to any Person; provided that (i) such Bank shall remain a "Bank" for all purposes of this Credit Agreement and the transferee of such participation shall not constitute a Bank hereunder and (ii) no participant under any such participation shall have rights to approve any amendment to or waiver of this Credit Agreement or any other Credit Document except to the extent such amendment or waiver would (x) change the scheduled final maturity date of any of the Loans, Notes or Commitments in which such participant is participating or (y) reduce the principal amount, interest rate or fees applicable to any of the Loans, Notes or Commitments in which such participant is participating or postpone the payment of any interest or fees or (z) release all or substantially all of the Collateral. In the case of any such participation, the participant shall not have any rights under this Credit Agreement or any of the other Credit Documents (the participant's rights against the granting Bank in respect of such participation to be those set forth in the agreement with such Bank creating such participation) and all amounts payable by ATel hereunder shall be determined as if such Bank had not sold such participation; provided that such participant shall be considered to be a "Bank" for purposes of Sections 10.02 and 10.06(b). 10.05. No Waiver; Remedies Cumulative. No failure or delay on the part of the Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between ATel and the Agent or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Agent or any Bank would otherwise have. No notice to or demand on ATel in any case shall entitle ATel to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Banks to any other or further action in any circumstances without notice or demand. 10.06. Payments Pro Rata. (a) The Agent agrees that promptly after its receipt of each payment from or on behalf of ATel in respect of any Obligations of ATel, it shall distribute such payment to the Banks pro rata based upon their 78 - 73 - respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligations then owed and due to such Bank bears to the total of such Obligations then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of ATel to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 10.07. Calculations; Computations. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by ATel to the Banks); provided that, except as otherwise specifically provided herein, all computations determining compliance with Section 7 and all definitions used herein for any purpose), shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the historical financial statements delivered to the Banks pursuant to Section 3.01(I). (b) All computations of interest and fees hereunder shall be made on the actual number of days elapsed over a year of 365 days. 10.08. Governing Law; Submission to Jurisdiction; Venue. (a) This Credit Agreement and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with and be governed by the laws of the State of New York applicable to contracts made and to be performed wholly therein. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United 79 - 74 - States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, ATel hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. ATel further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to CT Corporation System at its address at 1633 Broadway, New York, New York 10019, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Agent or any Bank to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against ATel in any other jurisdiction. (b) ATel hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 10.09. Counterparts. This Credit Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with ATel and the Agent. 10.10. Effectiveness. This Credit Agreement shall become effective on the date (the "Effective Date") on which ATel and each of the Banks shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Agent at the Agent's Office or, in the case of the Banks, shall have given to the Agent telephonic (confirmed in writing), written, telex or telecopy notice (actually received) at such office that the same has been signed and mailed to it. The Agent will give ATel and each Bank prompt written notice of the occurrence of the Effective Date. 10.11. Headings Descriptive. The headings of the several sections and subsections of this Credit Agreement are inserted for convenience only and shall not in any way affect 80 - 75 - the meaning or construction of any provision of this Credit Agreement. 10.12. Amendment or Waiver. Neither this Credit Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Required Banks; provided that no such change, waiver, discharge or termination shall, without the consent of each affected Bank and the Agent, (i) extend the scheduled final maturity date of any Loan, or any portion thereof, or reduce the rate or extend the time of payment of interest thereon or fees or reduce the principal amount thereof, or increase the Commitments of any Bank over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Loan Commitment shall not constitute a change in the terms of any Commitment of any Bank), (ii) release all or substantially all of the Collateral (except as expressly permitted by the Credit Documents), (iii) amend, modify or waive any provision of this Section, or Sections 1.08, 2.04, 7, 9.07, 10.01, 10.02, 10.04, 10.06 or 10.07(b), (iv) reduce any percentage specified in, or otherwise modify, the definition of Required Banks or (v) consent to the assignment or transfer by ATel of any of its rights and obligations under this Credit Agreement. No provision of Section 9 may be amended without the consent of the Agent. 10.13. Survival. All indemnities set forth herein including, without limitation, in Section 1.08, 2.04, 9.07 or 10.01 shall survive the execution and delivery of this Credit Agreement and the making of the Loans, the repayment of the Obligations and the termination of the Loan Commitments. 10.14. Domicile of Loans. Each Bank may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank. 10.15. Waiver of Jury Trial. Each of the parties to this agreement hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Credit Agreement, the Credit Documents or the transactions contemplated hereby or thereby. 10.16. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant 81 - 76 - shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. 10.17. Confidentiality. Except as may be required to enforce the rights and duties established hereunder, the parties hereto shall preserve in a confidential manner all Confidential Information received from the other pursuant to this Credit Agreement, the Credit Documents and the transactions contemplated hereunder and thereunder, and shall not disclose such Confidential Information except to those person with which a confidential relationship is maintained (including regulators, legal counsel, accountants, or designated agents), to participants or assignees or prospective participants or assignees who agree to be bound by the terms of this provision, or where required by law, requested by any governmental authority or pursuant to legal process. 82 - 77 - IN WITNESS WHEREOF, the parties hereto have caused this indenture to be duly executed, all as of the date first written above. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: 83 Credit Agreement among American Telecasting, Inc., Banque Indosuez and the Banks listed herein BANQUE INDOSUEZ, NEW YORK BRANCH as Agent and Collateral Agent By: /s/ BANQUE INDOSUEZ ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: Loan Commitment: $17,000,000 84 ANNEX I List of Banks Banque Indosuez, New York Branch 85 ANNEX II Bank Addresses Banque Indosuez, New York Branch 1211 Avenue of the Americas New York, New York 10036 86 ___________________________________________ Exhibit A to the Credit Agreement FORM OF NOTE AMERICAN TELECASTING, INC. New York, New York U.S. $17,000,000 February 26, 1997 FOR VALUE RECEIVED, AMERICAN TELECASTING, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANQUE INDOSUEZ, NEW YORK BRANCH (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Banque Indosuez, New York Branch, located at 1211 Avenue of the Americas, Seventh Floor, New York, New York 10036-8701 or as otherwise designated pursuant to the Credit Agreement (as defined) on the Final Maturity Date, the principal sum of SEVENTEEN MILLION U.S. DOLLARS ($17,000,000) or, if less, the unpaid principal amount of the Loans made by the Bank to the Borrower pursuant to the Credit Agreement. The Borrower also promises to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in the Credit Agreement. This Note is one of the Notes referred to in the Credit Agreement, dated as of February 26, 1997, among the Borrower, the Bank, the other lending institutions party thereto, and Banque Indosuez, New York Branch, as Agent (as amended or modified in accordance with its terms, the "Credit Agreement") and is entitled to the benefits thereof and shall be subject to the provisions thereof. This Note is also entitled to the benefits of the Guarantees (as defined in the Credit Agreement) and the Security Documents (as defined in the Credit Agreement). As provided in the Credit Agreement, this Note is subject to mandatory and voluntary prepayment, in whole or in part. ___________________________________________ Footnote continued from previous page. 87 ___________________________________________ In case an Event of Default (as defined in the Credit Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Credit Agreement. The Borrower and the Guarantors hereby waive presentment, demand, protest, notice of dishonor, and any and all other notices or demands of any kind in connection with the delivery, performance, default or enforcement of this Note. All borrowings evidenced by this Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, however, that the failure of the holder hereof to make such a notation or any error in such a notation shall not affect the obligations of the Borrower under this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ---------------------------------- Name: Title: ___________________________________________ Footnote continued from previous page. 88 ___________________________________________ TRANSACTIONS ON NOTE ___________________________________________ Footnote continued from previous page. 89 ___________________________________________
Amount of Outstanding Amount of Principal or Principal Loan Made Interest Paid Balance Notation Borrower Date This Date This Date This Date Made By - -------- ---- --------- --------- --------- -------
___________________________________________ Footnote continued from previous page. 90 -1- EXHIBIT H TO THE CREDIT AGREEMENT FORM OF SUBSIDIARY GUARANTEE This GUARANTEE (the "Guarantee"), dated as of February 26, 1997 by the signatories hereto, (each a "Guarantor" and collectively, the "Guarantors"), in favor and for the benefit of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, in its capacity as agent (in such capacities and together with any successors in such capacity, the "Agent") for the ratable benefit of the lending institutions (the "Banks") from time to time party to the Credit Agreement (as hereinafter defined). R E C I T A L S: A. Pursuant to a certain credit agreement dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms thereof in effect, the "Credit Agreement"; capitalized terms not defined herein have the meanings ascribed to them in the Credit Agreement) by and among American Telecasting, Inc. (the "Borrower"), the lending institutions identified therein (collectively, the "Banks") and Banque Indosuez, New York branch, as Agent, the Banks have agreed to make certain Loans to the Borrower. B. It is a condition precedent to the Banks' obligations to make the Loans under the Credit Agreement that the Guarantors shall have executed and delivered this Guarantee and that this Guarantee shall be in full force and effect. C. This Guarantee is given by the Guarantors in favor of the Banks to guarantee, on a joint and several basis, all of the Obligations of the Borrower in accordance with the terms of the Credit Agreement. ______________________________________ Footnote continued from previous page. 91 -2- D. All of the Guarantors' obligations hereunder shall be secured pursuant to the Security Documents to which the Guarantors are a party. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Guarantors hereby agree as follows: Guarantee. (a) To induce the Banks to execute and deliver the Credit Agreement and to make the Loans upon the terms and conditions set forth in the Credit Agreement, and in consideration thereof, each of the Guarantors, jointly and severally, hereby unconditionally and irrevocably (i) guarantees to the Banks and their respective successors, endorsees, transferees and assigns, the prompt and complete payment and performance when due (whether at the Final Maturity Date, by acceleration or otherwise) and at all times thereafter of the Obligations of the Borrower (including amounts which would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, or similar provisions under the bankruptcy laws of foreign jurisdictions) and (ii) agrees to pay any and all reasonable expenses (including reasonable attorneys' fees and disbursements) which may be paid or incurred by the Banks, the Agent or the Collateral Agent in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantors under this Guarantee (collectively, the "Guaranteed Obligations"). (b) Each of the Guarantors agrees that this Guarantee constitutes a guarantee of payment when due and not of collection and waives any right to require that any resort be had by the Collateral Agent, the Agent or any Bank to any of the security held for payment of any of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Agent, the Collateral Agent or any Bank in favor of the Borrower or any other Person. (c) No payment or payments made by the Guarantors or any other Person or received or collected by the Banks (or the ______________________________________ Footnote continued from previous page. 92 -3- Collateral Agent or Agent on behalf of the Banks) from the Guarantors or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time in reduction of or in payment of the Guaranteed Obligations shall be deemed to modify, reduce, release or otherwise affect the liability or obligations of the Guarantors hereunder which shall, notwithstanding any such payment or payments other than payments made to the Banks (or the Collateral Agent or Agent on behalf of the Banks) by the Guarantors or payments received or collected by the Banks (or the Collateral Agent or Agent on behalf of the Banks) from the Guarantors, remain liable for the Guaranteed Obligations until the Guaranteed Obligations are indefeasibly paid in full in cash or cash equivalents, subject to the provisions of Section 1(d) hereof. (d) Notwithstanding any other provisions of this Guarantee, the maximum aggregate amount of Guaranteed Obligations which each of the Guarantors agrees to guarantee pursuant to this Guarantee shall equal the lesser of (i) the excess of the fair saleable value of the property of such Guarantor over the total liabilities of such Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, other than any such contingent liabilities under the Credit Agreement and the other Credit Documents), such excess to be determined on the date of this Guarantee or the date on which, from time to time, such enforcement or realization is effected, whichever is higher and, (ii) the maximum aggregate amount of Guaranteed Obligations which does not render this Guarantee, as it relates to such Guarantor, void or voidable under applicable laws relating to fraudulent conveyance or fraudulent transfer. Subject to the preceding sentence, each of the Guarantors understands, agrees and confirms that this is a guarantee of payment when due and not of collection and that each Bank may, from time to time, enforce this Guarantee up to the full amount of the Guaranteed Obligations owed to such Bank without proceeding against the Borrower, against any security for the Guaranteed Obligations, against any other guarantor or under any other guarantee covering the Guaranteed Obligations. Waiver by Guarantors. Each of the Guarantors hereby waives absolutely and irrevocably any claim which it may have against the Borrower or any of their respective Affiliates by ______________________________________ Footnote continued from previous page. 93 -4- reason of any payment to the Agent, Collateral Agent or any Bank, or to any other Person pursuant to or in respect of this Guarantee, including any claims by way of subrogation, contribution, reimbursement, indemnity or otherwise until such time as the Obligations hereunder have been paid in full. Consent by Guarantors. Each of the Guarantors hereby consents and agrees that, without the necessity of any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Guaranteed Obligations made by the Agent, the Collateral Agent or any Bank may be rescinded by the Banks (or the Agent or Collateral Agent on behalf of the Banks) and any of the Guaranteed Obligations continued, and the Guaranteed Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Banks (or the Agent or the Collateral Agent on behalf of the Banks); and the Credit Agreement or any other Credit Document, or other guarantee or documents in connection therewith, or any of them, may be amended, modified, supplemented or terminated, in whole or in part, as the Banks (or the Agent or Collateral Agent on behalf of the Banks) may deem advisable from time to time; and any Guarantee or right of offset or any Collateral may be sold, exchanged, waived, surrendered or released, all without the necessity of any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, which will remain bound hereunder, notwithstanding any such renewal, extension, modification, acceleration, compromise, amendment, supplement, termination, sale, exchange, waiver, surrender or release. Neither the Banks nor the Agent or the Collateral Agent shall have any obligation to protect, secure, perfect or insure any Collateral or property at any time held as security for the Guaranteed Obligations or this Guarantee. When making any demand hereunder against any Guarantor, the Agent, the Collateral Agent or the Banks may, but shall be under no obligation to, make a similar demand on any other Borrower or any such other guarantor, and any failure by the Agent, the Collateral Agent or the Banks to make any such demand or to collect any payments from such other Borrower or any such other guarantor or any release of such other Borrower or any such other guarantor or any of the Guarantors' obligations or ______________________________________ Footnote continued from previous page. 94 -5- liabilities hereunder shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Banks against any of the Guarantors hereunder. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. Waivers; Successors and Assigns. The Guarantors waive any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by the Banks upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between any of the Guarantors and any other guarantor or any of the Borrower, on the one hand, and the Banks, on the other hand, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each of the Guarantors waives diligence, presentment, protest, demand for payment and notice of default or non-payment to or upon any guarantor, any of the Borrower or the Guarantors with respect to the Guaranteed Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional Guarantee of payment without regard to the validity, regularity or enforceability of the Credit Agreement, the other Credit Documents, any of the Guaranteed Obligations or any guarantee therefor or right of offset with respect thereto at any time or from time to time held by the Banks and without regard to any defense (other than the defense of payment), set off or counterclaim which may at any time be available to or be asserted by any guarantor, or any of the Borrower against the Banks, or by any other circumstance whatsoever (with or without notice to or knowledge of the Guarantors) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Guaranteed Obligations, or any of the Guarantors under this Guarantee, in bankruptcy or in any other instance, and the obligations and liabilities of any of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Banks or any other Person at any time of any right or remedy against any guarantor, any of the Borrower or against any other Person which may be or become liable or obligated in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon ______________________________________ Footnote continued from previous page. 95 -6- each of the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Banks, and their respective successors, endorsees, transferees and assigns (including each holder from time to time of Guaranteed Obligations) until all of the Guaranteed Obligations and the obligations of the Guarantors under this Guarantee shall have been satisfied by indefeasible payment in full in cash or cash equivalents, notwithstanding that from time to time during the term of the Credit Agreement any guarantor or any of the Borrower may be released from all of its Guaranteed Obligations thereunder. Guarantee Secured. Payment under this Guarantee is secured by pledges, encumbrances and mortgages of Collateral pursuant to applicable Security Documents in accordance with the Credit Agreement. Reference is hereby made to the Credit Agreement and the applicable Security Documents for a description of the Collateral pledged and the right of the respective parties to such property, to secure all the obligations of the Guarantors hereunder. Rights of Set-Off. The Banks, and the Agent and Collateral Agent on behalf of the Banks, are each hereby irrevocably authorized upon the occurrence and during the continuance of an Event of Default without notice to any of the Guarantors (any such notice being expressly waived by any of the Guarantors to the extent permitted by applicable law) to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect or contingent or matured or unmatured, at any time held or owing by the Banks to or for the credit or the account of any of the Guarantors, or any part thereof, in such amounts as the Banks, or the Agent or Collateral Agent on behalf of the Banks, may elect, against and on account of the obligations and liabilities of any of the Guarantors to the Banks, in any currency, whether arising hereunder or otherwise, as the Banks, or the Agent or Collateral Agent on behalf of the Banks, may elect, whether or not the Banks, or the Agent or Collateral Agent on behalf of the Banks, have made any demand for payment but only to the extent that such obligations, liabilities and claims shall have become due and payable (whether as stated, by acceleration or otherwise). The Banks, or the Agent or Collateral Agent on ______________________________________ Footnote continued from previous page. 96 -7- behalf of the Banks, agree to notify the Guarantors promptly of any such set-off and the application made by the Banks, or the Agent on behalf of the Banks; provided, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Banks, or the Agent or Collateral Agent on behalf of the Banks, under this Section 6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Banks, or the Agent or Collateral Agent on behalf of the Banks, may otherwise have. Effectiveness; Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned by the Banks upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any guarantor or the Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any guarantor, the Borrower, or any substantial part of its property, or otherwise, all as though such payments had not been made. Payments of Guaranteed Obligations. Each of the Guarantors hereby guarantees that the Guaranteed Obligations will be paid for the ratable benefit of the Banks without set-off or counterclaim in lawful currency of the United States of America at the office of the Collateral Agent located at 1211_Avenue of the Americas, 7th Floor, New York, New York 10036-8701. Each of the Guarantors shall make any payments required hereunder upon receipt of written notice thereof from the Agent or Collateral Agent or any Bank; provided, however, that the failure of the Agent or Collateral Agent or any Bank to give such notice shall not affect Guarantors' obligations hereunder. Default. If (x) the Borrower has failed to pay or perform when due its Guaranteed Obligations or (y) there is an event with respect to the Guarantors that would require or permit the acceleration pursuant to Section 7.04 of the Credit Agreement of any outstanding Loan, or (z) the Guarantors obligations, if any, under the Credit Agreement are accelerated, then in the case of clause (x) all of the ______________________________________ Footnote continued from previous page. 97 -8- Guaranteed Obligations with respect to the Borrower and in the case of clause (y) or clause (z) all of the Guaranteed Obligations shall be immediately due and payable by the Guarantors, regardless of whether in the case of clause (x) the payment of the Guaranteed Obligations has been accelerated or in the case of clause (y) or clause (z) the Borrower is in default with respect to the Guaranteed Obligations. Representations and Warranties. To induce the Banks to enter into the Credit Agreement and to make Loans thereunder, the Guarantors represent and warrant to each Bank that the following statements are true, correct and complete on and as of the Closing Date: Organization and Powers. Each of the Guarantors has been duly incorporated and is an existing corporation in good standing under the laws of its jurisdiction of incorporation and has the power and authority to own its property and assets and to transact the business in which it is engaged and proposes to engage. Each of the Guarantors has duly qualified and is qualified to do business and is in good standing in all jurisdictions in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Materially Adverse Effect. Each of the Guarantors has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to own and carry on its business as now conducted and as contemplated to be conducted by the Documents, other than such licenses, authorizations, consents and approvals the failure to obtain which has not had and will not have a Materially Adverse Effect. Each of the Guarantors has all authority to enter into each of the Security Documents to which it is or is to be a party and to carry out the transactions contemplated thereby and to execute and deliver this Guarantee. No Violations. Neither the execution, delivery or performance by any of the Guarantors of any of the Credit Documents to which it is, or is to be, a party, nor compliance with any of the terms and provisions thereof, nor the consummation of any of the transactions contemplated therein, nor the grant and perfection of the security interests pursuant to the Security Documents (a) will contravene any provision of ______________________________________ Footnote continued from previous page. 98 -9- any law, statute, rule, regulation, order, writ, injunction or decree of any Governmental Authority, (b) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute (with notice or lapse of time or both) a default under any material contractual obligation of any of the Guarantors, or (other than as contemplated by the Security Documents) result in the creation or imposition of (or the obligation to create or impose), any Lien upon any of the property or assets of the Guarantors pursuant to any material contractual obligation or (c) will violate any provision of the organizational documents of the Guarantors. Approvals. The execution, delivery and performance by any of the Guarantors of the Credit Documents to which it is, or is to be, a party do not and will not require any registration with, consent or waiver or approval of, or notice to, or other action to, with or by, any Governmental Authority or other Person except filings required for the perfection of security interests granted pursuant to the Security Documents. All consents and approvals from or notices to or filings with any Governmental Authority or other Person required to be obtained by any Guarantor have been obtained and are in full force and effect except where failure to obtain such consents, approvals, notices, etc. would not have a Material Adverse Effect. Binding Obligation. This Guarantee constitutes the legal, valid and binding obligation of each of the Guarantors, enforceable, jointly and severally, against each of the Guarantors in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. Investment Company. Each of the Guarantors is not an "investment company" or a company "controlled" by an "investment company" (as each of such quoted terms is defined or used in the Investment Company Act of 1940, as amended) or subject to any foreign, federal or local statute or regulation limiting its ability to incur indebtedness for money borrowed ______________________________________ Footnote continued from previous page. 99 -10- or guarantee such indebtedness as contemplated hereby or by any other Credit Document. Ratable Sharing. The Banks by acceptance of this Guarantee agree among themselves that with respect to all amounts received by them which are applicable to the payment of obligations of each of the Guarantors under this Guarantee, if the Banks, or the Agent or Collateral Agent on behalf of the Banks, exercise their rights hereunder, including, without limitation, acceleration of the obligations of each of the Guarantors hereunder, equitable adjustment will be made so that, in effect, all such amounts will be shared among the banks pro rata based on the relative outstanding Guaranteed Obligations. Merger. If any of the Guarantors shall merge into or consolidate with another entity, or liquidate, wind up or dissolve itself in a transaction not prohibited by the Credit Agreement, or if all of the stock of any of the Guarantors shall be sold or otherwise disposed of in a manner not prohibited by the Credit Agreement, such Guarantor hereby covenants and agrees, that upon any such merger, consolidation, liquidation, or dissolution, the guarantee given in this Guarantee and the due and punctual performance and observance of all of the covenants and conditions of the Credit Agreement to be performed by such Guarantor, shall be expressly assumed (in the event that any of such Guarantor is not the surviving entity in the merger) by supplemental agreements satisfactory in form to the Banks, or the Agent or Collateral Agent on behalf of the Banks, by the entity or entities formed by such consolidation, or into which such Guarantor shall have been merged, or by the entity or entities which shall have acquired such property. In addition, such Guarantor shall deliver to the Banks, or the Agent or Collateral Agent on behalf of the Banks, an Officers' Certificate and an opinion of counsel, each stating that such merger, consolidation or transfer and such supplemental agreements comply with this Guarantee and that all conditions precedent herein provided relating to such transaction have been complied with. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor entity or entities, by supplemental agreements executed and delivered to the Banks or the Agent or Collateral Agent on behalf ______________________________________ Footnote continued from previous page. 100 -11- of the Banks, and satisfactory in form to the Banks, or the Agent or Collateral Agent on behalf of the Banks, of the guarantee given in this Guarantee and the due and punctual performance of all of the covenants and conditions of the Credit Agreement to be performed by such Guarantor, such successor entity or entities shall succeed to and be substituted for such Guarantor, with the same effect as if it or they had been named herein as a Guarantor. No Waiver. No failure to exercise and no delay in exercising, on the part of the Banks, or the Agent or Collateral Agent on behalf of the Banks, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other power or right. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. In the event the Banks, the Agent or the Collateral Agent on behalf of the Banks, shall have instituted any proceeding to enforce any right, power or remedy under this Guarantee by sale or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Banks, the Agent or the Collateral Agent on behalf of the Banks, then and in every such case, the Guarantors, the Banks, the Agent or the Collateral Agent on behalf of the Banks, and each Bank shall be restored to its respective former position and rights hereunder, and all rights, remedies and powers of the Banks, the Agent or the Collateral Agent on behalf of the Banks, shall continue as if no such proceeding had been instituted. Termination. This Guarantee shall terminate and be of no further force and effect, upon the payment and satisfaction of the Guaranteed Obligations. Notices. All notices, demands, instructions or other communications required or permitted to be given to or made upon any party hereto shall be given in accordance with the provisions of the Credit Agreement and at the address either set forth therein or as provided on the signature page hereof. Amendments, Waivers, etc. No provision of this Guarantee shall be waived, amended, terminated or supplemented ______________________________________ Footnote continued from previous page. 101 -12- except by a written instrument executed by such Guarantors and the Agent or Collateral Agent, on behalf of the Banks. Notice of Exercise. Upon exercise of its rights hereunder, the Banks, or the Agent or Collateral Agent on behalf of the Banks, as the case may be, shall provide written notice on the date of such exercise to the Banks, or the Collateral Agent on behalf of the Banks, as the case may be, of such exercise. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. CONSENT TO JURISDICTION AND SERVICE PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR WITH RESPECT TO THIS GUARANTEE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS GUARANTEE EACH OF THE GUARANTORS ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTEE. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND EACH OF THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE GUARANTORS DESIGNATE AND APPOINT AMERICAN TELECASTING INC., WITH AN ADDRESS AT 5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS, COLORADO 80919, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE GUARANTORS IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE GUARANTORS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE GUARANTORS AS PROVIDED IN SECTION 14 HEREOF. IF ANY AGENT APPOINTED BY THE GUARANTORS REFUSES TO ACCEPT SERVICE, THE GUARANTORS HEREBY AGREE THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS ______________________________________ Footnote continued from previous page. 102 -13- IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY BANK TO BRING PROCEEDINGS AGAINST ANY OF THE GUARANTORS IN THE COURTS OF ANY OTHER JURISDICTION. Severability of Provisions. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Headings. The Section headings used in this Guarantee are for convenience of reference only and shall not affect the construction of this Agreement. Future Advances. This Guarantee shall guarantee the payment of any amounts advanced from time to time pursuant to the Credit Agreement. Counterparts. This Guarantee and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. ______________________________________ Footnote continued from previous page. 103 -14- IN WITNESS WHEREOF, the undersigned have caused this Guarantee to be duly executed and delivered by its duly authorized officer on the day and year first above written. AMERICAN TELECASTING DEVELOPMENT INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF ANCHORAGE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF BEND, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF BILLINGS, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 104 -15- AMERICAN TELECASTING OF BISMARK, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF CENTRAL FLORIDA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF CINCINNATI, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF COLORADO SPRINGS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF COLUMBUS, INC. By: ----------------------------------- ______________________________________ Footnote continued from previous page. 105 -16- Name: Title: AMERICAN TELECASTING OF DENVER, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF FORT COLLINS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF FORT MYERS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF GREEN BAY, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF HAWAII, INC. ______________________________________ Footnote continued from previous page. 106 -17- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSON, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSONVILLE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LANSING, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LINCOLN, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 107 -18- AMERICAN TELECASTING OF LITTLE ROCK, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LOUISVILLE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MEDFORD, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MICHIANA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MINNESOTA, INC. ______________________________________ Footnote continued from previous page. 108 -19- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MONTEREY, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF NEBRASKA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF NORTH DAKOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF OKLAHOMA, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 109 -20- AMERICAN TELECASTING OF PORTLAND, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF RAPID CITY INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF REDDING, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF ROCKFORD, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SALEM/EUGENE, INC. By: ----------------------------------- ______________________________________ Footnote continued from previous page. 110 -21- Name: Title: AMERICAN TELECASTING OF SANTA BARBARA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SANTA ROSA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SARASOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SHERIDAN, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SIOUX VALLEY, INC. ______________________________________ Footnote continued from previous page. 111 -22- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SOUTH DAKOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF TOLEDO, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF YOUNGSTOWN, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF YUBA CITY, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 112 -23- FRESNO WIRELESS CABLE TELEVISION, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 113 ______________________________________ EXHIBIT I______________ TO THE CREDIT AGREEMENT MANAGEMENT SUBORDINATION AGREEMENT THIS MANAGEMENT SUBORDINATION AGREEMENT, dated as of February 26, 1997, is by and between American Telecasting, Inc., (the "Subordinated Creditor"), and BANQUE INDOSUEZ, NEW YORK BRANCH, as Agent ("Banque"). WHEREAS, the Subordinated Creditor, Banque, and the banks listed on Annex I thereto (the "Banks") have entered into a Credit Agreement dated as of even date herewith (such Credit Agreement, together with any supplements, restatements, modifications and amendments, is hereinafter referred to as the "Credit Agreement") pursuant to which the Subordinated Creditor has incurred certain monetary obligations to the Banks (the "Senior Debt"); WHEREAS, the Subordinated Creditor has entered into management agreements with each of its Subsidiaries (each such management agreement, an "Operating Agreement" and collectively, the "Operating Agreements") pursuant to which, among other things, the Subordinated Creditor will provide management services to such Subsidiaries in return for management fees and reimbursement for costs and expenses as required by each of their respective Operating Agreements; and WHEREAS, it is a condition under the terms of the Credit Agreement that all payments pursuant to each Operating Agreement be subordinated to the Senior Debt (such payments are hereinafter referred to as the "Subordinated Payments"). NOW, THEREFORE, in consideration of the foregoing and of the premises herein contained, the parties agree as follows: Any capitalized terms not otherwise defined herein shall have the meanings set forth in the Credit Agreement. ______________________________________ Footnote continued from previous page. 114 ______________________________________ The Subordinated Creditor agrees to subordinate and does hereby subordinate, all payments by each of its Subsidiaries of the Subordinated Payments to any payments to the Banks with respect to the Senior Debt and further agrees as follows: except as provided in paragraph 3 hereof, not to accept payment which may be due with respect to, and not to demand, sue for, take or receive all or any part of the Subordinated Payments or any interest thereon, unless and until any and all of the Senior Debt shall have been fully paid and discharged; not to modify, amend or waive any of the terms or conditions of any agreement relating to the Subordinated Payments (including without limitation each of the Operating Agreements) without the prior written consent of Banque; that, except as provided in paragraph 3 hereof, if any payments are made on account of the Subordinated Payments, each and every amount so paid will be forthwith paid to Banque to be credited and applied by Banque as Agent upon the Senior Debt as provided in the Credit Agreement whether matured or unmatured at such time, and until so paid shall hold such payments in segregated amounts and in trust for the benefit of the Banks. that, in the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, or reorganization or other similar proceedings in connection therewith, relating to any Subsidiary of the Subordinated Creditor, or to any of such Subsidiary's respective properties, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of any such Subsidiary, whether or not involving insolvency or bankruptcy, the Banks shall be entitled to receive payment in full of the Senior Debt before the Subordinated Creditor is entitled to receive any payment on account of the Subordinated Payments, and to enable the Banks to assert and enforce their rights hereunder in any such action or proceedings, or upon the happening of any such event, Banque is irrevocably authorized and empowered, in its discretion, as the Subordinated Creditor's attorneys-in-fact or otherwise, to ______________________________________ Footnote continued from previous page. 115 ______________________________________ make and present, for and on behalf of the Subordinated Creditor, such proofs of claim against any such Subsidiary on account of any or all of the Subordinated Payments as it may in good faith deem advisable, and to receive and collect any and all interest or other payments or disbursements made thereon, and to apply the same in its discretion upon the Senior Debt for the benefit of the Banks; that in the event the Subordinated Payments are, or any part thereof is, declared due and payable before maturity because of the existence of default (under circumstances where the provisions of the foregoing clause (d) are not applicable) ("Acceleration") then the Banks shall be entitled to receive payment in full of the Senior Debt before the Subordinated Creditor shall be entitled to receive any payment on account of the Subordinated Payments; not to commence any action or proceeding against any of its Subsidiaries or any of its Subsidiaries' assets to recover all or any part of the Subordinated Payments or exercise any right it may have as a secured party of any of its Subsidiaries with respect to any of its assets or bring or join with any creditor, unless Banque shall also join, on behalf of the Banks, in bringing any proceedings against any such Subsidiary under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of the federal or any state government; not to transfer, assign, encumber or subordinate at any time while this Agreement remains in effect, any right, claim or interest of any kind in or to any of the Subordinated Payments and/or any interest thereon, unless the same is done expressly subject to the terms or provisions of this Agreement; that Banque, on behalf of the Banks, may at any time in its discretion renew or extend the time of payment of all or any exiting or future indebtedness or obligations of any Subsidiary of the Subordinated Creditor to the Banks or waive any rights or release any collateral relative thereto at any time or times, and, with reference thereto, make and enter into such agreements as it may deem proper or desirable without ______________________________________ Footnote continued from previous page. 116 ______________________________________ notice to or further assent of the Subordinated Creditor and all without in any manner impairing or affecting this Agreement or any of the Banks' rights hereunder, and that any collateral security securing such Subordinated Payments shall be expressly made subordinate and junior to any lien in the same collateral securing Senior Debt, and the Subordinated Creditor will promptly file notices or instruments in all appropriate public offices to give public notice of this subordination. Notwithstanding paragraph 2 hereof, each Subsidiary of the Subordinated Creditor may pay to the Subordinated Creditor, and the Subordinated Creditor may retain for itself, current and earned payments (which payments otherwise would constitute Subordinated Payments hereunder) pursuant to the Operating Agreements so long as no Event of Default (or event which with notice or a lapse of time would become an Event of Default) has occurred and is continuing under the Credit Agreement at the time of such payment, or would occur immediately after giving effect to such payment. The Subordinated Creditor hereby represents and warrants to Banque as follows: The Subordinated Creditors (i) is a corporation duly formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation; (ii) has the power and authority to own its assets and to transact the business in which it is now or in which it proposes to be engaged; (iii) and is duly qualified as a foreign entity to do business and is in good standing in all jurisdictions in which any of its activities or the ownership of its properties makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the business or properties of the Subordinated Creditor. The execution, delivery and performance by the Subordinated Creditor of this Agreement has been duly authorized by all necessary corporate actions and does not and will not: (i) require any consent or approval of each of the ______________________________________ Footnote continued from previous page. 117 ______________________________________ Subordinated Creditor's board of directors or shareholders or any other person that has not been obtained; (ii) conflict with, or result in the breach of, or constitute a default under, any of the terms, conditions or provisions of (A) the Subordinated Creditor's certificate of incorporation or by-laws, (B) any law or any regulation applicable to the Subordinated Creditor, (C) any order, writ, injunction or decree of any court or governmental instrumentality applicable to the Subordinated Creditor, (D) any agreement or instrument to which the Subordinated Creditors is subject, which conflict, breach or default would have a material adverse effect on the business or properties of the Subordinated Creditor or the ability of the Subordinated Creditor to execute, deliver or perform this Agreement, or (iii) result in the creation or imposition of any Lien (other than in favor of the Banks) upon the Subordinated Creditor's properties or assets pursuant to the terms of any such agreement or instrument or otherwise. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body is required for the due execution, delivery and performance by the Subordinated Creditor of this Agreement. This Agreement is a legal, valid and binding obligation of the Subordinated Creditor, enforceable against the Subordinated Creditor in accordance with its terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. There is no action, suit or proceeding pending or, to the knowledge of the Subordinated Creditor, threatened against or otherwise affecting the Subordinated Creditor before any court or other governmental instrumentality or any arbitrator which would, in any one case or in the aggregate, materially adversely affect the ability of the Subordinated Creditor to perform its obligations under this Agreement. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing or by telecopier (fax) and, unless otherwise expressly provided ______________________________________ Footnote continued from previous page. 118 ______________________________________ herein, shall be deemed to have been duly given or made when delivered by hand, or five (5) days after deposited in the mail, air postage prepaid, or in the case of notice by telecopier (fax) when confirmed, addressed as follows or to such other address as may be hereafter notified by the respective parties to this Agreement: If to the Subordinated Creditor: American Telecasting, Inc. 5575 Tech Center Drive, Suite 300 Colorado Springs, CO 80914 Attention: President With a copy to: McDermott, Will & Emery 1850 K Street, N.W., Suite 450 Washington, D.C. 20006 Attention: Robert Jensen, Esq and Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue, 35th Floor New York, NY 10022 Attention: Randall Doud, Esq. If to the Banks: Banque Indosuez, New York Branch 1211 Avenue of the Americas New York, New York 10036 ______________________________________ Footnote continued from previous page. 119 ______________________________________ Attention: Michael Arougheti Telecopier (fax) no.: (212) 278-2203 (212) 278-2000 With a copy to: William B. Gannett, Esq. Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Telecopier (fax) no.: (212) 269-5420 (212) 701-3000 THE SUBORDINATED CREDITOR HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND OF THE SUBORDINATED CREDITOR HERBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURT. THE SUBORDINATED CREDITOR WAIVES ANY OBJECTION TO ANY ACTION OR PROCEEDING IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY ON THE BASIS OF FORUM NON CONVENIENS. THE SUBORDINATED CREDITOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY. THE SUBORDINATED CREDITOR HEREBY WAIVES PERSONAL SERVICE OF ANY PROCESS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE SUBORDINATED CREDITOR AT THE ADDRESS SET FORTH IN SECTION 5. THE SUBORDINATED CREDITOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE FOR PURPOSES OF ENFORCEMENT IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE SUBORDINATED CREDITORS FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST BANQUE OR THE BANKS SHALL BE BROUGHT ONLY IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY. NOTHING IN THIS PARAGRAPH 6 SHALL AFFECT THE RIGHT OF THE BANKS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANKS TO BRING ANY ACTION OR PROCEEDING AGAINST ANY SUBORDINATED CREDITOR OR THE PROPERTY OF THE SUBORDINATED CREDITOR IN THE COURTS OF ANY OTHER JURISDICTION. ______________________________________ Footnote continued from previous page. 120 ______________________________________ This is a continuing agreement and shall remain in full force and effect and be binding upon parties hereto and their successors and assigns until the Senior Debt has been satisfied. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICT OF LAWS. No modification or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the parties agreeing to such waiver or modification. Any such waiver shall be effective only in the specific instance and for the purpose for which given. Provisions of this Agreement are solely for the purpose of defining the relative rights of Banque, the Banks and the Subordinated Creditors and nothing herein shall impair any obligations of any Subsidiary of the Subordinated Creditor to the parties hereto nor affect or impair the rights of any party relative to those of other creditors of any Subsidiary of the Subordinated Creditor, nor shall anything herein prevent either party from exercising all remedies otherwise permitted by law or hereunder, subject to the relative rights of the parties expressed herein. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same Agreement. ______________________________________ Footnote continued from previous page. 121 ______________________________________ IN WITNESS WHEREOF, each party, by its proper officer duly authorized, has executed this Agreement as of the date and year first above written. AMERICAN TELECASTING DEVELOPMENT INC. By: ----------------------------------- Name: Title: BANQUE INDOSUEZ, NEW YORK BRANCH By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 122 -10- The undersigned, on behalf of each of Subsidiary of the Subordinated Creditor, hereby accept the terms hereof and agree to take any action requested by the parties hereto in accordance with or in furtherance of the terms hereof. AMERICAN TELECASTING DEVELOPMENT INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF ANCHORAGE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF BEND, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF BILLINGS, INC. By: ----------------------------------- Name: ______________________________________ Footnote continued from previous page. 123 -11- Title: AMERICAN TELECASTING OF BISMARK, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF CENTRAL FLORIDA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF CINCINNATI, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF COLORADO SPRINGS, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 124 -12- AMERICAN TELECASTING OF COLUMBUS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF DENVER, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF FORT COLLINS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF FORT MYERS, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF GREEN BAY, INC. ______________________________________ Footnote continued from previous page. 125 -13- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF HAWAII, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSON, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSONVILLE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LANSING, INC. By: ----------------------------------- Name: ______________________________________ Footnote continued from previous page. 126 -14- Title: AMERICAN TELECASTING OF LINCOLN, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LITTLE ROCK, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF LOUISVILLE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MEDFORD, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 127 -15- AMERICAN TELECASTING OF MICHIANA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MINNESOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF MONTEREY, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF NEBRASKA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF NORTH DAKOTA, INC. ______________________________________ Footnote continued from previous page. 128 -16- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF OKLAHOMA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF PORTLAND, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF RAPID CITY INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF REDDING, INC. By: ----------------------------------- Name: ______________________________________ Footnote continued from previous page. 129 -17- Title: AMERICAN TELECASTING OF ROCKFORD, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SALEM/EUGENE, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SANTA BARBARA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SANTA ROSA, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 130 -18- AMERICAN TELECASTING OF SARASOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SHERIDAN, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SIOUX VALLEY, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF SOUTH DAKOTA, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF TOLEDO, INC. ______________________________________ Footnote continued from previous page. 131 -19- By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF YOUNGSTOWN, INC. By: ----------------------------------- Name: Title: AMERICAN TELECASTING OF YUBA CITY, INC. By: ----------------------------------- Name: Title: FRESNO WIRELESS CABLE TELEVISION, INC. By: ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 132 ______________________________________ THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. OPTION AGREEMENT THIS OPTION AGREEMENT (the "Agreement"), dated as of February 26, 1997, is made and entered into by and among AMERICAN TELECASTING, INC., a Delaware corporation (the "Company"), and the holder listed on the signature page hereto (collectively, together with its assigns, the "Holder"). WHEREAS, as partial consideration for the commitment of Banque Indosuez (the "Bank") to make a loan to the Company pursuant to the Credit Agreement dated as of February 25, 1997 by and among the Company, Banque Indosuez, New York Branch, as Agent and Collateral Agent, and the lending institutions named therein (the "Credit Agreement"), the Company has agreed to issue to the Bank and its affiliates, 141,667 Warrants to Purchase $6.00 principal amount of Loan ("Debt Warrants") and 141,667 Warrants to Purchase shares of Class A Common Stock of the Company ("Equity Warrants") on the date hereof; and WHEREAS, the parties hereto agree that no more than an aggregate of 141,667 Debt Warrants and Equity Warrants shall ever become exercisable; NOW, THEREFORE, in consideration of the mutual premises, agreements and covenants hereinafter set forth, the parties hereto agree as follows: ARTICLE ______________________________________ Footnote continued from previous page. 133 ______________________________________ Option Upon the earlier to occur of (i) the Holder receiving the notice referred to in Article II hereof and (ii) one year from the date hereof, the Holder shall have the right, for a 5-day period, to exercise or put to the Company the Debt Warrants attached hereto as Exhibit A. If the Holder elects not to exercise or put the Debt Warrants during such period, or elects to exercise or put such Warrants only in part, or, in the event the Holder elects to put the Debt Warrants and the Company fails to make payment therefor within the time specified for such payment in the Debt Warrant, the Equity Warrant attached hereto as Exhibit B shall become fully exercisable; provided if the Debt Warrants are exercised in part, the number of Equity Warrants shall be reduced by the number of Debt Warrants so exercised or put to the Company and which the Company has satisfied in accordance with its terms. The Holder shall surrender the portion of the Equity Warrant reduced by the proviso in the preceding sentence after the applicable portion of the Debt Warrant is exercised or after the Debt Warrant is put to the Company and the Holder receives the applicable amount in cash. ARTICLE Covenants The Company agrees to give the Holder at least one Business Day's notice of any prepayment in full of, and termination of the Credit Agreement. ARTICLE ______________________________________ Footnote continued from previous page. 134 ______________________________________ Representations and Warranties of the Company The Company represents and warrants to the Holders as of the date of this Agreement as follows: () Due Authorization. The execution, delivery and performance of this Agreement by the Company has been duly authorized by all requisite action. () Binding Obligation. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. () No Violation. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated herein, by the Company does not violate any provision of law, any order of any court or other agency of government, any organizational document of the Company or any provision of any material indenture, agreement or other instrument to which the Company or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company which violation, conflict, breach or default or lien, charge, restriction or encumbrance would have a material adverse effect on the business, condition (financial or otherwise) of the Company taken as a whole. () Government Action. No action has been taken and no statute, rule or regulation or order has been enacted, no injunction, restraining order or order of any nature has been issued by a federal or state court of competent jurisdiction and no action, suit or proceeding is pending against or affecting or threatened against, the Company before any court or arbitrator or any governmental body, ______________________________________ Footnote continued from previous page. 135 ______________________________________ agency or official which, if adversely determined, would in any manner draw into question the validity of this Agreement. Other than filings required with the Commission and under state securities laws, no action or approval by, or filing or registration with, any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement by the Company. ARTICLE Investment Representation The Holder represents that it is purchasing this Option, the Debt Warrants and the Equity Warrants for its own account, for investment, and does not have a view to, or the purpose of, transferring, reselling, or otherwise disposing of this Option, the Debt Warrants or the Equity Warrants. ARTICLE Miscellaneous SECTION . Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall be effective upon delivery in person, faxed or telecopied, addressed as follows: () if to the Company, 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919, Attention: President; with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, ______________________________________ Footnote continued from previous page. 136 ______________________________________ N.W., Suite 450, Washington, D.C. 20006-2296, Washington, DC 20006-2296, Attention: Robert Jensen, Esq.; () if to the Holder, at such address as may have been furnished to the Company in writing by the Holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a Holder) or to the Holder (in the case of the Company) in accordance with the provisions of this paragraph. SECTION . Waivers; Amendments. No failure or delay of the Holder or the Company in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Holder and the Company are cumulative and not exclusive of any rights or remedies which it would otherwise have. The provisions of this Agreement may be amended, modified or waived with (and only with) the written consent of the Company and the Holder. No notice or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. SECTION . Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflicts of law. SECTION . Survival of Agreements; Representations and Warranties, etc. All warranties, representations and covenants made by the Company herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Holder and shall continue in full force and effect so long as this Agreement is in effect regardless of any investigation made by the Holder. All statements in any such certificate or other instrument shall constitute representations and warranties hereunder. ______________________________________ Footnote continued from previous page. 137 ______________________________________ SECTION . Covenants to Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Agreement contained by or on behalf of the parties hereto shall bind their successors and assigns, whether so expressed or not. The Company shall not be required to register any transfers if the Holder fails to furnish to the Company, after a request therefor, an opinion of counsel reasonably satisfactory to the Company that such transfer is exempt from the registration requirements of the Securities Act; provided that the Company agrees not to request an opinion of counsel with respect to transfers by an affiliate of Banque Indosuez to its employees so long as such persons furnish documentation regarding the evidence of such exemption reasonably satisfactory to the Company. SECTION . Severability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION . Section Headings. The section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of or be taken into consideration in interpreting this Agreement. SECTION . Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. SECTION . Complete Agreement. This document and the documents referred to herein contain the complete agreement between the parties and supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way, and any other agreements or understandings among the parties hereto are hereby terminated. ______________________________________ Footnote continued from previous page. 138 ______________________________________ SECTION . Submission to Jurisdiction; Venue. () Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, the Company hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to CT Corporation Systems at its address at 1633 Broadway, New York, New York 10019, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. () The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. ______________________________________ Footnote continued from previous page. 139 ______________________________________ IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first set forth above. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: HOLDER: INDOSUEZ CM II, INC. By: /s/ INDOSUEZ CM II, INC. ------------------------- By: ------------------------- ______________________________________ Footnote continued from previous page. 140 ______________________________________ Exhibit A to Option Agreement THIS DEBT WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS DEBT WARRANT IS SUBJECT TO AN OPTION AGREEMENT, DATED AS OF FEBRUARY 26, 1997, BY AND AMONG THE COMPANY AND THE HOLDER THEREOF. Dated: February 26, 1997 141,667 DEBT WARRANTS Each Debt Debt Warrant to Purchase $6.00 Principal Amount of Loan AMERICAN TELECASTING, INC. EXPIRING March 2, 1998. THIS IS TO CERTIFY THAT, for value received, INDOSUEZ CM II, INC., or registered assigns (the "Holder") is entitled to purchase from AMERICAN TELECASTING, INC., a Delaware corporation (the "Company"), at any time from time to time during the Exercise Period at the Exercise Price (as hereinafter defined) $6.00 principal amount of Loans (as ______________________________________ Footnote continued from previous page. 141 ______________________________________ defined in the Credit Agreement ("Credit Agreement") dated as of February 25, 1997 by and among Banque Indosuez, New York Branch, as Agent and Collateral Agent, the lending institutions a party thereto, and the Company) per Debt Debt Warrant, and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter described, subject to the terms of the Option Agreement. This Debt Debt Warrant is exercisable or puttable during a 5-day period (the "Exercise Period") commencing on the earlier of (i) the Holder having received notice that payment in full of all amounts outstanding under, and the termination of, the Credit Agreement had occurred or that the Company has irrevocably committed to cause such event to occur within 5 Business Days, and (ii) one year from the date of issuance of this Debt Debt Warrant. This Debt Debt Warrant is one of one or more warrants (the "Debt Debt Warrants") of the same form and having the same terms as this Debt Debt Warrant. Certain terms used in this Debt Debt Warrant are defined in Article IV. ARTICLE EXERCISE OF DEBT WARRANTS .. Method of Exercise. To exercise this Debt Debt Warrant in whole or in part, the Holder shall deliver to the Company (a) this Debt Debt Warrant and (b) a written notice, in substantially the form of the Subscription Notice attached hereto, of such Holder's election to exercise this Debt Debt Warrant, which notice shall specify the number of Debt Debt Warrants to be exercised. The Company shall, as promptly as practicable and in any event within one Business Day thereafter, execute and deliver or cause to be executed and delivered, in accordance with such notice, a Note (as defined in the Credit Agreement) in the principal amount equal to the amount specified in said ______________________________________ Footnote continued from previous page. 142 ______________________________________ notice. The Note so delivered shall be specified in such notice in the principal amount equal to the amount, and shall be issued in the name of the Holder or such other name or names as shall be designated in such notice. In no event shall the Company be required to deliver a Note representing the Loan if at the time of such exercise the issuance of such Note or Loan is prohibited by any agreement to which the Company is a party and, in such event, the put feature in Section 3.1 shall be deemed automatically exercised by the Holder. ARTICLE EXCHANGE AND REPLACEMENT OF DEBT WARRANTS .. Ownership of Debt Debt Warrant. The Company may deem and treat the Person in whose name this Debt Debt Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by any Person) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Debt Debt Warrant for registration of transfer as provided in this Article II. .. Division or Combination of Debt Debt Warrants. This Debt Debt Warrant may be divided or combined with other Debt Debt Warrants upon surrender hereof and of any Debt Debt Warrant or Debt Debt Warrants with which this Debt Debt Warrant is to be combined at the agency selected by the Company for such purpose (which may be its corporate headquarters), together with a written notice specifying the names and denominations in which the new Debt Debt Warrant or Debt Debt Warrants are to be issued, signed by the holders hereof and thereof or their respective duly authorized agents or attorneys. Subject to compliance with the provisions of the Option Agreement dated as of the date of initial issuance ______________________________________ Footnote continued from previous page. 143 ______________________________________ of this Debt Debt Warrant, the Company shall execute and deliver a new Debt Debt Warrant or Debt Debt Warrants in exchange for the Debt Debt Warrant or Debt Debt Warrants to be divided or combined in accordance with such notice. .. Loss, Theft, Destruction or Mutilation of Debt Debt Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Debt Debt Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of such Debt Debt Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Debt Debt Warrant, a new Debt Debt Warrant of like tenor and representing the right to purchase the same aggregate principal amount of Loan as provided for in such lost, stolen, destroyed or mutilated Debt Debt Warrant. .. Expenses of Delivery of Debt Debt Warrants. The Company shall pay all expenses, taxes (other than transfer taxes or income taxes of a Holder) and other charges payable in connection with the preparation, issuance and delivery of Debt Debt Warrants and the Loan issuable upon exercise of the Debt Debt Warrants hereunder. ARTICLE CERTAIN RIGHTS .. Put Right. At any time during the Exchange Period, in lieu of exercising this Debt Debt Warrant the Holder of this Debt Debt Warrant may put (a "Put") this Debt Debt Warrant to the Company, in whole or in part, for a net put price (the "Put Amount") of $6.00 per Debt Debt Warrant, in cash, by delivering to the Company, at its corporate headquarters, this Debt Debt Warrant and a written notice, substantially in the form of the Put Notice attached hereto, ______________________________________ Footnote continued from previous page. 144 ______________________________________ which notice shall specify the number of Debt Debt Warrants to be put and the wire transfer instructions as to which account the Company shall wire the aggregate Put Amount in same day funds. The Company shall make such transfer within five Business Day of receipt of such Put Notice. .. Certain Representations and Covenants. Information. () The Company covenants and agrees that, until exercise or termination of this Debt Debt Warrant, the Company will deliver to each Holder: () As soon as available but not later than ninety (90) days after the close of the fiscal year of the Company, a consolidated balance sheet of the Company as at the end of such year and the related consolidated and consolidating statements of income, of stockholders' equity and of cash flows for such year, such consolidated statements to be audited by Arthur Andersen LLP or other "Big Six" accounting firm; () As soon as available but not later than forty-five (45) days after the end of each quarter, a consolidated balance sheet of the Company as at the end of, and the related consolidated statements of income, of stockholders' equity and of cash flows for the portion of the Company's fiscal year then elapsed, all prepared in accordance with generally accepted accounting principles; () As soon as available, any and all management letters provided to the Company's board of directors or audit committee by the Company's auditors; () As soon as available, any and all reports filed by the Company under the Securities Act and the Exchange Act; and () As soon as available, any and all press releases of the Company. () Prohibition on Payment. The Company is not a party to any agreement which would restrict the Company's ______________________________________ Footnote continued from previous page. 145 ______________________________________ ability to pay the aggregate maximum Put Amount in cash. The Company agrees that it will not, without the consent of the Holders of a majority of the Debt Debt Warrants at the time then outstanding, enter into any agreement or amend any existing agreement which would prohibit or otherwise limit the Company's ability to make cash payments upon exercise of any Put or restrict the Holder's ability to exercise this Debt Debt Warrant. ARTICLE DEFINITIONS The following terms, as used in this Debt Debt Warrant, have the following respective meanings: "Business Day" shall mean (a) if any class of Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which such class of Common Stock is listed or admitted to trading is open for business or (b) if no class of Common Stock is so listed or admitted to trading, a day on which any New York Stock Exchange member firm is open for business. "Company" shall have the meaning set forth in the first paragraph of this Debt Debt Warrant. "Debt Debt Warrants" shall have the meaning set forth in the first paragraph of this Debt Debt Warrant. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any similar or successor federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time. ______________________________________ Footnote continued from previous page. 146 ______________________________________ "Exercise Price" shall mean $.01 per $1,000 principal amount of Loan. "Holder" shall have the meaning set forth in the first paragraph of this Debt Debt Warrant. "Debt Warrantholder" means a holder of a Debt Warrant. ARTICLE MISCELLANEOUS .. Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall be effective upon delivery in person, faxed, or mailed by certified or registered mail, return receipt requested, postage pre-paid, addressed as follows: () if to the Company, to 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919, Attention: President; with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, N.W., Suite 450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.; () if to an initial Holder of Debt Debt Warrants, to such Holder c/o Banque Indosuez, New York Branch, at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, with a copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: William B. Gannett, Esq., and if to any subsequent Holder of Debt Debt Warrants, to it at such address as may have been furnished to the Company in writing by such Holder; ______________________________________ Footnote continued from previous page. 147 ______________________________________ or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Debt Debt Warrants) or to the Holders of Debt Debt Warrants (in the case of the Company) in accordance with the provisions of this paragraph. .. Waivers; Amendments. No failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Holder are cumulative and not exclusive of any rights or remedies which it would otherwise have. The provisions of this Debt Debt Warrant may be amended, modified or waived with (and only with) the written consent of the Company and the Holders of a majority of the Debt Warrants; provided, however, that no such amendment, modification or waiver shall, without the written consent of each Debt Warrantholder whose interest might be adversely affected by such amendment, modification or waiver, (a) change the principal amount of Loan subject to issuance upon exercise of this Debt Debt Warrant, the Put Amount or provisions for payment thereof or (b) amend, modify or waive the provisions of this Section or Article III. Any such amendment, modification or waiver effected pursuant to this Section shall be binding upon the holders of all Debt Debt Warrants, upon each future holder thereof and upon the Company. In the event of any such amendment, modification or waiver the Company shall give prompt notice thereof to all Debt Warrantholders and, if appropriate, notation thereof shall be made on all Debt Debt Warrants thereafter surrendered for registration of transfer or exchange. No notice or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. .. Governing Law. This Debt Debt Warrant shall be construed in accordance with and governed by the laws of the ______________________________________ Footnote continued from previous page. 148 ______________________________________ State of New York without regard to principles of conflicts of law. .. Survival of Agreements; Representations and Debt Debt Warranties etc. All representations, warranties and covenants made by the Company herein or in any certificate or other instrument delivered by or on behalf of it in connection with the Debt Debt Warrants shall be considered to have been relied upon by the Holder and shall survive the issuance and delivery of the Debt Debt Warrants, regardless of any investigation made by the Holder, and shall continue in full force and effect so long as any Debt Debt Warrant is outstanding. All statements in any such certificate or other instrument shall constitute representations and warranties hereunder. .. Covenants to Bind Successor and Assigns. All covenants, stipulations, promises and agreements in this Debt Debt Warrant contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. .. Severability. In case any one or more of the provisions contained in this Debt Debt Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. .. Section Headings. The section headings used herein are for convenience of reference only, are not part of this Debt Debt Warrant and are not to affect the construction of or be taken into consideration in interpreting this Debt Debt Warrant. .. No Rights as Stockholder. This Debt Debt Warrant shall not entitle the Holder to any rights as a stockholder of the Company. ______________________________________ Footnote continued from previous page. 149 ______________________________________ .. No Impairment. The Company shall not by any action including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debt Debt Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will use its commercially reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Debt Debt Warrant. .. Submission to Jurisdiction; Venue. () Any legal action or proceeding with respect to this Debt Debt Warrant may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Debt Debt Warrant, the Company irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to CT Corporation Systems at its address at 1633 Broadway, New York, New York 10019, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. () The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Debt Debt Warrant brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. ______________________________________ Footnote continued from previous page. 150 -12- IN WITNESS WHEREOF, AMERICAN TELECASTING, INC. has caused this Debt Debt Warrant to be executed in its corporate name by one of its officers thereunto duly authorized, and attested by its Secretary or an Assistant Secretary, all as of the day and year first above written. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: Attest: - ------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 151 -13- SUBSCRIPTION NOTICE (To be executed upon exercise of Debt Debt Warrant) TO AMERICAN TELECASTING, INC.: The undersigned hereby irrevocably elects to exercise _______________ of the Debt Debt Warrants for, and to acquire thereunder, _________________ principal amount of Loan. Please issue the Note evidencing such Loan in the following name or names and denominations: Dated: _____________, 19__ _______________________________________________ Note: The above signature should correspond exactly with the name on the face of the attached Debt Debt Warrant or with the name of the assignee appearing in the attached assignment form. ______________________________________ Footnote continued from previous page. 152 -14- PUT NOTICE (To be executed upon put of Debt Debt Warrant) TO AMERICAN TELECASTING, INC.: The undersigned hereby irrevocably elects to put __________ of the Debt Debt Warrants represented by the attached Debt Debt Warrant for payment of an aggregate Put Amount of $________, as provided in the attached Debt Debt Warrant. Payment of the aggregate Put Amount should be made in same-day funds to the following account: Dated: _____________, 19__ _______________________________________________ Note: The above signature should correspond exactly with the name on the face of the attached Debt Debt Warrant or with the name of the assignee appearing in the attached assignment form. ______________________________________ Footnote continued from previous page. 153 -15- ASSIGNMENT (To be executed upon assignment of Debt Debt Warrant) For value received, ______________________________ hereby sells, assigns and transfers unto __________________ the attached Debt Debt Warrant, together with all rights, title and interest therein, and does hereby irrevocably constitute and appoint _________________ attorney to transfer said Debt Debt Warrant on the books of American Telecasting, Inc., with full power of substitution in the premises. _______________________________________________ Note: The above signature should correspond exactly with the name on the face of the attached Debt Debt Warrant. ______________________________________ Footnote continued from previous page. 154 ______________________________________ Exhibit B to Option Agreement THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF THE HOLDER) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF FEBRUARY 26, 1997, BY AND AMONG THE COMPANY AND THE OTHER PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE. THIS WARRANT IS ALSO SUBJECT TO AN OPTION AGREEMENT, DATED AS OF FEBRUARY 26, 1997, BY AND AMONG THE COMPANY AND THE HOLDER THEREOF. Dated: February 26, 1997 141,667 WARRANTS To Purchase One Share of Class A Common Stock AMERICAN TELECASTING, INC. EXPIRING FEBRUARY 26, 2007. THIS IS TO CERTIFY THAT, for value received, INDOSUEZ CM_II, INC. or registered assigns (the "Holder") is entitled to purchase from AMERICAN TELECASTING, INC., a Delaware corporation (the "Company"), at any time or from time to time ______________________________________ Footnote continued from previous page. 155 ______________________________________ after the Exercise Period (as hereinafter defined) has expired and prior to 5:00 p.m., New York City time, on February 25, 2007 at the place where a Warrant Agency (as hereinafter defined) is located, at the Exercise Price (as hereinafter defined), the number of shares of Class A Common Stock, par value $0.01 per share (the "Common Stock"), of the Company shown above, all subject to adjustment and upon the terms and conditions as hereinafter provided, and is entitled also to exercise the other appurtenant rights, powers and privileges hereinafter described. This Warrant is also subject to adjustment pursuant to the Option Agreement (as hereinafter defined). This Warrant is one of one or more warrants (the "Warrants") of the same form and having the same terms as this Warrant. Certain terms used in this Warrant are defined in Article V. ARTICLE EXERCISE OF WARRANTS .. Method of Exercise. To exercise this Warrant in whole or in part, the Holder shall deliver to the Company, at the Warrant Agency, (a) this Warrant, (b) a written notice, in substantially the form of the Subscription Notice attached hereto, of such Holder's election to exercise this Warrant, which notice shall specify the number of shares of Common Stock to be purchased, the denominations of the share certificate or certificates desired and the name or names in which such certificates are to be registered, and (c) payment of the Exercise Price with respect to such shares. Notwithstanding the foregoing, this Warrant shall be exercisable only, to the extent and at the time or times, that the Holder could legally take possession and title of such shares. Payment made pursuant to clause (c) above may be made, at the option of the Holder: (x) by cash, money order, certified or bank cashier's check or wire transfer or (y) the delivery of a notice to the Company that the Holder is exercising this Warrant by ______________________________________ Footnote continued from previous page. 156 ______________________________________ authorizing the Company to reduce the number of shares of Common Stock subject to this Warrant by the number of shares having an aggregate value equal to the aggregate Exercise Price. The Company shall, as promptly as practicable and in any event within three Business Days thereafter, execute and deliver or cause to be executed and delivered, in accordance with such notice, a certificate or certificates representing the aggregate number and type of shares of Common Stock specified in said notice. The share certificate or certificates so delivered shall be in such denominations as may be specified in such notice or, if such notice shall not specify denominations, shall be in the amount of the number of shares of Common Stock for which the Warrant is being exercised, and shall be issued in the name of the Holder or such other name or names as shall be designated in such notice. Such certificate or certificates shall be deemed to have been issued, and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a holder of record of such shares, as of the date the aforementioned notice is received by the Company. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificate or certificates, deliver to the Holder a new Warrant evidencing the rights to purchase the remaining shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant which shall then be returned to the Holder. The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of share certificates and new Warrants, except that, if share certificates or new Warrants shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all transfer taxes payable as a result of such transfer shall be paid by the Holder at the time of delivering the aforementioned notice of exercise or promptly upon receipt of a written request of the Company for payment. .. Shares To Be Fully Paid and Nonassessable. All shares of Common Stock issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable and free from all preemptive rights of any stockholder, and from all taxes, liens and charges with respect to the issue ______________________________________ Footnote continued from previous page. 157 ______________________________________ thereof (other than transfer taxes) and, if the Common Stock is then listed on any national securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ, be duly listed or quoted thereon, as the case may be. .. No Fractional Shares To Be Issued. The Company shall not be required to issue fractions of shares of Common Stock upon exercise of this Warrant. If any fraction of a share would, but for this Section, be issuable upon any exercise of this Warrant, and if the Company shall have elected not to issue such fraction of a share, in lieu of such fractional share the Company shall pay to the Holder, in cash, an amount equal to such fraction of the Fair Market Value per share of outstanding Common Stock of the Company on the Business Day immediately prior to the date of such exercise. .. Share Legend. Each certificate for shares of Common Stock issued upon exercise of this Warrant, unless at the time of exercise such shares are registered under the Securities Act, shall bear the following legend: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR. THIS SECURITY IS BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF FEBRUARY 25, 1997, BY AND AMONG THE COMPANY AND THE OTHER PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE." Any certificate issued at any time in exchange or substitution for any certificate bearing such legend (except a new certificate issued upon completion of a public distribution ______________________________________ Footnote continued from previous page. 158 ______________________________________ pursuant to a registration statement under the Securities Act) shall also bear such legend unless, in the opinion of counsel selected by the holder of such certificate (who may be an employee of such holder) reasonably satisfactory to the Company, the securities represented thereby are no longer subject to restrictions on resale under the Securities Act. .. Reservation; Authorization. The Company has reserved and will keep available for issuance upon exercise of the Warrants the total number of shares of Common Stock deliverable upon exercise of all Warrants from time to time outstanding. The issuance of such shares has been duly and validly authorized and, when issued and sold in accordance with the Warrants, such shares will be duly and validly issued, fully paid and nonassessable. ARTICLE WARRANT AGENCY; TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS .. Warrant Agency. If the Requisite Holders shall request appointment of an independent warrant agency with respect to the Warrants, the Company shall promptly appoint and thereafter maintain, at its own expense, an agency, which agency may be the Company's then existing transfer agent (the "Warrant Agency"), for certain purposes specified herein, and shall give prompt notice of such appointment (and appointment of any successor Warrant Agency) to all holders of Warrants. Until an independent Warrant Agency is so appointed, the Company shall perform the obligations of the Warrant Agency provided herein at its address at _______________________________ or such other address as the Company shall specify by notice to all Warrantholders. ______________________________________ Footnote continued from previous page. 159 ______________________________________ .. Ownership of Warrant. The Company may deem and treat the Person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by any Person other than the Warrant Agency) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer as provided in this Article II. .. Transfer of Warrant. The Company agrees to maintain at the Warrant Agency books for the registration of transfers of the Warrants, and transfer of this Warrant and all rights hereunder shall be registered, in whole or in part, on such books, upon surrender of this Warrant at the Warrant Agency, together with a written assignment of this Warrant duly executed by the Holder or his duly authorized agent or attorney, with (unless the Holder is the original Warrantholder) signatures guaranteed by a bank or trust company or a broker or dealer registered with the NASD, and funds sufficient to pay any transfer taxes payable upon such transfer. Upon surrender the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in the instrument of assignment, and this Warrant shall promptly be cancelled. Notwithstanding the foregoing, a Warrant may be exercised by a new holder in accordance with the procedures set forth herein without having a new Warrant issued. The Warrant Agency shall not be required to register any transfers if the Holder fails to furnish to the Company, after a request therefor, an opinion of counsel reasonably satisfactory to the Company that such transfer is exempt from the registration requirements of the Securities Act; provided that the Company agrees not to request an opinion of counsel with respect to transfers by an affiliate of Banque Indosuez to its employees so long as such persons furnish documentation reasonably satisfactory to the Company. .. Division or Combination of Warrants. This Warrant may be divided or combined with other Warrants upon surrender hereof and of any Warrant or Warrants with which this Warrant is to be combined at the Warrant Agency, together with a written notice specifying the names and denominations in which the new Warrant or Warrants are to be issued, signed by the holders hereof and thereof or their respective duly authorized agents or attorneys. Subject to compliance with Section 2.3 as to any transfer which may be involved in the ______________________________________ Footnote continued from previous page. 160 ______________________________________ division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. .. Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company (the original Warrantholder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of any Warrant owned by such holder), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock as provided for in such lost, stolen, destroyed or mutilated Warrant. .. Expenses of Delivery of Warrants. The Company shall pay all expenses, taxes (other than transfer taxes or income taxes of a Holder) and other charges payable in connection with the preparation, issuance and delivery of Warrants and shares issuable upon exercise of the Warrants hereunder. ARTICLE CERTAIN RIGHTS .. Registration Rights. The Common Stock issuable upon exercise of this Warrant is entitled to the benefits of the Registration Rights Agreement dated as of February 25, 1997, by and among the Company and the other parties listed therein (the "Registration Rights Agreement"). The Company shall keep a copy of the Registration Rights ______________________________________ Footnote continued from previous page. 161 ______________________________________ Agreement, and any amendments thereto, at the Warrant Agency and shall furnish copies thereof to the Holder upon request. .. Contest and Appraisal Rights. Upon each determination of Fair Market Value hereunder (other than a determination relating solely to setting the value of fractional shares), the Company shall promptly give notice thereof to all Warrantholders, setting forth in reasonable detail the calculation of such Fair Market Value and the method and basis of determination thereof, as the case may be. If the Requisite Holders shall disagree with such determination and shall, by notice to the Company given within 30 days after the Company's notice of such determination, elect to dispute such determination, such dispute shall be resolved in accordance with this Section 3.2. In the event that a determination of Market Price, or a determination of Fair Market Value solely involving Market Price, is disputed, such dispute shall be submitted, at the Company's expense, to a New York Stock Exchange member firm selected by the Company and acceptable to the Warrantholders, whose determination of Fair Market Value and/or Market Price, as the case may be, shall be binding on the Company and the Warrantholders. In the event that a determination of Fair Market Value, other than a determination solely involving Market Price, is disputed, such dispute shall be resolved through the Appraisal Procedure. .. Certain Covenants. The Company covenants and agrees that, until exercise or cancellation of this Warrant, the Company will deliver to each Holder: () As soon as available but not later than ninety (90) days after the close of the fiscal year of the Company, a consolidated balance sheet of the Company as at the end of such year and the related consolidated and consolidating statements of income, of stockholders' equity and of cash flows for such year, such consolidated statements to be audited by Arthur Andersen LLP or other "Big Six" accounting firm; () As soon as available but not later than forty-five (45) days after the end of each quarter, a consolidated balance sheet of the Company as at the end of, and the related consolidated statements of income, of stockholders' equity and of cash flows for the portion of the Company's fiscal year then ______________________________________ Footnote continued from previous page. 162 ______________________________________ elapsed, all prepared in accordance with generally accepted accounting principles; () As soon as available, any and all management letters provided to the Company's board of directors or audit committee by the Company's auditors; () As soon as available, any and all reports filed by the Company under the Securities Act and the Exchange Act; and () As soon as available, any and all press releases of the Company. ARTICLE ANTIDILUTION PROVISIONS .. Adjustments Generally. The Exercise Price and the number of shares of Common Stock (or other securities or property) issuable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events, as provided in this Article IV. .. Common Stock Reorganization. If the Company shall after the date of issuance of this Warrant subdivide its outstanding shares of Common Stock into a greater number of shares or consolidate its outstanding shares of Common Stock into a smaller number of shares (any such event being called a "Common Stock Reorganization"), then (a) the Exercise Price shall be adjusted, effective immediately after the record date at which the holders of shares of Common Stock are determined for purposes of such Common Stock Reorganization, to a price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Common ______________________________________ Footnote continued from previous page. 163 ______________________________________ Stock outstanding on such record date before giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such Common Stock Reorganization, and (b) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be adjusted, effective at such time, to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Common Stock Reorganization by a fraction, the numerator of which shall be the number of shares outstanding after giving effect to such Common Stock Reorganization and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such Common Stock Reorganization. .. Common Stock Distribution. () If the Company shall after the date of issuance of this Warrant issue or otherwise sell or distribute any shares of Common Stock, otherwise than pursuant to a Common Stock Reorganization (any such event, including any event described in paragraphs (b) and (c) below, being herein called a "Common Stock Distribution"), if such Common Stock Distribution shall be for a consideration per share less than the Fair Market Value per share of outstanding Common Stock of the Company on the date of such Common Stock Distribution, or on the first date of the announcement of such Common Stock Distribution (whichever is less), then, effective upon such Common Stock Distribution, the number of shares of Common Stock purchasable upon exercise of this Warrant shall be adjusted by multiplying the number of shares of Common Stock subject to purchase upon exercise of this Warrant by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding (and issuable upon exercise or conversion of outstanding options, warrants and convertible securities) immediately prior to such Common Stock Distribution plus the number of shares of Common Stock issued (or deemed to be issued pursuant to paragraphs (b) and (c) below) in such Common Stock Distribution and the denominator of which shall be an amount equal to the sum of (A) the number of shares of Common Stock outstanding (and issuable upon exercise or conversion of outstanding options, warrants and convertible securities) immediately prior to such Common Stock Distribution, plus (B) the number of shares of Common Stock which the aggregate consideration, if any, received by the Company (determined as provided below) for such Common Stock ______________________________________ Footnote continued from previous page. 164 ______________________________________ Distribution would buy at the Fair Market Value thereof, as of the date immediately prior to such Common Stock Distribution or as of the date immediately prior to the date of announcement of such Common Stock Distribution (whichever is less). In the event of any such adjustment, the Exercise Price for each Warrant shall be adjusted to a number determined by dividing the Exercise Price immediately prior to such Common Stock Distribution by the fraction used for purposes of the aforementioned adjustment. The provisions of this paragraph (a), including by operation of paragraph (b) or (c) below, shall not operate to increase the Exercise Price or to reduce the number of shares of Common Stock subject to purchase upon exercise of this Warrant. () If the Company shall after the date of issuance of this Warrant issue, sell, distribute or otherwise grant in any manner (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any warrants or options for the purchase of, Common Stock or any stock or securities convertible into or exchangeable for Common Stock including the Company's Class B Common Stock (such rights, warrants or options being herein called "Options" and such convertible or exchangeable stock or securities being herein called "Convertible Securities"), whether or not such Options or the rights to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon conversion or exchange of such Convertible Securities (determined by dividing (i) the aggregate amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of Options to acquire Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Fair Market Value per share of outstanding Common Stock of the Company on the date of granting such Options or on the date of announcement thereof (whichever is less), then for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon the ______________________________________ Footnote continued from previous page. 165 ______________________________________ exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting of such Options and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the number of shares of Common Stock purchasable upon the exercise of this Warrant or of the Exercise Price shall be made upon the actual exercise of such Options or upon conversion or exchange of such Convertible Securities. () If the Company shall after the date of issuance of this Warrant issue, sell or otherwise distribute or grant (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the aggregate amount received or receivable by the Company as consideration for the issue, sale or distribution of such Convertible Securities, plus, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Fair Market Value per share of outstanding Common Stock of the Company on the date of such issue, sale or distribution or on the date of announcement thereof (whichever is less), then, for purposes of paragraph (a) above, the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the date of the issue, sale or distribution of such Convertible Securities and thereafter shall be deemed to be outstanding and the Company shall be deemed to have received as consideration such price per share, determined as provided above, therefor. Except as otherwise provided in paragraph (d) below, no additional adjustment of the number of shares of Common Stock purchasable upon exercise of this Warrant or of the Exercise Price shall be made upon the actual conversion or exchange of such Convertible Securities. () If the purchase price provided for in any Option referred to in paragraph (b) above, the additional ______________________________________ Footnote continued from previous page. 166 ______________________________________ consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in paragraph (b) or (c) above, or the rate at which any Convertible Securities referred to in paragraph (b) or (c) above are convertible into or exchangeable for Common Stock shall change at any time (other than under or by reason of provisions designed to protect against, and having the effect of protecting against, dilution upon an event which results in a related adjustment pursuant to this Article IV), the number of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price then in effect shall forthwith be readjusted (effective only with respect to any exercise of this Warrant after such readjustment) to the number of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price which would then be in effect had the adjustment made upon the issue, sale, distribution or grant of such Options or Convertible Securities been made based upon such changed purchase price, additional consideration or conversion rate, as the case may be; provided, however, that such readjustment shall give effect to such change only with respect to such Options and Convertible Securities as then remain outstanding. If, at any time after any adjustment of the number of shares of Common Stock purchasable upon exercise of each Warrant or the Exercise Price shall have been made pursuant to this Article IV on the basis of the issuance of any Option or Convertible Securities or after any new adjustments of the number of shares of Common Stock purchasable upon exercise of each Warrant or the Exercise Price shall have been made pursuant to this paragraph, the right of conversion, exercise or exchange in such Option or Convertible Securities shall expire or terminate, and the right of conversion, exercise or exchange in respect of a portion of such Option or Convertible Securities shall not have been exercised, such previous adjustment shall be rescinded and annulled. Thereupon, a recomputation shall be made of the effect of such Option or Convertible Securities on the basis of treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such right of conversion, exercise or exchange as having been issued on the date or dates of such conversion, exercise or exchange and for the consideration actually received and receivable therefor, and treating any such Option or Convertible Securities which then remain outstanding as having been granted or issued immediately after the time of any such issuance for the consideration per share for which shares of Common Stock are issuable under such Option or Convertible Securities; and, if and to the extent called for by the foregoing provisions of ______________________________________ Footnote continued from previous page. 167 ______________________________________ this Section on the basis aforesaid, a new adjustment of the number of shares of Common Stock purchasable upon exercise of each Warrant and the Exercise Price shall be made, which new adjustment shall supersede (effective only with respect to any exercise of this Warrant after such readjustment) the previous adjustment so rescinded and annulled. () If the Company shall after the date of issuance of this Warrant pay a dividend or make any other distribution upon any capital stock of the Company payable in Common Stock, Options or Convertible Securities, then, for purposes of paragraph (a) above, such Common Stock, Options or Convertible Securities, as the case may be, shall be deemed to have been issued or sold without consideration. () If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor net of any underwriting commissions or concessions paid or allowed by the Company in connection therewith. If any shares of Common Stock, Options or Convertible Securities shall be issued, sold or distributed for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the Fair Market Value of such consideration, after deduction of any expenses incurred and any underwriting commissions or concessions paid or allowed by the Company in connection therewith. If any shares of Common Stock, Options or Convertible Securities shall be issued in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the Fair Market Value of such portion of the assets and business of the nonsurviving corporation as shall be attributable to such Common Stock, Options or Convertible Securities, as the case may be. If any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for consideration to be determined pursuant to the Appraisal Procedure. () If the Company shall take a record of the holders of the Common Stock for the purpose of entitling them to ______________________________________ Footnote continued from previous page. 168 ______________________________________ receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue, sale, distribution or grant of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. () For purposes of determining whether any adjustment is required pursuant to this Article IV, any security of the Company having rights substantially equivalent to the Common Stock as to dividends or upon liquidation, dissolution or winding up of the Company shall be treated as if such security were Common Stock. .. Dividends. If the Company shall after the date of issuance of this Warrant issue or distribute to all or substantially all holders of shares of Common Stock evidences of indebtedness, any other securities of the Company or any property, assets or cash, and if such issuance or distribution does not constitute a Common Stock Reorganization or a Common Stock Distribution (any such nonexcluded event being herein called a "Dividend"), (i) the number of shares of Common Stock subject to purchase upon exercise of this Warrant shall be increased (but not decreased), effective immediately after the record date at which the holders of shares of Common Stock are determined for purposes of such Dividend, to a number determined by multiplying the number of shares of Common Stock subject to purchase immediately before such Dividend by a fraction, the numerator of which shall be the Fair Market Value per share of outstanding Common Stock on such record date and the denominator of which shall be the Fair Market Value per share of outstanding Common Stock of the Company on such record date less the then Fair Market Value of the evidences of indebtedness, securities, cash, or property or other assets issued or distributed in such Dividend with respect to one share of Common Stock, and (ii) the Exercise Price shall be decreased (but not increased) to a price determined by multiplying the Exercise Price then in effect by a fraction, the numerator of which shall be the number of shares of Common Stock subject to ______________________________________ Footnote continued from previous page. 169 ______________________________________ purchase upon exercise of this Warrant immediately before such Dividend and the denominator of which shall be the number of shares of Common Stock subject to purchase upon exercise of this Warrant immediately after such Dividend. If after the date of issuance of this Warrant the Company repurchases shares of Common Stock for a per share consideration which exceeds the Fair Market Value (as calculated immediately prior to such repurchase), then the number of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price shall be adjusted in accordance with the foregoing provisions, as if, in lieu of such repurchases, the Company had (I) distributed a Dividend having a Fair Market Value equal to the Fair Market Value of all property and cash expended in the repurchases, and (II) effected a reverse split of the Common Stock in the proportion required to reduce the number of shares of Common Stock outstanding from (A) the number of such shares outstanding immediately before such first repurchase to (B) the number of such shares outstanding immediately following all the repurchases. .. Capital Reorganization. If after the date of issuance of this Warrant there shall be any consolidation or merger to which the Company is a party, other than a consolidation or a merger in which the Company is a continuing corporation and which does not result in any reclassification of, or change (other than a Common Stock Reorganization or a change in par value) in, outstanding shares of Common Stock, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety (any such event being called a "Capital Reorganization"), then, effective upon the effective date of such Capital Reorganization, the Holder shall have the right to purchase, upon exercise of this Warrant, the kind and amount of shares of stock and other securities and property (including cash) which the Holder would have owned or have been entitled to receive after such Capital Reorganization if this Warrant had been exercised immediately prior to such Capital Reorganization, assuming such holder (i) is not a person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or conveyance was made, as the case may be ("constituent person"), or an Affiliate of a constituent person and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such Capital Reorganization (provided that if the kind or amount of securities, cash or other property receivable upon such Capital Reorganization is not the same for each share of Common Stock held immediately prior to such consolidation, merger, sale or conveyance by other than a ______________________________________ Footnote continued from previous page. 170 ______________________________________ constituent person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purposes of this Section the kind and amount of shares of stock and other securities or other property (including cash) receivable upon such Capital Reorganization shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). As a condition to effecting any Capital Reorganization, the Company or the successor or surviving corporation, as the case may be, shall execute and deliver to each Warrantholder and to the Warrant Agency an agreement as to the Warrantholder's rights in accordance with this Section 4.5, providing for subsequent adjustments as nearly equivalent as may be practicable to the adjustments provided for in this Article IV. The provisions of this Section 4.5 shall similarly apply to successive Capital Reorganizations. .. Certain Other Events. If any event occurs after the date of issuance of this Warrant as to which the foregoing provisions of this Article IV are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board of Directors of the Company, fairly protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then such Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of such Board, to protect such purchase rights as aforesaid, but in no event shall any such adjustment have the effect of increasing the Exercise Price or decreasing the number of shares of Common Stock subject to purchase upon exercise of this Warrant, or otherwise adversely affect the Warrantholders. .. Adjustment Rules. () Any adjustments pursuant to this Article IV shall be made successively whenever an event referred to herein shall occur. () If the Company shall set a record date to determine the holders of shares of Common Stock for purposes of a Common Stock Reorganization, Common Stock Distribution, Dividend or Capital Reorganization, and shall legally abandon such action prior to effecting such Action, then no adjustment ______________________________________ Footnote continued from previous page. 171 ______________________________________ shall be made pursuant to this Article IV in respect of such action. () No adjustment in the amount of shares purchasable upon exercise of this Warrant or in the Exercise Price shall be made hereunder unless such adjustment increases or decreases such amount or price by one percent or more, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall serve to adjust such amount or price by one percent or more. () No adjustment in the Exercise Price shall be made hereunder if such adjustment would reduce the exercise price to an amount below par value of the Common Stock, which par value shall initially be $0.01 per share of Common Stock. () No adjustment shall be made pursuant to this Article IV in respect of (i) the issuance (or deemed issuance) or repurchase of shares of Common Stock in connection with the exercise of the Warrants or (ii) the issuance of shares of Common Stock in an underwritten public offering managed by a nationally recognized investment banking firm. .. Proceedings Prior to Any Action Requiring Adjustment. As a condition precedent to the taking of any action which would require an adjustment pursuant to this Article IV, the Company shall take any action which may be necessary, including obtaining regulatory approvals or exemptions, in order that the Company may thereafter validly and legally issue as fully paid and nonassessable all shares of Common Stock which the holders of Warrants are entitled to receive upon exercise thereof. .. Notice of Adjustment. Not less than 30 nor more than 40 days prior to the record date or effective date, as the case may be, of any action which requires or might require an adjustment or readjustment pursuant to this Article IV, the Company shall give notice to each Warrantholder of such event, describing such event in reasonable detail and specifying the record date or effective date, as the case may be, and, if determinable, the required adjustment and the ______________________________________ Footnote continued from previous page. 172 ______________________________________ computation thereof. If the required adjustment is not determinable at the time of such notice, the Company shall give notice to each Warrantholder of such adjustment and computation promptly after such adjustment becomes determinable. If no Holder objects to any such notice within 30 days of receipt of the Company's notice, the adjustment will be deemed accepted by the Holders. ARTICLE DEFINITIONS The following terms, as used in this Warrant, have the following respective meanings: "Appraisal Procedure" means a procedure whereby two independent appraisers, one chosen by the Company and one by the Requisite Holders, shall mutually agree upon the determinations then the subject of appraisal. Each party shall deliver a notice to the other appointing its appraiser within 15 days after the Appraisal Procedure is invoked. If within 30 days after appointment of the two appraisers they are unable to agree upon the amount in question, a third independent appraiser shall be chosen within 10 days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having experience in the appraisal of the subject matter to be appraised. The decision of the third appraiser so appointed and chosen shall be given within 30 days after the selection of such third appraiser. If three appraisers shall be appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the other determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive on the Company and the Warrantholders; ______________________________________ Footnote continued from previous page. 173 ______________________________________ otherwise the average of all three determinations shall be binding and conclusive on the Company and the Warrantholders. The costs of conducting any Appraisal Procedure shall be borne by the Warrantholders requesting such Appraisal Procedure, except (a) the fees and expenses of the appraiser appointed by the Company and any costs incurred by the Company shall be borne by the Company, (b) the fees and expenses of the appraiser appointed by the Requisite Holders shall be borne by the Requisite Holders, and (c) the fees and expenses of any third appraiser shall be shared equally by the Company and such Requisite Holders; provided if such Appraisal Procedure shall result in a determination that is disparate by 5% or more to the benefit of the holder from the Company's initial determination, all costs of conducting such Appraisal Procedure shall be borne by the Company. "Business Day" shall mean (a) if any class of Common Stock is listed or admitted to trading on a national securities exchange, a day on which the principal national securities exchange on which such class of Common Stock is listed or admitted to trading is open for business or (b) if no class of Common Stock is so listed or admitted to trading, a day on which any New York Stock Exchange member firm is open for business. "Capital Reorganization" shall have the meaning set forth in Section 4.5. "Closing Price" with respect to any security on any day means (a) if such security is listed or admitted for trading on a national securities exchange, the reported last sales price regular way or, if no such reported sale occurs on such day, the closing bid price regular way on such day, in each case as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such class of security is listed or admitted to trading, or (b) if such security is not listed or admitted to trading on any national securities exchange, the last quoted sales price, or, if not so quoted, the closing bid price in the over-the-counter market on such day as reported by NASDAQ or any comparable system then in use or, if not so reported, as reported by any New York Stock Exchange member firm reasonably selected by the Company for such purpose. ______________________________________ Footnote continued from previous page. 174 ______________________________________ "Common Stock" shall have the meaning set forth in the first paragraph of this Warrant subject to adjustment pursuant to Article IV. "Common Stock Distribution" shall have the meaning set forth in Section 4.3(a). "Common Stock Reorganization" shall have the meaning set forth in Section 4.2. "Company" shall have the meaning set forth in the first paragraph of this Warrant. "Convertible Securities" shall have the meaning set forth in Section 4.3(b). "Dividend" shall have the meaning set forth in Section 4.4. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any similar or successor federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time. "Exercise Period" means the Exercise Period as defined in the Option Agreement. "Exercise Price" shall mean $3.281. "Fair Market Value" means the fair market value of the business or property in question, as determined in good faith by the Board of Directors of the Company, provided, however, that the Fair Market Value of any security for which a Closing Price is available shall be the Market Price of such security. The Fair Market Value of the Company shall be the Fair Market Value of the Company and its subsidiaries as a going concern. Notwithstanding the foregoing, if, at any date ______________________________________ Footnote continued from previous page. 175 ______________________________________ of determination of the Fair Market Value of the Company, the Common Stock of any class shall then be publicly traded, the Fair Market Value of the Company on such date shall be the Market Price on such date multiplied by the number of shares of Common Stock on a fully diluted basis, giving effect to any consideration to be paid to the Company in connection with the exercise or conversion of any security. Notwithstanding the foregoing, the Fair Market Value of shares of Common Stock to be issued in connection with the grant of employee stock options will be deemed to be, if lower, the Closing Price on the date of such sale or grant. "Holder" shall have the meaning set forth in the first paragraph of this Warrant. "Market Price" with respect to any security on any day means the average of the daily Closing Prices of a share or unit of such security for the 10 consecutive Business Days ending on the most recent Business Day for which a Closing Price is available; provided, however, that in the event that, in the case of Common Stock, the Market Price is determined during a period following the announcement by the Company of (A) a dividend or distribution of Common Stock, or (B) any subdivision, combination or reclassification of Common Stock and prior to the expiration of 20 Business Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of Common Stock. "NASD" means The National Association of Securities Dealers, Inc. "NASDAQ" means The National Association of Securities Dealers, Inc. Automated Quotation System. "Option Agreement" means the Option Agreement between the Company and each of the initial Warrantholders dated the date of original issuance of this Warrant. ______________________________________ Footnote continued from previous page. 176 ______________________________________ "Options" shall have the meaning set forth in Section 4.3(b). "Registrable Security" shall have the meaning set forth in the Registration Rights Agreement dated as of February 26, 1997 among the Company and the Holders of the Warrants. "Registration Rights Agreement" shall have the meaning set forth in Section 3.1. "Requisite Holders" means the Holders of Warrants to purchase a majority of the shares of Common Stock issuable upon exercise of the Warrants (excluding Warrants held by the Company or any of its subsidiaries) at the time outstanding. "Securities Act" shall mean the Securities Act of 1933, as amended, and any similar or successor federal statute, and the rules and regulations of the Securities and Exchange Commission (or its successor) thereunder, all as the same shall be in effect at the time. "Warrant Agency" shall have the meaning set forth in Section 2.1. "Warrantholder" means a holder of a Warrant. "Warrants" shall have the meaning set forth in the first paragraph of this Warrant. ARTICLE MISCELLANEOUS ______________________________________ Footnote continued from previous page. 177 ______________________________________ .. Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall be effective upon delivery in person, faxed, or mailed by certified or registered mail, return receipt requested, postage pre-paid, addressed as follows: () if to the Company, to 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919, Attention: President; with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street N.W., Suite 450, Washington, DC 20006-2296, Attention: Robert Jensen, Esq.; () if to an initial Holder of Warrants, to such Holder c/o Banque Indosuez, New York Branch, at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, with a copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: William B. Gannett, Esq., and if to any subsequent Holder of Warrants, to it at such address as may have been furnished to the Company in writing by such Holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Warrants) or to the Holders of Warrants (in the case of the Company) in accordance with the provisions of this paragraph. .. Waivers; Amendments. No failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Holder are cumulative and not exclusive of any rights or remedies which it would otherwise have. The provisions of this Warrant may be amended, modified or waived with (and only with) the written consent of the Company and the Requisite Holders; provided, however, that no such amendment, modification or waiver shall, without the written consent of each Warrantholder whose interest might be adversely affected by ______________________________________ Footnote continued from previous page. 178 ______________________________________ such amendment, modification or waiver, (a) change the number of shares of Common Stock subject to purchase upon exercise of this Warrant, the Exercise Price or provisions for payment thereof or (b) amend, modify or waive the provisions of this Section or Articles III or IV. The provisions of the Registration Rights Agreement may be amended, modified or waived only in accordance with the respective provisions thereof. Any such amendment, modification or waiver effected pursuant to this Section or the applicable provisions of the Registration Rights Agreement shall be binding upon the holders of all Warrants and Warrant Shares, upon each future holder thereof and upon the Company. In the event of any such amendment, modification or waiver the Company shall give prompt notice thereof to all Warrantholders and, if appropriate, notation thereof shall be made on all Warrants thereafter surrendered for registration of transfer or exchange. No notice or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. .. Governing Law. This Warrant shall be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflicts of law. .. Survival of Agreements; Representations and Warranties etc. All representations, warranties and covenants made by the Company herein or in any certificate or other instrument delivered by or on behalf of it in connection with the Warrants shall be considered to have been relied upon by the Holder and shall survive the issuance and delivery of the Warrants, regardless of any investigation made by the Holder, and shall continue in full force and effect so long as any Warrant is outstanding. All statements in any such certificate or other instrument shall constitute representations and warranties hereunder. .. Covenants to Bind Successor and Assigns. All covenants, stipulations, promises and agreements in this ______________________________________ Footnote continued from previous page. 179 ______________________________________ Warrant contained by or on behalf of the Company shall bind its successors and assigns, whether so expressed or not. .. Severability. In case any one or more of the provisions contained in the Registration Rights Agreement or this Warrant shall be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. .. Section Headings. The sections headings used herein are for convenience of reference only, are not part of this Warrant and are not to affect the construction of or be taken into consideration in interpreting this Warrant. .. No Rights as Stockholder. This Warrant shall not entitle the Holder to any rights as a stockholder of the Company. .. No Impairment. The Company shall not by any action including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not, directly or indirectly, increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its commercially reasonable best efforts to obtain all such authorizations, exemptions or consents from any public ______________________________________ Footnote continued from previous page. 180 ______________________________________ regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. .. Submission to Jurisdiction; Venue. () Any legal action or proceeding with respect to this Warrant may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Warrant, the Company irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to CT Corporation Systems at its address at 1633 Broadway, New York, New York 10019, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. () The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or or in connection with this Warrant brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. ______________________________________ Footnote continued from previous page. 181 -28- IN WITNESS WHEREOF, AMERICAN TELECASTING, INC. has caused this Warrant to be executed in its corporate name by one of its officers thereunto duly authorized, and attested by its Secretary or an Assistant Secretary, all as of the day and year first above written. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: Attest: - ------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 182 -29- SUBSCRIPTION NOTICE (To be executed upon exercise of Warrant) TO AMERICAN TELECASTING, INC.: The undersigned hereby irrevocably elects to exercise the right to purchase represented by the attached Warrant for, and to purchase thereunder, _________________ shares of voting Class A Common Stock, as provided for therein, and tenders herewith payment of the Exercise Price in full in accordance with the terms of the attached Warrant. Please issue a certificate or certificates for such shares of Class A Common Stock in the following name or names and denominations: If said number of shares shall not be all the shares issuable upon exercise of the attached Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of such shares less any fraction of a share paid in cash. Dated: _____________, 19__ _______________________________________________ Note: The above signature should correspond exactly with the name on the face of the attached Debt Debt Warrant or with the name of the assignee appearing in the assignment form. ______________________________________ Footnote continued from previous page. 183 -30- ASSIGNMENT (To be executed upon assignment of Warrant) For value received, ______________________________ hereby sells, assigns and transfers unto __________________ the attached Warrant, together with all rights, title and interest therein, and does hereby irrevocably constitute and appoint _________________ attorney to transfer said Warrant on the books of American Telecasting, Inc., with full power of substitution in the premises. __________________________________________ Note: The above signature should correspond exactly with the name on the face of the attached Warrant. ______________________________________ Footnote continued from previous page. 184 ______________________________________ THIS BOND APPRECIATION RIGHTS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. BOND APPRECIATION RIGHTS CERTIFICATE RELATING TO THE SENIOR DISCOUNT NOTES DUE 2004 OF AMERICAN TELECASTING, INC. ______________________________________ Footnote continued from previous page. 185 -2- No. 1 4,500 Bond Appreciation Rights This certifies that FOR VALUE RECEIVED INDOSUEZ CM II, INC. or, subject to the terms hereof, permitted transferees (the "Registered Holder"), is the registered owner of the number of Bond Appreciation Rights ("BARs") specified above. Each BAR represents the equivalent of $1,000 face amount (the "Equivalent Amount") of Senior Discount Notes due 2004 (the "Notes") of American Telecasting, Inc., a Delaware corporation (the "Company"), and has an initial value of $290 (the "BAR Price"). The Equivalent Amount and the BAR Price are each subject to adjustment as provided in Section 5 hereof. Upon the presentation and surrender of this BAR Certificate, with the Exercise Form attached hereto or a comparable form reasonably acceptable to the Company, duly completed and executed, at the office of the Company during normal business hours on any business day the Registered Holder shall be entitled to the receipt of an amount calculated in the manner set forth in Section 2 hereof. This BARs Certificate shall be governed by and construed in accordance with the internal laws of the State of New York (other than its rules of conflicts of laws to the extent the application of the laws of another jurisdiction would be required thereby). Procedures for Exercise of BARs. During the Exercise Period, a Registered Holder may exercise BARs by surrendering a BARs Certificate or Certificates together with an Exercise Form in the form attached hereto. A BAR shall be deemed to be exercised at the time immediately prior to the close of business on the business day (the "Exercise Date") on which the duly executed and completed Exercise Form is received by the Company at its office at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919. 186 -3- The term "Exercise Period" shall mean the period beginning at the earlier of (a) any event of default under the existing terms of the Notes or (b) 9:00 a.m., New York City time, on June 15, 1999 and ending at 5:00 p.m., New York City time, on December 31, 2004. This BARs Certificate, upon the surrender hereof (in the manner described above) by the Registered Holder, may be exchanged without charge for one or more replacement BARs Certificates of like tenor and date entitling the Registered Holder to the same aggregate number of BARs as is evidenced by this surrendered BARs Certificate. The BARs represented hereby shall cease to be exercisable upon the termination of the Exercise Period or earlier upon proper exercise. Payment of BAR Value. As soon as practicable after each exercise of a BAR, the Company will pay to the Registered Holder in cash an amount (the "BAR Value") equal to the excess of (A) the then current Market Price (as defined below) of the Equivalent Amount as to which the BAR has been exercised over (B) the BAR Price of the Equivalent Amount. "Market Price" of any security on any day means (i) the average bid prices of three dealers who make a market in the security, which such dealers shall be selected by a majority in interest of the Registered Holders, or (ii) if such quotes are not so available or reported as determined by a majority in interest of the Registered Holders and noticed to the Company, the fair saleable value (the "Appraised Value") of such security (determined without giving effect to any discount for (i) a minority interest or (ii) any lack of liquidity) on such date, as determined in good faith by the Company's Board of Directors, or if a majority in interest of the Registered Holders elect to dispute such Appraised Value, the fair market value as determined in accordance with the terms of Section 3(b). Determination and Payment of BAR Value. 187 -4- Determination and Payment. Except as set forth in Section 3(b), the BAR Value with respect to any exercise of BARs hereunder shall be determined within 5 days of the Exercise Date and, subject to Section 4, shall be payable in the manner provided below within one business day following the date of such determination. Payment of the BAR Value shall be made by wire transfer of immediately available (same day) funds to an account in a bank located in the United States designated by the Holder for such purpose. Appraisal. If in determining the BAR Value it is necessary to determine the Appraised Value of the Notes or other securities and a majority in interest of the Registered Holders elects to dispute the determination made by the Company, the Appraised Value shall be determined by two independent appraisers, one chosen by the Company and one by a majority in interest of the Registered Holders. If within 20 days after appointment of the two appraisers they are unable to agree upon the amount in question, a third independent appraiser shall be chosen within 10 days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having experience in the appraisal of the subject matter to be appraised. The decision of the third appraiser so appointed and chosen shall be given within 30 days after the selection of such third appraiser. If three appraisers shall be appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the other determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive on the Company and the Registered Holders; otherwise the average of all three determinations shall be binding and conclusive on the Company and the Registered Holders. The costs of conducting any appraisal shall be borne as follows: (a) the fees and expenses of the appraiser appointed by the Company and any costs incurred by the Company shall be borne by the Company, (b) the fees and expenses of the appraiser appointed by the Registered Holders and any costs incurred by the Registered Holders shall be borne by the Registered Holders and (c) the fees and expenses of any third appraiser shall be shared equally by the Company and the Registered Holders electing such appraisal; provided if such Appraised Value shall result in a determination that is disparate by 5% or more from the Company's initial 188 -5- determination, all costs of conducting such appraisal procedure shall be borne by the Company. Non-Cash Payment Upon Exercise. Right to Pay in Other Securities. Notwithstanding anything to the contrary set forth in this Agreement, if on the date of exercise of any of the BARs hereunder, the Company shall be prohibited from paying cash by the terms of any loan or other agreement by which it is bound, the Registered Holder may elect to receive, in lieu of all or a part of the BAR Value otherwise payable in cash in respect of such exercise, (i) if permitted by the terms of the Company's then existing agreements, Notes having an aggregate current Market Value on the Exercise Date with respect to such exercise equal to such BAR Value or (ii) if permitted by the terms of the Company's then existing agreements, debt securities substantially similar to the Notes, in a form mutually acceptable to the Company and the Registered Holder, having an aggregate current Market Value on the Exercise Date with respect to such exercise equal to such BAR Value. Prohibition on Payment. The Company is not a party to any agreement which would restrict the Company's ability to pay the BAR Value in cash. The Company agrees that it will not, without the consent of the Registered Holders of a majority of the BARs at the time then outstanding, enter into any agreement or amend any existing agreement which would prohibit or otherwise limit the Company's ability to make cash payments or payments in the form of Notes or other securities upon exercise of the BARs. Adjustments. Adjustment or Substitution of Notes and Price. In the event that the Notes are changed into or exchanged for a different kind or number of debt securities, or equity or other securities (including warrants or rights to acquire stock or securities) or assets (including cash) of the Company or stock or securities or assets (including cash) of another corporation, then an appropriate and equitable adjustment shall be made in the number and kind of securities or other assets the Market Value of which determines the BAR Value payable in respect of exercises of any BARs hereunder, and/or in the kind of 189 -6- securities deliverable under Section 4, so as to prevent the dilution of rights represented by the BARs granted hereunder. In the event of a transaction (including a tender or exchange offer) in which the Notes are changed into or exchanged for shares of stock or securities of another corporation, that other corporation shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Agreement to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 5(a). In the event that the Company shall make any direct or indirect payment or distribution to more than 50% of the holders of Notes, other than payments of interest, the BAR Price shall be adjusted downward to reflect fully any such payment or distribution. The foregoing provisions of this Section 5(a) shall similarly apply to successive reorganizations, tender offers, exchange offers and other transactions. Notice of Adjustments. Whenever an adjustment is made pursuant to Section 5(a), the Company shall promptly prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number and kind of securities or other assets the current Market Value of which determines the BAR Value payable in respect of exercises of BARs hereunder and/or the kind of securities deliverable under Section 4, as the case may be, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder. The Company shall keep at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder. Notice of Other Corporate Actions. The Company shall promptly give notice to each Holder of any other corporate action for which notice is given to holders of Notes of the Company. Assignability. 190 -7- This BARs Certificate shall be transferable, in whole or in part, upon surrender of this BARs Certificate to the Company, together with a written assignment of the BARs certificate, on the Form of Assignment attached hereto or in other form reasonably satisfactory to the Company, duly executed by the Registered Holder hereof or his duly appointed legal representative. If less than all of the BARs Certificate is being transferred, a new BARs Certificate or BARs Certificates shall be issued to the Registered Holder for the portion of the BARs Certificate not being transferred. Expenses. The Company shall promptly reimburse the Registered Holders for all reasonable fees (including reasonable attorney fees and expenses) incurred by such Registered Holder in connection with the enforcement of its rights hereunder. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York without regard to principles of conflicts of law. Headings. 191 -8- The headings of the paragraphs in this BARs Certificate are for convenience of reference only and shall not define, limit or affect any of the provisions hereof. Replacement of BARs. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any BARs Certificate and in the case of any such loss, theft or destruction of any BARs Certificate, upon delivery of indemnity reasonably satisfactory to the Company, or in the case of any such mutilation, upon surrender of such BARs Certificate for cancellation at the principal office of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new BARs Certificate of like tenor. No Rights or Liabilities as Stockholder. Nothing contained in this BARs Certificate shall be construed as conferring upon the Registered Holder hereof any rights as a stockholder of the Company, or as imposing any liabilities on such Holder as a stockholder of the Company or, to purchase any securities of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or by any other person. IN WITNESS WHEREOF, the Company has caused this BARs Certificate to be duly exercised, manually or in facsimile, by two of its officers thereunto duly authorized. Dated: February 26, 1997 AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- 192 -9- Name: Title: By: ----------------------------------- Name: Title: 193 -10- EXERCISE FORM To be executed by the Registered Holder to exercise BARs The undersigned Registered Holder hereby irrevocably elects to exercise _____ BARs represented by this BARs Certificate and requests that cash in an amount equal to the aggregate BAR Value be paid to [payment instructions] and if such number of BARs shall not equal the number of BARs represented by this BARs Certificate, irrevocably requests that a new BARs Certificate for the balance of such BARs be registered in the name of, and delivered to, the Registered Holder at the address stated below. Dated: __________, ____ ----------------------------------- ----------------------------------- ----------------------------------- Address ----------------------------------- Social Security or Other Identifying Number ----------------------------------- Signature Guaranteed 194 -11- FORM OF ASSIGNMENT To be executed by the Registered Holder to transfer BARs FOR VALUE RECEIVED, ____________________ hereby sells, assigns, and transfers unto Name: ------------------------------------------------------ Address: --------------------------------------------------- Zip Code: -------------------------------------------------- ------------------------------------------------------------ Social Security or Other Identifying Number [please print or type] __________ of the BARs represented by this BARs Certificate, and hereby irrevocably constitutes and appoints ___________ ____________________ Attorney to transfer this BARs Certificate on the books of the Company, with full power of substitution. Dated: __________, ___ ----------------------------------- Signature Guaranteed THE SIGNATURE TO THE EXERCISE FORM OR FORM OF ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS BARs 195 -12- CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES OR A MEMBER FIRM OF THE AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK EXCHANGE, UNLESS THE REGISTERED HOLDER WOULD ITSELF BE ABLE TO PROVIDE A SIGNATURE GUARANTEE IN WHICH CASE A SIGNATURE GUARANTEE SHALL NOT BE NECESSARY. 196 EXHIBIT C-2 TO THE CREDIT AGREEMENT SECURITIES PLEDGE AGREEMENT This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of February 26, 1997, made by AMERICAN TELECASTING, INC., a Delaware corporation having an office at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at 1211 Avenue of the Americas, New York, New York 10036, as pledgee, assignee and secured party, in its capacity as collateral agent (in such capacities and together with any successors in such capacities, the "Collateral Agent") for the lending institutions (the "Banks") under the Credit Agreement (as hereinafter defined). R E C I T A L S : Pursuant to a certain credit agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Credit Agreement), among the Pledgor, the Banks and Banque Indosuez, New York Branch, as Agent for the Banks, the Banks have agreed to make to or for the account of the Pledgor certain Loans up to an aggregate principal amount of $17,000,000. The Pledgor is the legal and beneficial owner of the Pledged Collateral (as hereinafter defined) pledged by it. It is a condition precedent to the obligations of the Banks to make the Loans under the Credit Agreement that the Pledgor execute and deliver the applicable Credit Documents, including this Agreement. This Agreement is given by the Pledgor in favor of Collateral Agent for its benefit and the benefit of the Banks and the Agent (collectively, the "Secured Parties") to secure the payment and performance of all of the Secured Obligations (as defined in Section 2). 197 A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows: Pledge. As collateral security for the payment and performance when due of all the Secured Obligations, the Pledgor hereby pledges, assigns, transfers and grants to Collateral Agent for the benefit of the Secured Parties, a continuing first priority security interest in and to all of the right, title and interest of the Pledgor in and to the following property, whether now existing or hereafter acquired, (collectively, the "Pledged Collateral"): the issued and outstanding shares of capital stock described on Schedule I hereto ("the Pledged Shares"), including the certificates representing the Pledged Shares and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares; all additional shares of capital stock of any issuer of the Pledged Shares from time to time acquired by the Pledgor in any manner (which securities shall be deemed to be part of the Pledged Shares) and the certificates representing such additional securities and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to such additional securities; all intercompany notes described on Schedule II hereto (the "Intercompany Notes") now owned or held by Pledgor and from time to time acquired by Pledgor in any way, and all certificates or instruments evidencing such Intercompany Notes and all proceeds thereof, all accessions thereto and substitutions therefor; all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital, income, profits and other property, interests or proceeds from time to time received, receivable or otherwise distributed to the Pledgor in respect of or in exchange for any or all of the Pledged Shares (collectively, "Distributions"); and 198 all Proceeds (as defined under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "UCC") or under other relevant law) of any of the foregoing, and in any event, including, without limitation, any and all (i) proceeds of any insurance (except payments made to a Person which is not a party to this Agreement), indemnity, warranty or guarantee payable to Collateral Agent or to the Pledgor from time to time with respect to any of its respective Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of its respective Pledged Collateral by any Governmental Authority (or any person acting under color of a Governmental Authority), (iii) instruments representing obligations to pay amounts in respect of Pledged Shares, (iv) products of the Pledged Collateral and (v) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of (i) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement (including, without limitation, the obligations of the Pledgor to pay principal, interest and all other reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the Obligations contained in the Credit Agreement), and (ii) without duplication of the amounts described in clause (i), all Obligations of the Pledgor now existing or hereafter arising under or in respect of this Agreement or any other Security Document, including, without limitation, with respect to all reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement (the obligations described in clauses (i) and (ii), collectively, the "Secured Obligations"). No Release. Subject to Section 18 of this Agreement, nothing set forth in this Agreement shall relieve the Pledgor from the performance of any term, covenant, condition on the Pledgor's part to be performed or observed 199 under or in respect of any of the Pledged Collateral or from any liability to the Person under or in respect of any of the Pledged Collateral or shall impose any obligation on Collateral Agent or any Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor's part to be so performed or observed or shall impose any liability on Collateral Agent or any Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any representation or warranty on the part of the Pledgor contained in this Agreement, or any other Credit Document or under or in respect of the Pledged Collateral or made in connection herewith or therewith. Subject to Section 18 of this Agreement, the obligations of the Pledgor contained in this Section 3 shall survive the termination of this Agreement and the discharge of the Pledgors' other obligations under this Agreement and the other Credit Documents. Delivery of Pledged Collateral. All certificates, agreements or instruments representing or evidencing the Pledged Collateral, to the extent not previously delivered to Collateral Agent, shall immediately upon receipt thereof by the Pledgor be delivered to and held by or on behalf of Collateral Agent pursuant hereto. All Pledged Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank (with signatures appropriately guaranteed), all in form and substance satisfactory to Collateral Agent. Subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of an Event of Default, to endorse, assign or otherwise transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral. Collateral Agent shall provide the Pledgor with notice of any endorsement, assignment or other transfer made pursuant to the preceding sentence. In addition, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right at any time to exchange certificates representing or evidencing Pledged Collateral for certificates of smaller or larger denominations. If an issuer of Pledged Shares is incorporated in a jurisdiction which does not permit the use of certificates to evidence equity ownership, then the Pledgor shall, to the extent permitted by applicable law, record such pledge on the stock register of such issuer, execute any customary stock pledge forms or other documents necessary or appropriate to complete the pledge and give Collateral Agent the right to 200 transfer the Pledged Shares under the terms hereof and provide to Collateral Agent an opinion of counsel, in form and substance satisfactory to Collateral Agent, confirming such pledge. Notwithstanding any provision of this Section 4 to the contrary, if the exercise of any rights provided in this Section 4 or Section 10 relates to the ownership or control of any radio, television or other license, permit, certificate or approval granted or issued by the FCC or any other Governmental Authority (including, without limitation, any multichannel or single channel multipoint distribution service, local multipoint distribution service, operational- fixed microwave service, cable television relay service station, business radio, instructional television fixed service, earth station or experimental licenses or permits issued by the FCC) (each, a "Governmental License") held by the Pledgor or a subsidiary of the Pledgor and it may be necessary to obtain the consent or approval of the FCC prior to the exercise of such rights, the provisions of Section 29 of this Agreement shall apply. Supplements, Further Assurances. The Pledgor agrees that at any time and from time to time, at the sole cost and expense of such Pledgor, the Pledgor shall promptly execute and deliver all further instruments and documents, including, without limitation, supplemental or additional UCC-1 financing statements, and take all further action that may be necessary or that Collateral Agent may reasonably request, in order to perfect and protect the pledge, security interest and Lien granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. The Pledgor shall, upon obtaining any Pledged Shares of any Person promptly (and in any event within three Business Days) deliver to Collateral Agent a pledge amendment, duly executed by the Pledgor, in substantially the form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. 201 Representations, Warranties and Covenants. The Pledgor represents, warrants and covenants as follows (as to itself only): No Liens. The Pledgor is, and at the time of any delivery of any Pledged Collateral to Collateral Agent pursuant to Section 4 of this Agreement will be, the sole legal and beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. All Pledged Collateral is on the date hereof, and will be be, so owned by the Pledgor, as applicable, free and clear of any Lien except for the Lien created by this Agreement. Authorization, Enforceability. The Pledgor has the requisite corporate power, authority and legal right to pledge and grant a security interest in all of the Pledged Collateral pledged by it pursuant to this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms. No Consents, etc. No consent of any party (including, without limitation, any stockholders or creditors of the Pledgor) and no consent, authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required either (x) for the pledge by the Pledgor of the Pledged Collateral pledged by it pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, or (y) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement, or (z) for the exercise by Collateral Agent of the remedies in respect of the Pledged Collateral pursuant to this Agreement; provided, however, that under the Communications Act and the rules and regulations of the FCC, FCC consent may be required prior to the transfer of control or assignment of any Governmental License issued by the FCC, or the exercise of any voting rights or management over the Pledgor or an issuer of Pledged Shares to the extent it holds, owns or controls any Governmental License issued by the FCC. Due Authorization and Issuance. All of the Pledged Shares have been, and to the extent hereafter issued will be upon such issuance, duly authorized and validly issued and fully paid and nonassessable. 202 Chief Executive Office. The Pledgor's chief executive office is located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado 80919. Pledgor shall not move its chief executive office except to such new location as Pledgor may establish in accordance with the last sentence of this Section 6(e). Pledgor shall not establish a new location for its chief executive office nor shall it change its name until (i) it shall have given Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location or name and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new location or name, Pledgor shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest of Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby. Delivery of Pledged Collateral; Filings. The Pledgor has delivered to Collateral Agent all certificates representing the Pledged Shares and Intercompany Notes and has caused to be filed with the Secretary of State of the State of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor, UCC-1 financing statements evidencing the Lien created by this Agreement, and such delivery, filing and pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations pursuant to the UCC, including, without limitation, the UCC as in effect in the States of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor. Pledged Collateral. All information set forth herein, including the Schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral is accurate and complete in all respects. No Violations, etc. The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board. 203 Ownership of Pledged Collateral. Except as otherwise permitted by the Credit Agreement, the Pledgor at all times will be the sole beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. No Options, Warrants, etc. Except as disclosed in the Credit Agreement, there are no options, warrants, calls, rights, commitments or agreements of any character to which the Pledgor is a party or by which it is bound obligating the Pledgor to issue, deliver or sell or cause to be issued, delivered or sold, additional securities of any issuer of the Pledged Shares or obligating any issuer of the Pledged Shares to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no voting trusts or other agreements or understandings to which the Pledgor or any issuer of the Pledged Shares is a party with respect to the voting of the securities of any issuer of the Pledged Shares. Endorsement, Assignment or Pledge of Instruments. None of the Pledged Collateral is, as of the date of this Agreement, and as to Pledged Collateral which arises from time to time after such date will be, evidenced by any instrument, note or chattel paper, except such as have been or will be endorsed, assigned or pledged and delivered to Collateral Agent by Pledgors simultaneously with the creation thereof. Systems. The Pledged Shares include the Pledgor's interest in each Credit Party operating Systems or holding System Agreements. Voting Rights; Distributions; etc. So long as no Event of Default shall have occurred and be continuing: The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares pledged by it pursuant to this Agreement or any part thereof for any purpose not inconsistent with the terms or purpose of this Agreement or any of the other Credit Documents and each Pledgor shall not in any event exercise such rights in any manner which may have an adverse effect on the value of 204 its respective Pledged Collateral or the security intended to be provided by this Agreement. Subject to the terms of the Credit Agreement, each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Credit Agreement; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be, and shall be forthwith delivered to Collateral Agent to hold as Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Collateral Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of the Pledgor and at such Pledgor's sole cost and expense, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof. Upon the occurrence and during the continuance of an Event of Default: All rights of the Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights; provided, however, to the extent the Pledgor or an issuer of Pledged Shares hold, own or control any Governmental License issued by 205 the FCC, if and to the extent required under the Communications Act or the FCC's rules, until the FCC has consented to a transfer of control or assignment of Pledgor, an issuer of Pledged Shares, or such Governmental License issued by the FCC, Pledgor shall continue to exercise the voting and other consensual rights. All rights of the Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof shall cease and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. Subject to any necessary prior or subsequent FCC approval, Collateral Agent shall be entitled to the appointment, as a matter of right and without giving notice to the Pledgor, of a receiver with respect to the Pledged Collateral, without regard to the adequacy or inadequacy of any Pledged Collateral for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof, and each Pledgor does hereby irrevocably consent to such appointment. Any such receiver shall have all the usual qualifications, powers and duties of receivers in similar cases, including the full power to conduct the business of the Pledgors. The Pledgor shall, at such Pledgor's sole cost and expense, from time to time execute and deliver to Collateral Agent and any other Person directed by Collateral Agent, appropriate instruments as Collateral Agent may request in order to permit Collateral Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 7(b)(i) hereof and to receive all Distributions which it may be entitled to receive under Section 7(b)(ii) hereof. All Distributions which are received by the Pledgor contrary to the provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Pledgor and shall immediately be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Transfers and Other Liens; Additional Shares; Principal Office. The Pledgor shall not (i) sell, convey, assign or otherwise dispose of, or grant any option, right or warrant 206 with respect to, any of the Pledged Collateral pledged by it pursuant to this Agreement, (ii) create or permit to exist any Lien upon or with respect to any Pledged Collateral pledged by it pursuant to this Agreement other than the Lien granted to Collateral Agent under this Agreement, or (iii) permit any issuer of the Pledged Shares to merge, consolidate or change its legal form unless a majority of the outstanding capital stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged to Collateral Agent pursuant to a pledge agreement in form and substance, satisfactory to Collateral Agent, and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation. The Pledgor shall (i) cause each issuer of the Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to such Pledgor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of capital stock or other equity securities of any issuer of the Pledged Shares which are required to be pledged hereunder. Reasonable Care. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Collateral Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Collateral Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Remedies Upon Default; Decisions Relating to Exercise of Remedies. If any Event of Default shall have occurred and be continuing, subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, in addition to other rights and remedies provided for herein or otherwise available to it to be exercised from time to time, (i) to retain and apply the Distributions to the Secured Obligations as provided in Section 11 hereof, and (ii) to exercise all the rights and remedies of a secured party on default under 207 the UCC, and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof (including, without limitation, any partial interest in the Pledged Shares) in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Pledged Collateral payable by such Person at such sale. Each purchaser at any such sale shall acquire the property sold absolutely free from any claim or right on the part of the Pledgor, and Pledgor hereby waives (to the fullest extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor acknowledges and agrees that, to the extent notice of sale shall be required by law, five (5) days' notice to such Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. No notification need be given to the Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. Notwithstanding any provision of this subsection 10(a) to the contrary, in the event of a private or public sale of the Pledged Collateral, prior to the consummation of the sale, to the extent required under the Communications Act of 1934, as amended, or any successor statute or law (the "Communications Act"), the prior consent of the FCC pursuant to the 208 Communications Act and the rules and regulations of the FCC will be obtained. The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to Persons who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. Notwithstanding the foregoing and to the extent commercially reasonable, each Pledgor shall, upon the occurrence and during the continuance of an Event of Default, at the request of Collateral Agent, for the benefit of Collateral Agent, cause any registration, qualification under or compliance with any federal or state securities law or laws to be effected with respect to all or any part of the Pledged Collateral as soon as practicable and at such Pledgor's sole cost and expense. The Pledgor will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Collateral, including, without limitation, registration under the Securities Act (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements. The Pledgor will cause Collateral Agent to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to Collateral Agent such number of prospectuses, offering circulars or other documents incident thereto as Collateral Agent from time to time may request, and will indemnify and 209 will cause the issuer of the Pledged Collateral to indemnify Collateral Agent and all others participating in the distribution of such Pledged Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading. If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, each Pledgor shall from time to time furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of securities included in the Pledged Collateral which may be sold by Collateral Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. The Pledgor recognizes, by reason of certain prohibitions contained in laws, rules, regulations or orders of any foreign Governmental Authority, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such foreign Governmental Authority. The Pledgor acknowledges that any such sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales. In addition to any of the other rights and remedies hereunder, Collateral Agent shall have the right to institute a proceeding seeking specific performance in connection with any of the agreements or obligations hereunder. Without limiting the generality of the provisions in Section 15 hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full power of substitution, its true and lawful attorney-in-fact, in its name, place and stead to take any action upon the occurrence and during the continuance of an Event of Default required to reflect the foreclosure sale of the Pledged Collateral or the exercise of any remedy hereunder. The foregoing grant of authority is a power of attorney coupled with an interest and such 210 appointment shall be irrevocable for the term of this Agreement. Application of Proceeds. All Distributions held from time to time by Collateral Agent and all cash proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Collateral Agent of its remedies as a secured creditor as provided in Section 10 hereof shall be applied, together with any other sums then held by Collateral Agent pursuant to this Agreement, promptly by Collateral Agent as follows: First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization, including, without limitation, reasonable compensation to Collateral Agent and its agents and counsel, and all reasonable expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization, including, without limitation, reasonable compensation to the Banks and their agents and counsel and all reasonable expenses, liabilities and advances made or incurred by the Banks in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Third, to the indefeasible payment in full in cash of interest and all amounts other than principal under the Credit Agreement at any time and from time to time owing by the Pledgor under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind among amounts so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Fourth, to the indefeasible payment in full in cash of principal at any time and from time to time owing by 211 the Pledgor under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind, among amounts of principal so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; and Fifth, to the applicable Pledgor, or its successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. Expenses. The Pledgor will upon demand pay to Collateral Agent the amount of any and all expenses, including the reasonable fees and expenses of its counsel and the fees and expenses of any experts and agents, which Collateral Agent may incur in connection with (i) the collection of the Secured Obligations, (ii) the enforcement and administration of this Agreement, (iii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights of Collateral Agent or any Secured Party hereunder or (v) the failure by the Pledgor to perform or observe any of the provisions hereof. All amounts payable by the Pledgor under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. The Pledgor's obligations under this Section 12 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations hereunder. No Waiver; Cumulative Remedies. No failure on the part of Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. In the event Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this instrument by foreclosure, sale, entry or otherwise, and 212 such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Collateral Agent, then and in every such case, each Pledgor, Collateral Agent and each holder of any of the Secured Obligations shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Collateral Agent and the Secured Parties shall continue as if no such proceeding had been instituted. Collateral Agent. Collateral Agent has been appointed as collateral agent pursuant to the Credit Agreement. The actions of Collateral Agent hereunder are subject to the provisions of the Credit Agreement. Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided in the Credit Agreement; provided, however, that at the time of appointment of a successor Collateral Agent, if Collateral Agent, through its possession, control, or ownership of Pledged Collateral or otherwise, holds, owns, or controls any Governmental License issued by the FCC such that the FCC must consent to the appointment of a successor Collateral Agent, until the FCC has consented to the appointment of a successor Collateral Agent the Collateral Agent shall retain control over such Pledged Collateral or Government Licenses. Upon the acceptance of any appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has covenanted to do hereunder or any warranty on the part of such Pledgor contained herein shall be breached, Collateral Agent or any Secured Party may (but shall not be obligated to), subject to the provisions of Section 29 of this Agreement, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all amounts so expended by Collateral Agent 213 or such Secured Party shall be paid by such Pledgor promptly upon demand therefor, with interest at the highest rate then in effect under the Credit Agreement during the period from and including the date on which such funds were so expended to the date of repayment. The Pledgor's obligations under this Section 15 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations under this Agreement, the Credit Agreement and any other Credit Document. The Pledgor hereby appoints Collateral Agent its attorney-in-fact with an interest, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the other Credit Documents which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement except that with respect to any FCC applications or filings or other action subject to FCC rules, regulations and policies, Collateral Agent shall serve as attorney-in-fact only to the extent permitted under the Communications Act and FCC rules, regulations and policies. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. The Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. Indemnity. Indemnity. The Pledgor agrees to indemnify, pay and hold harmless Collateral Agent and each of the Secured Parties and the officers, directors, employees, agents and affiliates of Collateral Agent and each of the Secured Parties (collectively called the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any other Credit Document (including, without limitation, any misrepresentation by the Pledgor in this Agreement or any other Credit Document) (the "indemnified liabilities"); provided that the Pledgors shall not have any obligation to an Indemnitee hereunder with respect to indemnified liabilities if it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a 214 court of competent jurisdiction that such indemnified liability arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, each Pledgor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. Survival. The obligations of each Pledgor contained in this Section 16 shall survive the termination of this Agreement and the discharge of each Pledgor's other obligations under this Agreement and under the other Credit Documents. Reimbursement. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by the Pledgor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Credit Agreement and unless in writing and signed by Collateral Agent and Pledgor. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Pledgor from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other Credit Document, no notice to or demand on the Pledgor in any case shall entitle any such Pledgor to any other or further notice or demand in similar or other circumstances. Termination; Release. When all the Secured Obligations have been indefeasibly paid in full and the Commitments of the Banks to make any Loan under the Credit Agreement shall have expired, this Agreement shall terminate. Upon termination of this Agreement or any release of Pledged Collateral in accordance with the provisions of the Credit Agreement, Collateral Agent shall, upon the request and at the sole cost and expense of the applicable Pledgor, forthwith assign, transfer and deliver to such Pledgor, against receipt and without recourse to or warranty by 215 Collateral Agent, such of the Pledged Collateral to be released (in the case of a release) as may be in the possession of Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, on the order of and at the sole cost and expense of such Pledgor, and proper instruments (including UCC termination statements on Form UCC-3) acknowledging the termination of this Agreement or the release of such Pledged Collateral, as the case may be. Notices. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner set forth in the Credit Agreement; provided that notices to Collateral Agent shall not be effective until received by Collateral Agent. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon each Pledgor, its respective successors and assigns, and (ii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and the other Secured Parties and each of their respective successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of the Pledgor) shall have any interest herein or any right or benefit with respect hereto. Without that limiting the generality of the foregoing clause (ii), any Bank may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank, herein or otherwise, subject however, to the provisions of the Credit Agreement. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS 216 PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 19 HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Obligations Absolute. All obligations of the Pledgor hereunder shall absolute and unconditional irrespective of: 217 any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Pledgor or any other Credit Party; any lack of validity or enforceability of the Credit Agreement or any other Credit Document or any other agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Credit Document or any other agreement or instrument relating thereto; any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect of this Agreement, or any other Credit Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 17 hereof; or any other circumstances which might otherwise constitute a defense available to, or a discharge of, any other Pledgor. Collateral Agent's Right to Sever Indebtedness. The Pledgor acknowledges that (i) the Pledged Collateral does not constitute the sole source of security for the payment and performance of the Secured Obligations and that the Secured Obligations are also secured by other types of property of such Pledgor and its Affiliates in other jurisdictions (all such property, collectively, the "Collateral"), (ii) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to execute in respect of such item a separate credit agreement, and (iii) each Pledgor intends that Collateral Agent have the same rights with respect to the Pledged Collateral, in any judicial proceeding relating to the exercise of any right or remedy hereunder or otherwise, 218 that Collateral Agent would have had if each item of collateral had been pledged or encumbered pursuant to a separate credit agreement and security instrument. In furtherance of such intent, each Pledgor agrees to the greatest extent permitted by law that Collateral Agent may at any time by notice (an "Allocation Notice") to the Pledgor allocate a portion of the Secured Obligations (the "Allocated Indebtedness") to the Pledged Collateral of such Pledgor and sever from the remaining Secured Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to the Pledged Collateral, the Secured Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate credit obligation of each Pledgor unrelated to the other transactions contemplated by the Credit Agreement or any other Credit Document or any document related to either thereof. To the extent that the proceeds of any judicial proceeding relating to the exercise of any right or remedy hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall belong to such Pledgor and shall not be available hereunder to satisfy any Secured Obligations of such Pledgor other than the Allocated Indebtedness. In any action or proceeding to exercise any right or remedy under this Agreement which is commenced after the giving by Collateral Agent of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Secured Obligations hereby secured, and the Pledgor may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 27, the proceeds received by Collateral Agent pursuant to this Agreement shall be applied by Collateral Agent in accordance with the provisions of Section 11 hereof. The Pledgor hereby waives to the greatest extent permitted under law the right to a discharge of any of the Secured Obligations under any statute or rule of law now or hereafter in effect which provides that the exercise of any particular right or remedy as provided for herein (by judicial proceedings or otherwise) constitutes the exclusive means for satisfaction of the Secured Obligations or which makes unavailable any further judgment or any other right or remedy provided for herein because Collateral Agent elected to proceed with the exercise of such initial right or remedy or because of any failure by Collateral Agent to comply with laws that prescribe conditions to the entitlement to such subsequent judgment or the availability of such subsequent right or remedy. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that such subsequent judgment or action is not available to Collateral Agent, no Pledgor shall (i) introduce in any other jurisdiction any judgment so holding as a defense to enforcement against such Pledgor of any remedy in the Credit 219 Agreement or executed in connection with the Credit Agreement or (ii) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered and only with respect to the collateral referred to in such judgment. In the event any instrument in addition to the Allocation Notice is necessary to effectuate the provisions of this Section 27, including, without limitation, any amendment to this Agreement, any substitute promissory note or affidavit or certificate of any kind, Collateral Agent may execute and deliver such instrument as the attorney-in-fact of the Pledgor. Notwithstanding anything set forth herein to the contrary, the provisions of this Section 27 shall be effective only to the maximum extent permitted by law. Future Advances. This Agreement shall secure the payment of any amounts advanced from time to time pursuant to the Credit Agreement. Facilitating Governmental Approvals; Specific Performance. In connection with the exercise by Collateral Agent of its rights under this Agreement relating to the disposition of the Pledged Collateral as it may affect the control of any Governmental License issued by the FCC or any other authorizations, agreements, permits, licenses, and franchises of the Pledgor, it may be necessary to obtain the prior consent or approval of the FCC or other Governmental Authority to the exercise of Collateral Agent's rights with respect to the Pledged Collateral. To the extent that any such consent or approval is required for any action that Collateral Agent may take under this Agreement with respect to the Pledged Collateral, receipt of such FCC or Governmental Authority approval shall be a condition precedent to Collateral Agent's exercise of such rights. In furtherance of the first sentence of this Section, the Pledgor hereby agrees, at its own cost, to use its best efforts to take any and all actions which Collateral Agent may request in order to obtain such consents or approvals or any other governmental authorization as may be necessary to enable Collateral Agent to exercise and enjoy the full rights and benefits granted to it under this Agreement, the Credit Agreement, or any other Credit Document, including, without limitation, the preparation, execution, delivery or filing on 220 the Pledgor's behalf and in such Pledgor's name, or in such other name as may be appropriate or required, or causing to be prepared, executed, delivered or filed, all applications, certificates, filings, instruments, information, reports and other documents (including, without limitation, any application for any assignment or transfer of control or ownership). The Pledgor hereby acknowledges that a breach of any of its respective obligations contained in this Agreement will cause irreparable injury to Collateral Agent, and that such a breach would not be adequately compensable in damages, and therefore Pledgors agree that their obligations under this Agreement shall be specifically enforceable. 221 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. AMERICAN TELECASTING, INC., as Pledgor By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: BANQUE INDOSUEZ, NEW YORK BRANCH, as Collateral Agent By: /s/ BARQUE INDOSUEZ ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: Notice Address: Banque Indosuez, New York Branch 1211 Avenue of the Americas New York, N.Y. 10036 Attention: Michael Arougheti 222 SECURITIES PLEDGE AGREEMENT This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of February 26, 1997, made by AMERICAN TELECASTING OF GREEN BAY, INC., a Delaware corporation having an office at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado 80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at 1211 Avenue of the Americas, New York, New York 10036, as pledgee, assignee and secured party, in its capacity as collateral agent (in such capacities and together with any successors in such capacities, the "Collateral Agent") for the lending institutions (the "Banks") under the Credit Agreement (as hereinafter defined). R E C I T A L S : A. Pursuant to a certain credit agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Credit Agreement), among American Telecasting, Inc. ("ATel"), the Banks and Banque Indosuez, New York Branch, as Agent for the Banks, the Banks have agreed to make to or for the account of ATel certain Loans up to an aggregate principal amount of $17,000,000. B. The Pledgor is the legal and beneficial owner of the Pledged Collateral (as hereinafter defined) pledged by it. C. It is a condition precedent to the obligations of the Banks to make the Loans under the Credit Agreement that the Pledgor execute and deliver the applicable Credit Documents, including this Agreement. D. The Pledgor has executed and delivered to Collateral Agent a certain guarantee instrument (the "Guarantee") pursuant to which, among other things, the Pledgor has guaranteed the obligations of ATel under the 223 Credit Agreement, and the Pledgor desires that its obligations under such Guarantee be secured hereunder. E. This Agreement is given by the Pledgor in favor of Collateral Agent for its benefit and the benefit of the Banks and the Agent (collectively, the "Secured Parties") to secure the payment and performance of all of the Secured Obligations (as defined in Section 2). A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows: Section 1. Pledge. As collateral security for the payment and performance when due of all the Secured Obligations, the Pledgor hereby pledges, assigns, transfers and grants to Collateral Agent for the benefit of the Secured Parties, a continuing first priority security interest in and to all of the right, title and interest of the Pledgor in and to the following property, whether now existing or hereafter acquired, (collectively, the "Pledged Collateral"): (a) the issued and outstanding shares of capital stock described on Schedule I hereto ("the Pledged Shares"), including the certificates representing the Pledged Shares and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares; (b) all additional shares of capital stock of any issuer of the Pledged Shares from time to time acquired by the Pledgor in any manner (which securities shall be deemed to be part of the Pledged Shares) and the certificates representing such additional securities and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to such additional securities; 224 (c) all intercompany notes described on Schedule II hereto (the "Intercompany Notes") now owned or held by Pledgor and from time to time acquired by Pledgor in any way, and all certificates or instruments evidencing such Intercompany Notes and all proceeds thereof, all accessions thereto and substitutions therefor; (d) all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital, income, profits and other property, interests or proceeds from time to time received, receivable or otherwise distributed to the Pledgor in respect of or in exchange for any or all of the Pledged Shares (collectively, "Distributions"); and (e) all Proceeds (as defined under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "UCC") or under other relevant law) of any of the foregoing, and in any event, including, without limitation, any and all (i) proceeds of any insurance (except payments made to a Person which is not a party to this Agreement), indemnity, warranty or guarantee payable to Collateral Agent or to the Pledgor from time to time with respect to any of its respective Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture Collateral of all or any part of its respective Pledged Collateral by any Governmental Authority (or any person acting under color of a Governmental Authority), (iii) instruments representing obligations to pay amounts in respect of Pledged Shares, (iv) products of the Pledged Collateral and (v) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. Section 2. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 225 362(a)) of (i) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Guarantee (including, without limitation, the Pledgor's obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in the Guarantee), (ii) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement (including, without limitation, the obligations of the Pledgor to pay principal, interest and all other reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the Obligations contained in the Credit Agreement), and (iii) without duplication of the amounts described in clauses (i) and (ii), all Obligations of the Pledgor now existing or hereafter arising under or in respect of this Agreement or any other Security Document, including, without limitation, with respect to all reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement (the obligations described in clauses (i), (ii) and (iii), collectively, the "Secured Obligations"). Section 3. No Release. Subject to Section 18 of this Agreement, nothing set forth in this Agreement shall relieve the Pledgor from the performance of any term, covenant, condition on the Pledgor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to the Person under or in respect of any of the Pledged Collateral or shall impose any obligation on Collateral Agent or any Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor's part to be so performed or observed or shall impose any liability on Collateral Agent or any Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any representation or warranty on the part of the Pledgor contained in this Agreement, or any other Credit Document or under or in respect of the Pledged Collateral or made in connection herewith or therewith. Subject to Section 18 of this Agreement, the obligations of the Pledgor contained in this Section 3 shall survive the termination of this Agreement and the discharge of the Pledgors' other obligations under this Agreement and the other Credit Documents. 226 Section 4. Delivery of Pledged Collateral. (a) All certificates, agreements or instruments representing or evidencing the Pledged Collateral, to the extent not previously delivered to Collateral Agent, shall immediately upon receipt thereof by the Pledgor be delivered to and held by or on behalf of Collateral Agent pursuant hereto. All Pledged Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank (with signatures appropriately guaranteed), all in form and substance satisfactory to Collateral Agent. Subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of an Event of Default, to endorse, assign or otherwise transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral. Collateral Agent shall provide the Pledgor with notice of any endorsement, assignment or other transfer made pursuant to the preceding sentence. In addition, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right at any time to exchange certificates representing or evidencing Pledged Collateral for certificates of smaller or larger denominations. (b) If an issuer of Pledged Shares is incorporated in a jurisdiction which does not permit the use of certificates to evidence equity ownership, then the Pledgor shall, to the extent permitted by applicable law, record such pledge on the stock register of such issuer, execute any customary stock pledge forms or other documents necessary or appropriate to complete the pledge and give Collateral Agent the right to transfer the Pledged Shares under the terms hereof and provide to Collateral Agent an opinion of counsel, in form and substance satisfactory to Collateral Agent, confirming such pledge. (c) Notwithstanding any provision of this Section 4 to the contrary, if the exercise of any rights provided in this Section 4 or Section 10 relates to the ownership or control of any radio, television or other license, permit, certificate or approval granted or issued by the FCC or any other Governmental Authority (including, without limitation, any multichannel or single channel multipoint distribution 227 service, local multipoint distribution service, operational-fixed microwave service, cable television relay service station, business radio, instructional television fixed service, earth station or experimental licenses or permits issued by the FCC) (each, a "Governmental License") held by the Pledgor or a subsidiary of the Pledgor and it may be necessary to obtain the consent or approval of the FCC prior to the exercise of such rights, the provisions of Section 29 of this Agreement shall apply. Section 5. Supplements, Further Assurances. (a) The Pledgor agrees that at any time and from time to time, at the sole cost and expense of such Pledgor, the Pledgor shall promptly execute and deliver all further instruments and documents, including, without limitation, supplemental or additional UCC-1 financing statements, and take all further action that may be necessary or that Collateral Agent may reasonably request, in order to perfect and protect the pledge, security interest and Lien granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. (b) The Pledgor shall, upon obtaining any Pledged Shares of any Person promptly (and in any event within three Business Days) deliver to Collateral Agent a pledge amendment, duly executed by the Pledgor, in substantially the form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. Section 6. Representations, Warranties and Covenants. The Pledgor represents, warrants and covenants as follows (as to itself only): 228 (a) No Liens. The Pledgor is, and at the time of any delivery of any Pledged Collateral to Collateral Agent pursuant to Section 4 of this Agreement will be, the sole legal and beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. All Pledged Collateral is on the date, and will be, so owned by the Pledgor, as applicable, free and clear of any Lien except for the Lien created by this Agreement. (b) Authorization, Enforceability. The Pledgor has the requisite corporate power, authority and legal right to pledge and grant a security interest in all of the Pledged Collateral pledged by it pursuant to this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms. (c) No Consents, etc. No consent of any party (including, without limitation, any stockholders or creditors of the Pledgor) and no consent, authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required either (x) for the pledge by the Pledgor of the Pledged Collateral pledged by it pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, or (y) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement, or (z) for the exercise by Collateral Agent of the remedies in respect of the Pledged Collateral pursuant to this Agreement; provided, however, that under the Communications Act and the rules and regulations of the FCC, FCC consent may be required prior to the transfer of control or assignment of any Governmental License issued by the FCC, or the exercise of any voting rights or management over the Pledgor or an issuer of Pledged Shares to the extent it holds, owns or controls any Governmental License issued by the FCC. (d) Due Authorization and Issuance. All of the Pledged Shares have been, and to the extent hereafter issued will be upon such issuance, duly authorized and validly issued and fully paid and nonassessable. 229 (e) Chief Executive Office. The Pledgor's chief executive office is located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado 80919. Pledgor shall not move its chief executive office except to such new location as Pledgor may establish in accordance with the last sentence of this Section 6(e). Pledgor shall not establish a new location for its chief executive office nor shall it change its name until (i) it shall have given Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location or name and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new location or name, Pledgor shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest of Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby. (f) Delivery of Pledged Collateral; Filings. The Pledgor has delivered to Collateral Agent all certificates representing the Pledged Shares and Intercompany Notes and has caused to be filed with the Secretary of State of the State of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor, UCC-1 financing statements evidencing the Lien created by this Agreement, and such delivery, filing and pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations pursuant to the UCC, including, without limitation, the UCC as in effect in the States of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor. (g) Pledged Collateral. All information set forth herein, including the Schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral is accurate and complete in all respects. 230 (h) No Violations, etc. The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board. (i) Ownership of Pledged Collateral. Except as otherwise permitted by the Credit Agreement, the Pledgor at all times will be the sole beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. (j) No Options, Warrants, etc. Except as disclosed in the Credit Agreement, there are no options, warrants, calls, rights, commitments or agreements of any character to which the Pledgor is a party or by which it is bound obligating the Pledgor to issue, deliver or sell or cause to be issued, delivered or sold, additional securities of any issuer of the Pledged Shares or obligating any issuer of the Pledged Shares to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no voting trusts or other agreements or understandings to which the Pledgor or any issuer of the Pledged Shares is a party with respect to the voting of the securities of any issuer of the Pledged Shares. (k) Endorsement, Assignment or Pledge of Instruments. None of the Pledged Collateral is, as of the date of this Agreement, and as to Pledged Collateral which arises from time to time after such date will be, evidenced by any instrument, note or chattel paper, except such as have been or will be endorsed, assigned or pledged and delivered to Collateral Agent by Pledgors simultaneously with the creation thereof. (l) Systems. The Pledged Shares include the Pledgor's interest in each Credit Party operating Systems or holding System Agreements. Section 7. Voting Rights; Distributions; etc. (a) So long as no Event of Default shall have occurred and be continuing: 231 (i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares pledged by it pursuant to this Agreement or any part thereof for any purpose not inconsistent with the terms or purpose of this Agreement or any of the other Credit Documents and each Pledgor shall not in any event exercise such rights in any manner which may have an adverse effect on the value of its respective Pledged Collateral or the security intended to be provided by this Agreement. (ii) Subject to the terms of the Credit Agreement, each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Credit Agreement; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be, and shall be forthwith delivered to Collateral Agent to hold as Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). (iii) Collateral Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of the Pledgor and at such Pledgor's sole cost and expense, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof. (b) Upon the occurrence and during the continuance of an Event of Default: 232 (i) All rights of the Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights; provided, however, to the extent the Pledgor or an issuer of Pledged Shares hold, own or control any Governmental License issued by the FCC, if and to the extent required under the Communications Act or the FCC's rules, until the FCC has consented to a transfer of control or assignment of Pledgor, an issuer of Pledged Shares, or such Governmental License issued by the FCC, Pledgor shall continue to exercise the voting and other consensual rights. (ii) All rights of the Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof shall cease and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. (iii) Subject to any necessary prior or subsequent FCC approval, Collateral Agent shall be entitled to the appointment, as a matter of right and without giving notice to the Pledgor, of a receiver with respect to the Pledged Collateral, without regard to the adequacy or inadequacy of any Pledged Collateral for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof, and each Pledgor does hereby irrevocably consent to such appointment. Any such receiver shall have all the usual qualifications, powers and duties of receivers in similar cases, including the full power to conduct the business of the Pledgors. (c) The Pledgor shall, at such Pledgor's sole cost and expense, from time to time execute and deliver to Collateral Agent and any other Person directed by Collateral Agent, appropriate instruments as Collateral Agent may request in order to permit Collateral Agent to exercise the 233 voting and other rights which it may be entitled to exercise pursuant to Section 7(b)(i) hereof and to receive all Distributions which it may be entitled to receive under Section 7(b)(ii) hereof. (d) All Distributions which are received by the Pledgor contrary to the provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Pledgor and shall immediately be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Section 8. Transfers and Other Liens; Additional Shares; Principal Office. (a) The Pledgor shall not (i) sell, convey, assign or otherwise dispose of, or grant any option, right or warrant with respect to, any of the Pledged Collateral pledged by it pursuant to this Agreement, (ii) create or permit to exist any Lien upon or with respect to any Pledged Collateral pledged by it pursuant to this Agreement other than the Lien granted to Collateral Agent under this Agreement, or (iii) permit any issuer of the Pledged Shares to merge, consolidate or change its legal form unless a majority of the outstanding capital stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged to Collateral Agent pursuant to a pledge agreement in form and substance, satisfactory to Collateral Agent, and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation. (b) The Pledgor shall (i) cause each issuer of the Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to such Pledgor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of capital stock or other equity securities of any issuer of the Pledged Shares which are required to be pledged hereunder. 234 Section 9. Reasonable Care. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Collateral Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Collateral Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Section 10. Remedies Upon Default; Decisions Relating to Exercise of Remedies. (a)If any Event of Default shall have occurred and be continuing, subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, in addition to other rights and remedies provided for herein or otherwise available to it to be exercised from time to time, (i) to retain and apply the Distributions to the Secured Obligations as provided in Section 11 hereof, and (ii) to exercise all the rights and remedies of a secured party on default under the UCC, and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof (including, without limitation, any partial interest in the Pledged Shares) in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase 235 price of any Pledged Collateral payable by such Person at such sale. Each purchaser at any such sale shall acquire the property sold absolutely free from any claim or right on the part of the Pledgor, and Pledgor hereby waives (to the fullest extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor acknowledges and agrees that, to the extent notice of sale shall be required by law, five (5) days' notice to such Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. No notification need be given to the Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. Notwithstanding any provision of this subsection 10(a) to the contrary, in the event of a private or public sale of the Pledged Collateral, prior to the consummation of the sale, to the extent required under the Communications Act of 1934, as amended, or any successor statute or law (the "Communications Act"), the prior consent of the FCC pursuant to the Communications Act and the rules and regulations of the FCC will be obtained. (b) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to Persons who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms 236 less favorable to Collateral Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. (c) Notwithstanding the foregoing and to the extent commercially reasonable, each Pledgor shall, upon the occurrence and during the continuance of an Event of Default, at the request of Collateral Agent, for the benefit of Collateral Agent, cause any registration, qualification under or compliance with any federal or state securities law or laws to be effected with respect to all or any part of the Pledged Collateral as soon as practicable and at such Pledgor's sole cost and expense. The Pledgor will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Collateral, including, without limitation, registration under the Securities Act (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements. The Pledgor will cause Collateral Agent to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to Collateral Agent such number of prospectuses, offering circulars or other documents incident thereto as Collateral Agent from time to time may request, and will indemnify and will cause the issuer of the Pledged Collateral to indemnify Collateral Agent and all others participating in the distribution of such Pledged Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration 237 statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading. (d) If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, each Pledgor shall from time to time furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of securities included in the Pledged Collateral which may be sold by Collateral Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (e) The Pledgor recognizes that, by reason of certain prohibitions contained in laws, rules, regulations or orders of any foreign Governmental Authority, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such foreign Governmental Authority. The Pledgor acknowledges that any such sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales. (f) In addition to any of the other rights and remedies hereunder, Collateral Agent shall have the right to institute a proceeding seeking specific performance in connection with any of the agreements or obligations hereunder. (g) Without limiting the generality of the provisions in Section 15 hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full power of substitution, its true and lawful attorney-in-fact, in its name, place and stead to take any action upon the occurrence and during the continuance of an Event of Default required to reflect the foreclosure sale of the Pledged Collateral or the exercise of any remedy hereunder. The foregoing grant of authority is a power of attorney coupled with an interest and 238 such appointment shall be irrevocable for the term of this Agreement. Section 11. Application of Proceeds. All Distributions held from time to time by Collateral Agent and all cash proceeds received by Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Collateral Agent of its remedies as a secured creditor as provided in Section 10 hereof shall be applied, together with any other sums then held by Collateral Agent pursuant to this Agreement, promptly by Collateral Agent as follows: First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization, including, without limitation, reasonable compensation to Collateral Agent and its agents and counsel, and all reasonable expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization, including, without limitation, reasonable compensation to the Banks and their agents and counsel and all reasonable expenses, liabilities and advances made or incurred by the Banks in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Third, to the indefeasible payment in full in cash of interest and all amounts other than principal under the Credit Agreement at any time and from time to time owing by the Pledgor under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind among amounts so due and payable, together with 239 interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Fourth, to the indefeasible payment in full in cash of principal at any time and from time to time owing by the Pledgor under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind, among amounts of principal so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; and Fifth, to the applicable Pledgor, or its successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. Section 12. Expenses. The Pledgor will upon demand pay to Collateral Agent the amount of any and all expenses, including the reasonable fees and expenses of its counsel and the fees and expenses of any experts and agents, which Collateral Agent may incur in connection with (i) the collection of the Secured Obligations, (ii) the enforcement and administration of this Agreement, (iii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights of Collateral Agent or any Secured Party hereunder or (v) the failure by the Pledgor to perform or observe any of the provisions hereof. All amounts payable by the Pledgor under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. The Pledgor's obligations under this Section 12 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations hereunder. Section 13. No Waiver; Cumulative Remedies. 240 (a) No failure on the part of Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (b) In the event Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this instrument by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Collateral Agent, then and in every such case, each Pledgor, Collateral Agent and each holder of any of the Secured Obligations shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Collateral Agent and the Secured Parties shall continue as if no such proceeding had been instituted. Section 14. Collateral Agent. Collateral Agent has been appointed as collateral agent pursuant to the Credit Agreement. The actions of Collateral Agent hereunder are subject to the provisions of the Credit Agreement. Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided in the Credit Agreement; provided, however, that at the time of appointment of a successor Collateral Agent, if Collateral Agent, through its possession, control, or ownership of Pledged Collateral or otherwise, holds, owns, or controls any Governmental License issued by the FCC such that the FCC must consent to the appointment of a successor Collateral Agent, until the FCC has consented to the appointment of a successor Collateral Agent the Collateral Agent shall retain control over such Pledged Collateral or Government Licenses. Upon the acceptance of any appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent 241 shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. Section 15. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has covenanted to do hereunder or any warranty on the part of such Pledgor contained herein shall be breached, Collateral Agent or any Secured Party may (but shall not be obligated to), subject to the provisions of Section 29 of this Agreement, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all amounts so expended by Collateral Agent or such Secured Party shall be paid by such Pledgor promptly upon demand therefor, with interest at the highest rate then in effect under the Credit Agreement during the period from and including the date on which such funds were so expended to the date of repayment. The Pledgor's obligations under this Section 15 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations under this Agreement, the Credit Agreement and any other Credit Document. The Pledgor hereby appoints Collateral Agent its attorney-in-fact with an interest, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the other Credit Documents which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement except that with respect to any FCC applications or filings or other action subject to FCC rules, regulations and policies, Collateral Agent shall serve as attorney-in-fact only to the extent permitted under the Communications Act and FCC rules, regulations and policies. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. The Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. 242 Section 16. Indemnity. (a) Indemnity. The Pledgor agrees to indemnify, pay and hold harmless Collateral Agent and each of the Secured Parties and the officers, directors, employees, agents and affiliates of Collateral Agent and each of the Secured Parties (collectively called the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any other Credit Document (including, without limitation, any misrepresentation by the Pledgor in this Agreement or any other Credit Document) (the "indemnified liabilities"); provided that the Pledgors shall not have any obligation to an Indemnitee hereunder with respect to indemnified liabilities if it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such indemnified liability arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, each Pledgor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. (b) Survival. The obligations of each Pledgor contained in this Section 16 shall survive the termination of this Agreement and the discharge of each Pledgor's other obligations under this Agreement and under the other Credit Documents. (c) Reimbursement. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to 243 reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. Section 17. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by the Pledgor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Credit Agreement and unless in writing and signed by Collateral Agent and Pledgor. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Pledgor from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other Credit Document, no notice to or demand on the Pledgor in any case shall entitle any such Pledgor to any other or further notice or demand in similar or other circumstances. Section 18. Termination; Release. When all the Secured Obligations have been indefeasibly paid in full and the Commitments of the Banks to make any Loan under the Credit Agreement shall have expired, this Agreement shall terminate. Upon termination of this Agreement or any release of Pledged Collateral in accordance with the provisions of the Credit Agreement, Collateral Agent shall, upon the request and at the sole cost and expense of the applicable Pledgor, forthwith assign, transfer and deliver to such Pledgor, against receipt and without recourse to or warranty by Collateral Agent, such of the Pledged Collateral to be released (in the case of a release) as may be in the possession of Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, on the order of and at the sole cost and expense of such Pledgor, and proper instruments (including UCC termination statements on Form UCC-3) acknowledging the termination of this Agreement or the release of such Pledged Collateral, as the case may be. Section 19. Notices. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner set forth in the Credit Agreement; 244 provided that notices to Collateral Agent shall not be effective until received by Collateral Agent. Section 20. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon each Pledgor, its respective successors and assigns, and (ii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and the other Secured Parties and each of their respective successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of the Pledgor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Bank may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank, herein or otherwise, subject however, to the provisions of the Credit Agreement. Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS AMERICAN TELECASTING, INC., WITH AN ADDRESS AT 5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS, COLORADO 80919, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY 245 SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 19 HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. Section 23. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 24. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. Section 25. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Section 26. Obligations Absolute. All obligations of the Pledgor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Pledgor or any other Credit Party; 246 (ii) any lack of validity or enforceability of the Credit Agreement, the Guarantee or any other Credit Document or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, the Guarantee, any other Credit Document or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect of this Agreement, the Guarantee or any other Credit Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 17 hereof; or (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any other Pledgor. Section 27. Collateral Agent's Right to Sever Indebtedness. (a) The Pledgor acknowledges that (i) the Pledged Collateral does not constitute the sole source of security for the payment and performance of the Secured Obligations and that the Secured Obligations are also secured by other types of property of such Pledgor and its Affiliates in other jurisdictions (all such property, collectively, the " "), (ii) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to 247 execute in respect of such item a separate credit agreement, and (iii) each Pledgor intends that Collateral Agent have the same rights with respect to the Pledged Collateral, in any judicial proceeding relating to the exercise of any right or remedy hereunder or otherwise, that Collateral Agent would have had if each item of collateral had been pledged or encumbered pursuant to a separate credit agreement and security instrument. In furtherance of such intent, each Pledgor agrees to the greatest extent permitted by law that Collateral Agent may at any time by notice (an "Allocation Notice") to the Pledgor allocate a portion of the Secured Obligations (the "Allocated Indebtedness") to the Pledged Collateral of such Pledgor and sever from the remaining Secured Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to the Pledged Collateral, the Secured Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate credit obligation of each Pledgor unrelated to the other transactions contemplated by the Credit Agreement or any other Credit Document or any document related to either thereof. To the extent that the proceeds of any judicial proceeding relating to the exercise of any right or remedy hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall belong to such Pledgor and shall not be available hereunder to satisfy any Secured Obligations of such Pledgor other than the Allocated Indebtedness. In any action or proceeding to exercise any right or remedy under this Agreement which is commenced after the giving by Collateral Agent of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Secured Obligations hereby secured, and the Pledgor may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 27, the proceeds received by Collateral Agent pursuant to this Agreement shall be applied by Collateral Agent in accordance with the provisions of Section 11 hereof. (b) The Pledgor hereby waives to the greatest extent permitted under law the right to a discharge of any of the Secured Obligations under any statute or rule of law now or hereafter in effect which provides that the exercise of any particular right or 248 remedy as provided for herein (by judicial proceedings or otherwise) constitutes the exclusive means for satisfaction of the Secured Obligations or which makes unavailable any further judgment or any other right or remedy provided for herein because Collateral Agent elected to proceed with the exercise of such initial right or remedy or because of any failure by Collateral Agent to comply with laws that prescribe conditions to the entitlement to such subsequent judgment or the availability of such subsequent right or remedy. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that such subsequent judgment or action is not available to Collateral Agent, no Pledgor shall (i) introduce in any other jurisdiction any judgment so holding as a defense to enforcement against such Pledgor of any remedy in the Credit Agreement, the Guarantee or any other agreement or instrument executed in connection with the Credit Agreement or (ii) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered and only with respect to the collateral referred to in such judgment. (c) In the event any instrument in addition to the Allocation Notice is necessary to effectuate the provisions of this Section 27, including, without limitation, any amendment to this Agreement, any substitute promissory note or affidavit or certificate of any kind, Collateral Agent may execute and deliver such instrument as the attorney-in-fact of the Pledgor. (d) Notwithstanding anything set forth herein to the contrary, the provisions of this Section 27 shall be effective only to the maximum extent permitted by law. Section 28. Future Advances. This Agreement shall secure the payment of any amounts advanced from time to time pursuant to the Credit Agreement. Section 29. Facilitating Governmental Approvals; Specific Performance. (a) In connection with the exercise by Collateral Agent of its rights under this Agreement relating to the disposition of the Pledged Collateral as it may affect the control of any Governmental License issued by the FCC or any other authorizations, agreements, permits, licenses, and 249 franchises of the Pledgor, it may be necessary to obtain the prior consent or approval of the FCC or other Governmental Authority to the exercise of Collateral Agent's rights with respect to the Pledged Collateral. To the extent that any such consent or approval is required for any action that Collateral Agent may take under this Agreement with respect to the Pledged Collateral, receipt of such FCC or Governmental Authority approval shall be a condition precedent to Collateral Agent's exercise of such rights. In furtherance of the first sentence of this Section, the Pledgor hereby agrees, at its own cost, to use its best efforts to take any and all actions which Collateral Agent may request in order to obtain such consents or approvals or any other governmental authorization as may be necessary to enable Collateral Agent to exercise and enjoy the full rights and benefits granted to it under this Agreement, the Credit Agreement, or any other Credit Document, including, without limitation, the preparation, execution, delivery or filing on the Pledgor's behalf and in such Pledgor's name, or in such other name as may be appropriate or required, or causing to be prepared, executed, delivered or filed, all applications, certificates, filings, instruments, information, reports and other documents (including, without limitation, any application for any assignment or transfer of control or ownership). (b) The Pledgor hereby acknowledges that a breach of any of its respective obligations contained in this Agreement will cause irreparable injury to Collateral Agent, and that such a breach would not be adequately compensable in damages, and therefore Pledgors agree that their obligations under this Agreement shall be specifically enforceable. 250 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. AMERICAN TELECASTING OF GREEN BAY, INC., as Pledgor By: /s/ AMERICAN TELECASTING OF GREEN BAY, INC. ----------------------------------- Name: Title: BANQUE INDOSUEZ, NEW YORK BRANCH, as Collateral Agent By: /s/ BANQUE INDOSUEZ ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: Notice Address: Banque Indosuez, New York Branch 1211 Avenue of the Americas New York, N.Y. 10036 Attention: Michael Arougheti 251 SCHEDULE I Pledged Shares 252
PERCENTAGE OF ALL CAPITAL OR OTHER EQUITY CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF ISSUER SECURITY VALUE NO(S) OF SHARES ISSUER - ------ -------- ----- ------------ --------- -------------
253 SCHEDULE II Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY ISSUER AMOUNT ISSUANCE RATE DATE - ------ --------- -------- -------- --------
254 EXHIBIT 1 PLEDGE AMENDMENT This Pledge Amendment, dated , 199 , is delivered pursuant to Section 5 of the Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Securities Pledge Agreement, dated as of February 24, 1997, made by the undersigned (as defined in the Securities Pledge Agreement), in favor of Banque Indosuez, New York Branch, as Collateral Agent (the "Agreement"; capitalized terms used herein and not defined have the meanings ascribed to them in the Credit Agreement) and that the Pledged Shares listed on this Pledge Amendment shall be deemed to be and shall become part of the Pledged Collateral and shall secure all Secured Obligations. --------------------------------------- By: ----------------------------------- Title: 255 SCHEDULE I Pledged Shares
PERCENTAGE OF ALL CAPITAL OR OTHER EQUITY CLASS OF PAR CERTIFICATE NUMBER INTERESTS OF ISSUER SECURITY VALUE NO(S) OF SHARES ISSUER - ------ -------- ----- ------------ --------- -------------
256 SCHEDULE II Intercompany Notes
PRINCIPAL DATE OF INTEREST MATURITY ISSUER AMOUNT ISSUANCE RATE DATE - ------ --------- -------- -------- --------
257 -1- GENERAL SECURITY AGREEMENT GENERAL SECURITY AGREEMENT (the "Agreement"), dated as of February 26, 1997, made by each of the subsidiaries party hereto (collectively, the "Pledgors"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at 1211 Avenue of the Americas, 7th Floor, New York, New York 10036, as pledgee, assignee and secured party, in its capacity as collateral agent (in such capacities and together with any successors in such capacity, "Collateral Agent") for the lending institutions (the "Banks") from time to time party to the Credit Agreement (as hereinafter defined). R E C I T A L S : A. Pursuant to a certain credit agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms used herein and not defined shall have the meanings assigned to them in the Credit Agreement), among American Telecasting, Inc. ("ATel"), the Banks and Banque Indosuez, New York Branch, as Agent for the Banks, the Banks have agreed to make to or for the account of ATel Loans up to an aggregate principal amount of $17,000,000. B. Pledgors are the legal and beneficial owners of the Pledged Collateral (as hereinafter defined). C. Pledgors have executed and delivered to Collateral Agent a certain guarantee instrument (the "Guarantee") pursuant to which, among other things, Pledgors have guaranteed the obligations of ATel under the Credit Agreement, and Pledgors desire that their obligations under such Guarantee be secured hereunder. D. It is a condition to the obligations of the Banks to make the Loans under the Credit Agreement that Pledgors execute and deliver the applicable Credit Documents, including this Agreement. ______________________________________ Footnote continued from previous page. 258 -2- E. This Agreement is given by Pledgors in favor of Collateral Agent for its benefit and the benefit of the Banks and the Agent (collectively, the "Secured Parties") to secure the payment and performance of all of the Secured Obligations (as defined in Section 2). A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgors and Collateral Agent hereby agree as follows: Pledge. As collateral security for the payment and performance when due of all the Secured Obligations, Pledgors hereby pledge, assign, transfer and grant to Collateral Agent for its benefit and the benefit of the Secured Parties, a continuing first priority security interest (except as set forth on Schedule A hereto) in and to all of the right, title and interest of Pledgors in, to and under the following property, whether now existing or hereafter acquired (collectively, the "Pledged Collateral"): each and every Receivable (as hereinafter defined); all Inventory (as hereinafter defined); all books, records, ledgers, print-outs, file materials and other papers containing information relating to Receivables and any account debtors in respect thereof, together with all Contracts (as hereinafter defined); all Equipment (as hereinafter defined); provided, however, that the security interest granted hereby in respect of any transmission and reception equipment utilized to transmit on ITFS frequencies shall be subject and subordinate to the terms of the System Agreements and the rights of the licensees of the ITFS frequencies under the System Agreements; ______________________________________ Footnote continued from previous page. 259 -3- all Intangibles (as hereinafter defined); all Insurance Policies (as hereinafter defined); all Pension Plan Reversions (as hereinafter defined); all Governmental Licenses, but only as and to the extent permitted by applicable law and administrative rules and regulations (including the rules and regulations promulgated by the FCC); all System Agreements (other than channel lease agreements), but only as and to the extent permitted by applicable law and administrative rules and regulations (including the rules and regulations promulgated by the FCC); any and all property of every name and nature which from time to time after the date hereof, by delivery or by writing of any kind for the purposes hereof, shall have been conveyed, mortgaged, pledged, assigned or transferred by Pledgors or by anyone on a Pledgor's behalf or with its consent to Collateral Agent for the benefit of the Secured Parties, which is hereby authorized to receive at any and all times any such property, as and for additional security for the payment of the Secured Obligations and to hold and apply such property subject to and in accordance with this Agreement; including, without limitation, all monies due and to become due to Pledgors in connection with any of the foregoing and all rights, remedies, powers, privileges and claims of Pledgors under or in connection therewith; all Documents (as hereinafter defined); all Instruments (as hereinafter defined); and ______________________________________ Footnote continued from previous page. 260 -4- all Proceeds (as hereinafter defined) of any and all of the foregoing. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of (i) all Obligations of Pledgors now existing or hereafter arising under or in respect of the Guarantee (including, without limitation, Pledgors' obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in the Guarantee), (ii) all Obligations of the Pledgors now existing or hereafter arising under or in respect of the Credit Agreement (including, without limitation, the obligations of Pledgors to pay principal, interest and all other reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the Obligations contained in the Credit Agreement) and (iii) without duplication of the amounts described in clauses (i) and (ii), all obligations of Pledgors now existing or hereafter arising under or in respect of this Agreement or any other Security Document, including, without limitation, all reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement or in any other Security Document, in each case whether in the regular course of business or otherwise (the obligations described in clauses (i), (ii) and (iii), collectively, the "Secured Obligations"). No Release. Nothing set forth in this Agreement shall relieve Pledgors from the performance of any term, covenant, condition or agreement on Pledgors' part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to any Person under or in respect of any of the Pledged Collateral or shall impose any obligation on Collateral Agent or any Secured Party to perform or observe any such term, covenant, condition or agreement on Pledgors' part to be so performed or observed or shall impose ______________________________________ Footnote continued from previous page. 261 -5- any liability on Collateral Agent or any Secured Party for any act or omission on the part of Pledgors relating thereto or for any breach of any representation or warranty on the part of Pledgors contained in this Agreement or any other Credit Document, or under or in respect of the Pledged Collateral or made in connection herewith or therewith. The obligations of Pledgors contained in this Section 3 shall survive the termination of this Agreement and the discharge of Pledgors' other obligations under this Agreement or the other Credit Documents. Supplements by Collateral Agent. Pledgors hereby authorize Collateral Agent, without relieving Pledgors of any obligations hereunder, to file financing statements, continuation statements, amendments thereto and other documents relative to all or any part thereof, without the signature of Pledgors where permitted by law, and Pledgors agree to do such further acts and things, and to execute and deliver to Collateral Agent such additional assignments, agreements, powers and instruments, as Collateral Agent may deem necessary or appropriate, wherever required or permitted by law in order to perfect and preserve the rights and interests granted to Collateral Agent hereunder or to carry into effect the purposes of this Agreement or better to assure and confirm unto Collateral Agent its respective rights, powers and remedies hereunder. All of the foregoing shall be at the sole cost and expense of Pledgors. Representations, Warranties and Covenants. Pledgors represent, warrant and covenant as follows: Necessary Filings. Upon the filing of financing statements and acceptance thereof in the appropriate offices under the UCC, the security interest granted to Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement in and to the Pledged Collateral will constitute a perfected security interest therein, superior and prior to the rights of all other Persons therein and subject to no Liens other than the Liens identified on Schedule A relating to the items of Pledged Collateral identified on such schedule (collectively, "Prior Liens"). ______________________________________ Footnote continued from previous page. 262 -6- No Liens. Pledgors are as of the date hereof, and, as to Pledged Collateral acquired by them from time to time after the date hereof, Pledgors will be, the owner of all Pledged Collateral free from any Lien or other right, title or interest of any Person other than (i) Prior Liens, (ii) the Lien and security interest created by this Agreement, (iii) Liens of the type described in clauses (a), (b), (c), (d), (i) and (j) of the definition of Permitted Encumbrances and (iv) Liens for taxes being contested in accordance with the Credit Agreement, and Pledgors shall defend the Pledged Collateral against all claims and demands of all Persons at any time claiming any interest therein adverse to Collateral Agent or any Secured Party. Other Financing Statements. There is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Pledged Collateral other than financing statements relating to (i) Prior Liens, (ii) this Agreement and (iii) Liens of the type described in clauses (a), (b), (c), (d), (i) and (j) of the definition of Permitted Encumbrances and so long as any of the Secured Obligations remain unpaid or the Commitments of the Banks to make any Loan shall not have expired or been sooner terminated, Pledgors shall not execute, authorize or permit to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Pledged Collateral, except, in each case, financing statements filed or to be filed in respect of and covering the security interests granted by Pledgors pursuant to this Agreement, financing statements relating to Prior Liens and financing statements relating to Liens of the type described in clauses (a), (b), (c), (d) and (i) of the definition of Permitted Encumbrances. Chief Executive Office; Records. The chief executive office of each of Pledgors is located at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919. Each Pledgor shall not move its chief executive office except to such new location as it may establish in accordance with the last sentence of this Section 5(d). All tangible ______________________________________ Footnote continued from previous page. 263 -7- evidence of all Receivables, Pension Plan Reversions, Contracts, Intangibles, Insurance Policies, System Agreements and Governmental Licenses of each Pledgor and the only original books of account and records of each Pledgor relating thereto are, and will continue to be, kept at such chief executive office, or at such new location for such chief executive office as each Pledgor may establish in accordance with the last sentence of this Section 5(d). All Receivables, Pension Plan Reversions, Contracts, Intangibles, Insurance Policies, System Agreements and Governmental Licenses of each Pledgor are, and will continue to be, controlled and monitored (including, without limitation, for general accounting purposes) from such chief executive office location shown above, or such new location as a Pledgor may establish in accordance with the last sentence of this Section 5(d). Pledgors shall not establish a new location for their chief executive office nor change their name until (i) it shall have given Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location or name and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new location or name, Pledgors shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest of Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby, including, without limitation, obtaining waivers of landlord's or warehouseman's liens with respect to such new location, if applicable. Location of Inventory. All Inventory held on the date hereof by each Pledgor is located at one of the locations shown with respect to each such Pledgor on Schedule B hereto, except for Inventory in transit in the ordinary course of business to or from one or more of such locations or such inventory located at the premises of subscribers in the ordinary course of business. All Inventory now held or subsequently acquired shall be kept at one of the locations shown on Schedule B hereto with respect to each Pledgor, except for Inventory in transit in the ordinary course of business to or from one or more of such locations or such Inventory located at the premises of subscribers in the ordinary course of ______________________________________ Footnote continued from previous page. 264 -8- business, or at such new location as a Pledgor may establish if (i) such Pledgor shall have given to Collateral Agent reasonable prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new location, Pledgors shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest in the Pledged Collateral intended to be granted hereby, including, without limitation, obtaining waivers of landlord's or warehouseman's liens with respect to such new location, if applicable. Location of Equipment. All Equipment held on the date hereof by each Pledgor is located at one of the locations shown with respect to each such Pledgor on Schedule C hereto. All Equipment now held or subsequently acquired by Pledgors shall be kept at one of the locations shown on Schedule C hereto with respect to each Pledgor except for such Equipment located at the premises of subscribers in the ordinary course of business, or such new location as a Pledgor may establish if (i) such Pledgor shall have given to Collateral Agent reasonable prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new location, Pledgors shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest of Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby, including, without limitation, obtaining waivers of landlord's or warehouseman's liens with respect to such new location, if applicable. Authorization, Enforceability. Pledgors have the requisite corporate power, authority and legal right to pledge and grant a security interest in all the Pledged Collateral pursuant to this Agreement, and this Agreement constitutes the legal, valid and binding obligation of Pledgors, enforceable against Pledgors in accordance with ______________________________________ Footnote continued from previous page. 265 -9- its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. No Consents, etc. Except as set forth in Part_B of Schedule D hereto, no consent of any party (including, without limitation, stockholders or creditors of Pledgors or any account debtor under a Receivable) and, except as provided in Section 30 of this Agreement, no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required for (x) the pledge by Pledgors of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by Pledgors, (y) the exercise by Collateral Agent of the rights provided for in this Agreement, or (z) the exercise by Collateral Agent of the remedies in respect of the Pledged Collateral pursuant to this Agreement other than internal consents of the Collateral Agent. Pledged Collateral. All information set forth herein, including the Schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral is accurate and complete in all material respects. System Agreements. The System Agreements listed on Schedule D hereto are all of the System Agreements the Pledgors and ATel have entered into with respect to Pledgors' and ATel's operation or planned development of their System in effect on the date hereof. Such System Agreements have been delivered to the Banks and are true and correct copies thereof. Except as to matters which would not, individually or in the aggregate, materially diminish the value of any Market, the System Agreements are in full force and effect, have not been amended or modified except as disclosed on Schedule D hereto, have not been assigned by any Pledgor, and no Pledgor has sent ______________________________________ Footnote continued from previous page. 266 -10- or received any notice of default thereunder and to the best knowledge of Pledgors no event has occurred as of the date hereof which with the passage of time or the giving of notice, or both, would constitute a default thereunder as of the date hereof. Each Pledgor shall perform and observe (except as otherwise provided by law) each term and provision of each System Agreement and maintain each System Agreement in full force and effect except in the ordinary course of business consistent with past practice and to the extent such actions would not have a Material Adverse Effect. No Amendments. Except as permitted by Section 6.10 of the Credit Agreement, each Pledgor agrees that no amendment or modification of any material term of any System Agreement shall be effective without the prior written consent of Collateral Agent. Each Pledgor further agrees that, so long as this Agreement is in effect, such Pledgor will not terminate any System Agreement and will not assign, sell, pledge, mortgage or otherwise transfer or encumber its interest in any System Agreement except in the ordinary course of business consistent with past practice and to the extent such actions would not have a Material Adverse Effect. No Defaults. Neither the execution nor the delivery of this Agreement constitutes the basis for a default under any System Agreement. Notices. Each Pledgor shall notify Collateral Agent in the event it receives any material notice or communication with respect to any System Agreement, including, without limitation, notices of default, and shall promptly forward copies of any such communications to Collateral Agent. Default Under System Agreements. To the extent permitted under the terms of any System Agreement and the terms of the written consent of the lessor under any such System Agreement, in the event of a default by any Pledgor under any System Agreement, the lessor under such agreement shall permit Collateral Agent to cure such ______________________________________ Footnote continued from previous page. 267 -11- default and thereafter perform any of such Pledgor's obligations under such System Agreement, and such performance by Collateral Agent will not constitute a default under such System Agreement. Governmental Licenses. Except as to matters which would not, individually or in the aggregate, materially diminish the value of any Market, the Governmental Licenses listed on Schedule E hereto are all of the Governmental Licenses each Pledgor holds, leases or subleases in connection with the operation of its System on the date hereof. All such Governmental Licenses are validly existing and in full force and effect under the Communications Act and any other statutes, laws, and regulations pursuant to which the Governmental Licenses have been issued, including the rules and regulations of the FCC. There is not now pending, or to the knowledge of any Pledgor is there threatened, any action by or before any governmental agency or entity, including the FCC, to revoke or materially and adversely modify any of such Governmental Licenses issued to such Pledgor, and such Pledgor is in substantial compliance with said Governmental Licenses. There are not, or to the knowledge of any Pledgor threatened, any notice of violation, notice of apparent liability or of forfeiture or material complaint against such Pledgor in connection with the System, except as incurred in the ordinary course of business and would not have a Material Adverse Effect. Special Provisions Concerning Receivables. Special Representations and Warranties. As of the time when each of its Receivables arises, each Pledgor shall be deemed to have represented and warranted that such Receivable and all records, papers and documents relating thereto to such Pledgor's knowledge (i) are genuine and correct and in all respects what they purport to be, (ii) represent the legal, valid and binding obligation of the account debtor, evidencing indebtedness unpaid and owed by such account debtor, arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein or out of an advance or a loan, (iii) will, in the case of a ______________________________________ Footnote continued from previous page. 268 -12- Receivable, except for the original or duplicate original invoice sent to a purchaser evidencing such purchaser's account, be the only original writings evidencing and embodying such obligation of the account debtor named therein, (iv) constitute and evidence true and valid obligations, enforceable in accordance with their respective terms, not subject to any defenses, set-offs or counterclaims except with respect to refunds, returns and allowances in the ordinary course of business, or stamp or other taxes, and (v) are in compliance and conform with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. Maintenance of Records. Pledgors shall keep and maintain at their own cost and expense complete records of each Receivable, in a manner consistent with prudent business practice, including, without limitation, records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto, and Pledgors shall make the same available to Collateral Agent or any Secured Party for inspection upon reasonable prior notice to such Pledgors, at such times during normal business hours as Collateral Agent or an Secured Party may request. Pledgors shall, at Pledgors' sole cost and expense, upon Collateral Agent's demand made at any time after the occurrence of an Event of Default, deliver all tangible evidence of Receivables, including, without limitation, all documents evidencing Receivables and any books and records relating thereto to Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by Pledgors). Upon the occurrence of an Event of Default, Collateral Agent may transfer a full and complete copy of each Pledgor's books, records, credit information, reports, memoranda and all other writings relating to the Receivables to and for the use by any Person that has acquired or is contemplating acquisition of an interest in the Receivables or Collateral Agent's security interest therein without the consent of such Pledgor; provided that, to the extent any such document is subject to a confidentiality agreement, Collateral Agent shall not transfer such document unless such Person executes a confidentiality agreement in a form satisfactory to the Collateral Agent. ______________________________________ Footnote continued from previous page. 269 -13- Legend. Pledgors shall legend, at the request of Collateral Agent made at any time after the occurrence of an Event of Default and in form and manner satisfactory to Collateral Agent, the Receivables and other books, records and documents of Pledgors evidencing or pertaining to the Receivables with an appropriate reference to the fact that the Receivables have been assigned to Collateral Agent for the benefit of the Secured Parties and that Collateral Agent has a security interest therein. Modification of Terms, etc. Pledgors shall not rescind or cancel any indebtedness evidenced by any Receivable or modify any term thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with past business practice, or extend or renew any such indebtedness except in the ordinary course of business consistent with past business practice or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto or sell any Receivable or interest therein without the prior written consent of Collateral Agent. Pledgors shall timely fulfill all material obligations on their part to be fulfilled under or in connection with the Receivables. Collection. Pledgors shall cause to be collected from the account debtor of each of the Receivables, as and when due (including, without limitation, Receivables that are delinquent, such Receivables to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Receivable, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable, except that Pledgors may, with respect to a Receivable, allow in the ordinary course of business (i) a refund or credit due as a result of returned or damaged or defective merchandise and (ii) such extensions of time to pay amounts due in respect of Receivables and such other modifications of payment terms or settlements in respect of Receivables as shall be commercially reasonable in the circumstances, all in accordance with Pledgors' ordinary course of business consistent with their collection practices as in effect from time to time. The costs and expenses (including, without limitation, attorneys' fees) of collection, in any ______________________________________ Footnote continued from previous page. 270 -14- case, whether incurred by Pledgors, Collateral Agent or any Secured Party, shall be paid by Pledgors. Instruments. Pledgors shall deliver to Collateral Agent, within five days after receipt thereof by Pledgors, any Instrument evidencing Receivables which is in the principal amount of $25,000 or more. Any Instrument delivered to Collateral Agent pursuant to this Section 6(f) shall be appropriately endorsed (if applicable) to the order of Collateral Agent, as agent for the Secured Parties, and shall be held by Collateral Agent as further security hereunder. Cash Collateral. Upon the occurrence of an Event of Default, if Collateral Agent so directs, Pledgors shall cause all payments on account of the Receivables to be held by Collateral Agent as cash collateral, upon acceleration or otherwise. Without notice to or assent by Pledgors, Collateral Agent may apply any or all amounts then or thereafter held as cash collateral in the manner provided in Section 11. The costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by Collateral Agent or any Secured Party, shall be paid by Pledgors. Provisions Concerning All Pledged Collateral. Protection of Collateral Agent's Security. Pledgors shall not take any action that impairs the rights of Collateral Agent or any Secured Party in the Pledged Collateral. Pledgors shall at all times keep the Inventory and Equipment insured, at Pledgors' own expense, to Collateral Agent's reasonable satisfaction against fire, theft and all other risks to which the Pledged Collateral may be subject, in such amounts and with such deductibles as would be maintained by operators of businesses similar to the business of Pledgors or as Collateral Agent may otherwise reasonably require. Each policy or certificate with respect to such insurance shall be endorsed to Collateral Agent's satisfaction for the benefit of Collateral Agent (including, without limitation, by naming Collateral Agent as an additional ______________________________________ Footnote continued from previous page. 271 -15- named insured and sole loss payee as Collateral Agent may request) and such policy or certificate shall be delivered to Collateral Agent. Each such policy or certificate shall state that such policy cannot be cancelled without 30 days' prior written notice to Collateral Agent. At least 30 days prior to the expiration of any such policy of insurance, Pledgors shall deliver to Collateral Agent an extension or renewal policy or an insurance certificate evidencing renewal or extension of such policy. If Pledgors shall fail to insure such Pledged Collateral to Collateral Agent's reasonable satisfaction, Collateral Agent shall have the right (but shall be under no obligation) to advance funds to procure or renew or extend such insurance and Pledgors agree to reimburse Collateral Agent for all costs and expenses thereof, with interest on all such funds from the date advanced until paid in full at the highest rate then in effect under the Credit Agreement. Insurance Proceeds. Upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the option to apply any proceeds of insurance received by it pursuant to this Agreement toward the payment of the Secured Obligations in accordance with Section 11 hereof or to continue to hold such proceeds as additional collateral to secure the performance by each Pledgor of the Secured Obligations. So long as no Event of Default shall have occurred and be continuing, each Pledgor shall have the option (i) to direct Collateral Agent to apply any proceeds of insurance received by it toward payment of the Secured Obligations in accordance with Section 11 hereof or (ii) to elect, by delivery of written notice to Collateral Agent, to apply the proceeds of such insurance to the repair or replacement of the item or items of Pledged Collateral in respect of which such proceeds were received. In the event that any Pledgor elects to apply such proceeds to the repair or replacement of any item of Pledged Collateral pursuant to clause (ii) of the preceding sentence, Collateral Agent shall release such proceeds as soon as practicable following its receipt of such Pledgor's written notice of such election. Such Pledgor shall upon its receipt of such proceeds promptly commence and diligently continue to perform such repair or promptly effect such replacement. ______________________________________ Footnote continued from previous page. 272 -16- Maintenance of Equipment. Each Pledgor shall cause the Equipment to be operated in compliance with all applicable FCC requirements and maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and to the extent consistent with current business practice in accordance with any manufacturer's manual, and shall forthwith, or in the case of any loss or damage which (individually or in the aggregate) exceeds $100,000 to any of the Equipment (of which prompt notice shall be given to Collateral Agent) as quickly as commercially practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable to such end. Payment of Taxes; Claims. Pledgors shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Pledged Collateral including all fees assessed or imposed by the FCC; provided, that, no such tax, assessment, charge, levy or claim shall be required to be paid to the extent that it is being diligently contested in good faith and by appropriate proceedings. Notwithstanding the foregoing, Pledgors may at their own expense contest the amount or applicability of any of the obligations described in the preceding sentence by appropriate legal or administrative proceedings, prosecution of which operates to prevent the collection thereof and the sale or forfeiture of the Pledged Collateral or any part thereof to satisfy the same; provided, however, that in connection with such contest, Pledgors shall have made provision for the payment of such contested amount on Pledgors' books if and to the extent required by generally accepted accounting principles. Further Actions. Pledgors shall, at their sole cost and expense, make, execute, endorse, acknowledge, file or refile and/or deliver to Collateral Agent from time to time such lists, descriptions and designations of the Pledged Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, ______________________________________ Footnote continued from previous page. 273 -17- confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Pledged Collateral and other property or rights covered by the security interest hereby granted, which Collateral Agent deems reasonably appropriate or advisable to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral and to perfect, preserve or protect the security interest in the Pledged Collateral created and granted by this Agreement. Financing Statements. Pledgors shall sign and deliver to Collateral Agent such financing and continuation statements, in form acceptable to Collateral Agent, as may from time to time be required to continue and maintain a valid, enforceable, first priority security interest in the Pledged Collateral as are to the extent provided herein and the other rights, as against third parties, provided hereby, all in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant law. Pledgors shall pay any applicable filing fees and other expenses related to the filing of such financing and continuation statements. Pledgors authorize Collateral Agent to file any such financing or continuation statements without the signature of Pledgors where permitted by law. Warehouse Receipts Non-Negotiable. If any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of the Inventory, Pledgors shall not permit such warehouse receipt or receipt in the nature thereof to be "negotiable" (as such term is used in Section 7-104 of the UCC or under other relevant law). Transfers and Other Liens. Pledgors shall not (a) sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral except as permitted by the Credit Agreement or (b) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral other than (i) Prior Liens, (ii) the Lien and security interest granted to Collateral Agent under this ______________________________________ Footnote continued from previous page. 274 -18- Agreement, (iii) Liens of the type described in clauses (a), (b), (c), (d), (i) and (j) of the definition of Permitted Encumbrances and (iv) Liens for taxes being contested in accordance with the Credit Agreement. Reasonable Care. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Collateral Agent, in its individual capacity, accords its own property, it being understood that Collateral Agent shall not have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Remedies upon Default; Obtaining the Pledged Collateral upon Event of Default. (a) Subject to any necessary prior or subsequent FCC approval, if an Event of Default shall have occurred, then and in every such case, Collateral Agent may: Personally, or by agents or attorneys, immediately take possession of the Pledged Collateral or any part thereof, from Pledgors or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon Pledgors' premises where any of the Pledged Collateral is located and remove such Pledged Collateral and use in connection with such removal any and all services, supplies, aids and other facilities of Pledgors. Instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables, the Contracts and the System Agreements) constituting the Pledged Collateral to make any payment required by the terms of such instrument or agreement directly to Collateral Agent; provided, however, that in the event that any such payments are made directly to Pledgors, prior to receipt by any such obligor of such instruction, Pledgors shall segregate all amounts received pursuant thereto in a separate account and pay the same promptly to Collateral Agent. ______________________________________ Footnote continued from previous page. 275 -19- Sell, assign or otherwise liquidate, or direct Pledgors to sell, assign or otherwise liquidate, any or all investments made in whole or in part with the Pledged Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment or liquidation. Take possession of the Pledged Collateral or any part thereof, by directing Pledgors in writing to deliver the same to Collateral Agent at any place or places so designated by Collateral Agent, in which event Pledgors shall at their own expense: (A) forthwith cause the same to be moved to the place or places designated by Collateral Agent and there delivered to Collateral Agent; (B) store and keep any Pledged Collateral so delivered to Collateral Agent at such place or places pending further action by Collateral Agent; and (C) while the Pledged Collateral shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition. Pledgors' obligation to deliver the Pledged Collateral is of the essence of this Agreement. Upon application to a court of equity having jurisdiction, Collateral Agent shall be entitled to a decree requiring specific performance by Pledgors of such obligation. Collateral Agent shall be entitled to the appointment, as a matter of right and without giving notice to any Pledgor, of a receiver with respect to the Pledged Collateral, without regard to the adequacy or inadequacy of any Pledged Collateral for the Secured Obligations or the solvency or insolvency of any Person or entity then legally or equitably liable for the Secured Obligations or any portion thereof, and each Pledgor does hereby irrevocably consent to such appointment. Any such receiver shall have all the usual qualifications, powers and duties of receivers in similar cases, including the full power to conduct the business of such Pledgor. Subject to the provisions of Section 30 of this Agreement, Collateral Agent may assume the rights and obligations under any System Agreement, and in connection therewith request that any Pledgor or its subsidiaries immediately take all steps and actions necessary for the ______________________________________ Footnote continued from previous page. 276 -20- assignment of such System Agreements to Collateral Agent, and such Pledgor or its subsidiaries shall immediately take all such steps and actions necessary for the effective assignment of such System Agreements to Collateral Agent, including, without limitation, the execution of an assignment of lease and obtaining the consent of any Persons which is or may be required for the assignment of such System Agreements to Collateral Agent. Collateral Agent shall have the right to seek specific performance of Pledgors' obligations under this Section 10 in accordance with Section 30 of this Agreement. Remedies; Disposition of the Pledged Collateral. (i) Upon the occurrence of an Event of Default, Collateral Agent may from time to time, subject to any necessary prior or subsequent FCC approval, exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC, and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable. Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Pledged Collateral payable by such Person at such sale. Each purchaser at any such sale shall acquire the property sold absolutely free from any claim or right on the part of Pledgors, and Pledgors hereby waive, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. ______________________________________ Footnote continued from previous page. 277 -21- Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgors hereby waive, to the fullest extent permitted by law, any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. (ii) Pledgors acknowledge and agree that, to the extent notice of sale shall be required by law, five days' notice to Pledgors of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters. No notification need be given to Pledgors if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. Waiver of Notice and Claims. Pledgors hereby waive, to the fullest extent permitted by applicable law, notice or judicial hearing in connection with Collateral Agent's taking possession or Collateral Agent's disposition of any of the Pledged Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which Pledgors would otherwise have under law, and Pledgors hereby further waive, to the fullest extent permitted by applicable law: (i) all damages occasioned by such taking of possession; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of Collateral Agent's rights hereunder; and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law. Collateral Agent shall not be liable for any incorrect or improper payment made pursuant to this Section 10 in the absence of gross negligence or willful misconduct. Any sale of, or the grant of options to purchase, or any other realization upon, any Pledged Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of Pledgors therein and thereto, and shall be a perpetual bar ______________________________________ Footnote continued from previous page. 278 -22- both at law and in equity against Pledgors and against any and all Persons claiming or attempting to claim the Pledged Collateral so sold, optioned or realized upon, or any part thereof, from, through or under Pledgors. Certain Sales of Pledged Collateral. Pledgors recognize that, by reason of certain prohibitions contained in law, rules, regulations or orders of any foreign Governmental Authority, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such foreign Governmental Authority. Pledgors acknowledge that any such sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner. Application of Proceeds. The proceeds received by Collateral Agent in respect of any sale of, collection from or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Collateral Agent of its remedies as a secured creditor as provided in Section 10 hereof shall be applied, together with any other sums then held by Collateral Agent pursuant to this Agreement, promptly by Collateral Agent as follows: First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization, including, without limitation, reasonable compensation to Collateral Agent and its agents and counsel, and all reasonable expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Second, to the payment of all other costs and expenses of such sale, collection or other realization, ______________________________________ Footnote continued from previous page. 279 -23- including, without limitation, compensation to the Banks and their agents and counsel and all reasonable expenses, liabilities and advances made or incurred by the Banks in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Third, to the indefeasible payment in full in cash of interest and all amounts other than principal under the Credit Agreement at any time and from time to time owing by Pledgors under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind among amounts so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Fourth, to the indefeasible payment in full in cash of principal at any time and from time to time owing by Pledgors under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind, among amounts of principal so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; and Fifth, to the Pledgors, or their respective successors or assigns, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. Expenses. Pledgors will upon demand pay to Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which Collateral Agent may incur in connection with (i) the collection of the Secured Obligations, (ii) the enforcement and administration of this Agreement, (iii) the custody or ______________________________________ Footnote continued from previous page. 280 -24- preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights of Collateral Agent or any Secured Party hereunder or (v) the failure by Pledgors to perform or observe any of the provisions hereof. All amounts payable by Pledgors under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. Pledgors' obligations under this Section 12 shall survive the termination of this Agreement and the discharge of Pledgors' other obligations hereunder. No Waiver; Cumulative Remedies. (a) No failure on the part of Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (b) In the event Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Collateral Agent, then and in every such case, Pledgors, Collateral Agent and each Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Collateral Agent and the Secured Parties shall continue as if no such proceeding had been instituted. Collateral Agent. Collateral Agent has been appointed as collateral agent pursuant to the Credit Agreement. The actions of Collateral Agent hereunder are subject to the provisions of the Credit Agreement. Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement and the Credit Agreement. Collateral Agent ______________________________________ Footnote continued from previous page. 281 -25- may resign and a successor Collateral Agent may be appointed in the manner provided in the Credit Agreement; provided, however, that at the time of appointment of a successor Collateral Agent, if Collateral Agent, through its possession, control, or ownership of Pledged Collateral or otherwise, holds, owns, or controls any Governmental License issued by the FCC such that the FCC must consent to the appointment of a successor Collateral Agent, until the FCC has consented to the appointment of a successor Collateral Agent the Collateral Agent shall retain control over such Pledged Collateral or Government Licenses. Upon the acceptance of any appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact. If Pledgors shall fail to do any act or thing that they have covenanted to do hereunder or if any warranty on the part of Pledgors contained herein shall be breached, Collateral Agent or any Secured Party may (but shall not be obligated to), subject to Section 30 of this Agreement, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all reasonable amounts so expended by Collateral Agent or such Secured Party shall be paid by Pledgors promptly upon demand therefor, with interest at the highest rate then in effect under the Credit Agreement during the period from and including the date on which such funds were so expended to the date of repayment. Pledgors' obligations under this Section 15 shall survive the termination of this Agreement and the discharge of Pledgors' other obligations under this Agreement, the Credit Agreement and the other Credit Documents. Pledgors hereby appoint Collateral Agent their attorney-in-fact, with full authority in the place and stead of Pledgors and in the name of Pledgors, or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the other Credit Documents which Collateral Agent may deem necessary or advisable to ______________________________________ Footnote continued from previous page. 282 -26- accomplish the purposes of this Agreement, except that with respect to any FCC applications or filings or other actions subject to FCC rules, regulations or policy, Collateral Agent shall serve as attorney-in-fact only to the extent permitted under the Communications Act and FCC rules, regulations and policies. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. Pledgors hereby ratify all that such attorney shall lawfully do or cause to be done by virtue hereof. Indemnity. Indemnity. Pledgors agree to indemnify, pay and hold harmless Collateral Agent and each of the Secured Parties and the officers, directors, employees, agents and Affiliates of Collateral Agent and each of the Secured Parties (collectively, the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any other Credit Document (including, without limitation, any misrepresentation by Pledgors in this Agreement or any other Credit Document) (the "indemnified liabilities"); provided that Pledgors shall have no obligation to an Indemnitee hereunder with respect to indemnified liabilities if it has been determined by a final decision (after all appeals and the expiration of time to appeal) of a court of competent jurisdiction that such indemnified liability arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Pledgors shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and ______________________________________ Footnote continued from previous page. 283 -27- satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. Survival. The obligations of Pledgors contained in this Section 16 shall survive the termination of this Agreement and the discharge of Pledgors' other obligations under this Agreement and under the other Credit Documents. Reimbursement. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by Pledgors therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by Collateral Agent and Pledgors. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement and any consent to any departure by Pledgors from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other Credit Document, no notice to or demand on Pledgors in any case shall entitle Pledgors to any other or further notice or demand in similar or other circumstances. Termination; Release. When all the Secured Obligations have been paid in full and the Commitments of the Banks to make any Loan shall have expired or been sooner terminated, this Agreement shall terminate. Upon termination of this Agreement or any release of Pledged Collateral in accordance with the provisions of the Credit Agreement, Collateral Agent shall, upon the request and at the sole cost and expense of Pledgors, forthwith assign, transfer and deliver to Pledgors, against receipt and without recourse to or warranty by Collateral Agent, such of the Pledged Collateral to be released (in the case of a release) as may be in possession of Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with ______________________________________ Footnote continued from previous page. 284 -28- respect to any other Pledged Collateral, proper instruments (including UCC termination statements on Form UCC-3) acknowledging the termination of this Agreement or the release of such Pledged Collateral, as the case may be. Definitions. The following terms shall have the following meanings. All such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Communications Act" shall mean the Communications Act of 1934, as amended, or any successor statute or law. "Contracts" shall mean all right, title and interest of Pledgors in, to and under, or derived from, any and all sale, service, performance and equipment lease contracts, agreements and grants (whether written or oral), channel lease agreements, and any other contract (whether written or oral) between Pledgors and third parties other than Excluded Contracts. "Documents" shall have the meaning assigned to that term under the UCC. "Equipment" shall mean "equipment", as such term is defined in the UCC, and, in any event shall include, without limitation, all equipment used in connection with any single or multichannel multipoint distribution service, instructional television fixed service or operational-fixed microwave service or other audio and video, including television, reception and distribution systems or franchises either presently or hereafter owned or operated by any Pledgor, all machinery, equipment, office machinery, furniture, conveyors, tools, materials, storage and handling equipment, automotive equipment, cameras and other studio equipment, amplifiers, transmitters, converters and similar equipment, cables, antennae, earth stations, connections, transmitting towers and associated equipment, reception, processing and distribution equipment, interconnection and control equipment, cable television and electronic data communications equipment, recreational equipment, and related goods and equipment, ______________________________________ Footnote continued from previous page. 285 -29- meters, oscilloscopes, test sets, electrical power equipment, security systems equipment, coaxial cable systems (or parts thereof) and microwave relay systems for the transmission and distribution of electromagnetic signals, including but not limited to all trunk, feeder and drop and coaxial cables and all electronic equipment, amplifiers, house drops, head ends, converters, repeaters, power supplies, batteries, controls, fittings, splitters and directional couplers incorporated therein or attached thereto, and all other equipment of every kind and nature, wherever situated, and owned by any Pledgor or in which any Pledgor may have any interest (to the extent of such interest), all modifications, alterations, repairs, substitutions, additions and accessions thereto, all replacements and all parts therefor, and together with all substitutes for any of the foregoing. "Excluded Contracts" shall mean contracts which prohibit the assignment, transfer or the grant of a security interest therein or which terminate upon any such assignment, transfer or grant; provided that each channel lease agreement which prohibits such assignment, transfer or grant shall be deemed a "Contract" hereunder on the date any Pledgor receives a consent to such assignment, transfer or the grant of a security interest therein. "FCC" shall mean the Federal Communications Commission or any governmental body or agency succeeding to the functions thereof. "Governmental Authority" means any federal, state, local, foreign or other governmental or administrative (including self-regulatory) body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission or other similar dispute-resolving body including, without limitation, those governing the regulation and protection of the environment. "Governmental Licenses" shall mean any radio, television or other license, permit, certificate or approval granted or issued by the FCC or any other Governmental Authority (including, without limitation, any single or multichannel multipoint distribution service, operational-fixed ______________________________________ Footnote continued from previous page. 286 -30- microwave service, local multipoint distribution service, instructional television fixed service, cable antenna relay service, or experimental licenses or permits issued by the FCC) described in Schedule E hereto or hereafter acquired in connection with the System. "Instrument" shall have the meaning assigned that term under the UCC. "Insurance Policies" shall mean all insurance policies held by Pledgors or naming any Pledgor as insured, additional insured or loss payee (including, without limitation, casualty insurance, liability insurance, property insurance and business interruption insurance) and all such insurance policies entered into after the date hereof other than insurance policies (or certificates of insurance evidencing such insurance policies) relating to health and welfare insurance and life insurance policies in which any Pledgor is not named as beneficiary (i.e., insurance policies that are not "Key Man" insurance policies). "Intangibles" shall mean "general intangibles", as such term is defined in the UCC, and, in any event shall include, without limitation, all manuals, blueprints, know-how, warranties and records in connection with the Equipment; all documents of title or documents representing the Inventory and all records, files and writings with respect thereto; any and all other rights, claims and causes of action of Pledgors against any other Person and the benefits of any and all collateral or other security given by any other Person in connection therewith, including, without limitation, all rights under any Contracts other than Excluded Contracts; all information, customer lists, identification of suppliers, data, plans, blueprints, specification designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials, standards, processing standards, performance standards, catalogs, research data, computer and automatic machinery software and programs, and the like pertaining to operations by Pledgors; all information relating to sales of products now or hereafter manufactured, distributed or franchised by Pledgors; all accounting information pertaining to Pledgors' operations or any of the Equipment, Inventory, Receivables or Intangibles and all media in which or on which ______________________________________ Footnote continued from previous page. 287 -31- any of the information or knowledge or data or records relating to such operations or any of the Equipment, Inventory, Receivables, Contracts or Intangibles may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data; all rights and goodwill of Pledgors; all licenses, consents, permits, variances, certifications and approvals of governmental agencies now or hereafter held by Pledgors pertaining to operations now or hereafter conducted by Pledgors or assets now or hereafter held by Pledgors; all causes of action, claims and warranties now or hereafter owned or acquired by Pledgors; and any other property consisting of a general intangible under the UCC applicable in such other location where Pledgors maintain its records relating to such property. "Inventory" shall mean, all "inventory", as such term is defined in the UCC, and, in any event, shall include, without limitation, wherever located, and whether now existing or hereafter acquired, all raw materials, work in process, returned goods, finished goods, samples and consigned goods to the extent of the consignee's interest therein, materials and supplies of any kind or nature which are or might be used in connection with the manufacture, printing, publication, packing, shipping, advertising, selling or finishing of any such goods, and all other products, goods, materials and supplies. "Pension Plan Reversions" shall mean Pledgors' right to receive the surplus funds, if any, which are payable to Pledgors following the termination of any employee pension plan and the satisfaction of all liabilities of participants and beneficiaries under such plan in accordance with applicable law. "Proceeds" shall mean all "proceeds", as such term is defined in the UCC or under other relevant law, and, in any event, shall include, without limitation, any and all (i) proceeds of any insurance (except payments made to a Person which is not a party to this Agreement), indemnity, warranty or guaranty payable to Collateral Agent or to Pledgors from time to time with respect to any of the Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to Pledgors from time to time in connection with any ______________________________________ Footnote continued from previous page. 288 -32- requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Collateral by any Governmental Authority (or any person acting on behalf of a Governmental Authority), (iii) instruments representing obligations to pay amounts in respect of Equipment, Intangibles, Inventory or Receivables, (iv) products of the Pledged Collateral and (v) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. "Receivables" shall mean all "accounts," as such term is defined in the UCC, and in any event shall include, without limitation, all of Pledgors' rights to payment for goods sold or leased or services performed by Pledgors or any other party, whether now in existence or arising from time to time hereafter, and all rights evidenced by an account, contract other than Excluded Contracts, security agreement, chattel paper, or other evidence of indebtedness or security together with (i) all security pledged, assigned, hypothecated or granted to or held by Pledgors to secure the foregoing, (ii) general intangibles arising out of Pledgors' rights in any goods, the sale of which gave rise thereto, (iii) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (iv) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, and (v) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers. "System" shall mean, collectively, the MDS, MMDS, ITFS, and other similar television distribution and reception systems (including any non-video service provided over such facilities) constructed and operated, or to be constructed and operated by the Credit Parties to provide a wireless cable service pursuant to the System Agreements and all rights incident or appurtenant to such System Agreements. "System Agreements" shall mean, collectively, all material instruments, leases, licenses, permits and agreements of the Credit Parties, whether now existing, or hereafter ______________________________________ Footnote continued from previous page. 289 -33- acquired or obtained, relating to the construction and operation of the System. "UCC" means the Uniform Commercial Code as in effect in any relevant jurisdiction. Notices. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner set forth in the Credit Agreement, as to either party, addressed to it at the address set forth in the Credit Agreement or at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 20; provided that notices to Collateral Agent shall not be effective until received by Collateral Agent. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon Pledgors, their successors and assigns and (ii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and the other Secured Parties and each of their respective successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of Pledgors) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Bank may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank, herein or otherwise, subject however, to the provisions of the Credit Agreement. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. ______________________________________ Footnote continued from previous page. 290 -34- CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGORS WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT PLEDGORS ACCEPT FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. PLEDGORS DESIGNATE AND APPOINT AMERICAN TELECASTING, INC., WITH AN ADDRESS AT 5575 TECH CENTER DRIVE, SUITE 300, COLORADO SPRINGS, COLORADO 80919 AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY PLEDGORS IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS THEIR AGENT TO RECEIVE ON THEIR BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY PLEDGORS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO PLEDGORS AT THEIR ADDRESSES PROVIDED FOR IN THE CREDIT AGREEMENT EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY PLEDGORS REFUSES TO ACCEPT SERVICE, PLEDGORS HEREBY AGREE THAT SERVICE UPON THEM BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGORS IN THE COURTS OF ANY OTHER JURISDICTION. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. ______________________________________ Footnote continued from previous page. 291 -35- Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Obligations Absolute. All obligations of Pledgors hereunder shall be absolute and unconditional irrespective of: any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of either of any Pledgor or any other Credit Party; any lack of validity or enforceability of the Credit Agreement, the Guarantee or any other Credit Document, or any other agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, the Guarantee or any other Credit Document, or any other agreement or instrument relating thereto; any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect of this Agreement, the Guarantee or any other Credit Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 17 hereof; or any other circumstances which might otherwise constitute a defense available to, or a discharge of, Pledgors. ______________________________________ Footnote continued from previous page. 292 -36- Collateral Agent's Right to Sever Indebtedness. (a) Pledgors acknowledge that (i) the Pledged Collateral does not constitute the sole source of security for the payment and performance of the Secured Obligations and that the Secured Obligations are also secured by other types of property of Pledgors and their Affiliates in other jurisdictions (all such property, collectively, the "Collateral"), (ii) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to execute in respect of such item a separate credit agreement, and (iii) Pledgors intend that Collateral Agent have the same rights with respect to the Pledged Collateral, in any judicial proceeding relating to the exercise of any right or remedy hereunder or otherwise, that Collateral Agent would have had if each item of Collateral had been pledged or encumbered pursuant to a separate credit agreement and security instrument. In furtherance of such intent, Pledgors agree to the greatest extent permitted by law that Collateral Agent may at any time by notice (an "Allocation Notice") to Pledgors allocate a portion of the Secured Obligations (the "Allocated Indebtedness") to all or a specified portion of the Pledged Collateral and sever from the remaining Secured Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to any of the Pledged Collateral, the Secured Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate credit obligation of Pledgors unrelated to the other transactions contemplated by the Credit Agreement, any other Credit Document or any document related to any thereof. To the extent that the proceeds of any judicial proceeding relating to the exercise of any right or remedy hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall belong to Pledgors and shall not be available hereunder to satisfy any Secured Obligations of Pledgors other than the Allocated Indebtedness. In any action or proceeding to exercise any right or remedy under this Agreement which is commenced after the giving by Collateral Agent of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Secured Obligations hereby secured, and Pledgors may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 28, the proceeds received by Collateral Agent pursuant to this ______________________________________ Footnote continued from previous page. 293 -37- Agreement shall be applied by Collateral Agent in accordance with the provisions of Section 11 hereof. (b) Pledgors hereby waive to the greatest extent permitted under law the right to a discharge of any of the Secured Obligations under any statute or rule of law now or hereafter in effect which provides that the exercise of any particular right or remedy as provided for herein (by judicial proceedings or otherwise) constitutes the exclusive means for satisfaction of the Secured Obligations or which makes unavailable any further judgment or any other right or remedy provided for herein because Collateral Agent elected to proceed with the exercise of such initial right or remedy or because of any failure by Collateral Agent to comply with laws that prescribe conditions to the entitlement to such subsequent judgment or the availability of such subsequent right or remedy. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that such subsequent judgment or action is not available to Collateral Agent, Pledgors shall not (i) introduce in any other jurisdiction any judgment so holding as a defense to enforcement against Pledgors of any remedy in the Credit Agreement or any other Credit Document or (ii) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered and only with respect to the collateral referred to in such judgment. (c) In the event any instrument in addition to the Allocation Notice is necessary to effectuate the provisions of this Section 28, including, without limitation, any amendment to this Agreement, any substitute promissory note or affidavit or certificate of any kind, Collateral Agent may execute and deliver such instrument as the attorney-in-fact of Pledgors. Such power of attorney is coupled with an interest and is irrevocable. (d) Notwithstanding anything set forth herein to the contrary, the provisions of this Section 28 shall be effective only to the maximum extent permitted by law. ______________________________________ Footnote continued from previous page. 294 -38- Future Advances. This Agreement shall secure the payment of any amounts advanced from time to time pursuant to the Credit Agreement. Facilitating Governmental Approvals; Specific Performance. (a) In connection with the exercise by Collateral Agent of its rights under this Agreement relating to the disposition of or operation of the Pledged Collateral under any licenses issued by the FCC or any other authorizations, agreements, permits, licenses, and franchises of any Pledgor, it may be necessary to obtain the prior consent or approval of the FCC or other governmental authority to the exercise of rights with respect to the Pledged Collateral. To the extent that any such consent or approval is required for any action that Collateral Agent may take under this Agreement with respect to the Pledged Collateral, receipt of such FCC or governmental authority approval shall be a condition precedent to Collateral Agent's exercise of such rights. In furtherance of the first sentence of this Section, each Pledgor hereby agrees, at its own cost, to use its best efforts to take any and all actions which Collateral Agent may request in order to obtain such consents or approvals or any other governmental authorization as may be necessary to enable Collateral Agent to exercise and enjoy the full rights and benefits granted to it under this Agreement, the Credit Agreement, or any other Credit Document, including, without limitation, the preparation, execution, delivery or filing on any Pledgor's behalf and in any Pledgor's name, or in such other name as may be appropriate or required, or causing to be prepared, executed, delivered or filed, all applications, certificates, filings, instruments, information, reports and other documents (including, without limitation, any application for any assignment or transfer of control of ownership). (b) Each Pledgor hereby acknowledges that a breach of any of its obligations contained in this Agreement will cause irreparable injury to Collateral Agent, and that such a breach would not be adequately compensable in damages, and therefore each Pledgor agrees that its obligations under this Agreement shall be specifically enforceable. Non-Disturbance. To the extent required to obtain a security interest under any Contract in the event of a ______________________________________ Footnote continued from previous page. 295 -39- foreclosure or other action taken pursuant to such security interest the rights of the counterparty under such Contract will continue in full force and effect so long as the counterparty is not in default thereunder. ______________________________________ Footnote continued from previous page. 296 -40- IN WITNESS WHEREOF, Pledgors and Collateral Agent have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. AMERICAN TELECASTING DEVELOPMENT INC. By: /s/ AMERICAN TELECASTING DEVELOPMENT INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF ANCHORAGE, INC. By: /s/ AMERICAN TELECASTING OF ANCHORAGE, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF BEND, INC. By: /s/ AMERICAN TELECASTING OF BEND, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF BILLINGS, INC. By: /s/ AMERICAN TELECASTING OF BILLINGS, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 297 -41- Title: AMERICAN TELECASTING OF BISMARK, INC. By: /s/ AMERICAN TELECASTING OF BISMARK, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF CENTRAL FLORIDA, INC. By: /s/ AMERICAN TELECASTING OF CENTRAL FLORIDA, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF CINCINNATI, INC. By: /s/ AMERICAN TELECASTING OF CINCINNATI, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF COLORADO SPRINGS, INC. By: /s/ AMERICAN TELECASTING OF COLORADO SPRINGS, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 298 -42- AMERICAN TELECASTING OF COLUMBUS, INC. By: /s/ AMERICAN TELECASTING OF COLUMBUS, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF DENVER, INC. By: /s/ AMERICAN TELECASTING OF DENVER, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF FORT COLLINS, INC. By: /s/ AMERICAN TELECASTING OF FORT COLLINS, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 299 -43- AMERICAN TELECASTING OF FORT MYERS, INC. By: /s/ AMERICAN TELECASTING OF FORT MYERS, INC. ----------------------------------------------- Name: Title: AMERICAN TELECASTING OF GREEN BAY, INC. By: /s/ AMERICAN TELECASTING OF GREEN BAY, INC. ----------------------------------------------- Name: Title: AMERICAN TELECASTING OF HAWAII, INC. By: /s/ AMERICAN TELECASTING OF HAWAII, INC. ----------------------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSON, INC. By: /s/ AMERICAN TELECASTING OF JACKSON, INC. ----------------------------------------------- Name: Title: AMERICAN TELECASTING OF JACKSONVILLE, INC. By: /s/ AMERICAN TELECASTING OF JACKSONVILLE, INC. ----------------------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 300 -44- AMERICAN TELECASTING OF LANSING, INC. By: /s/ AMERICAN TELECASTING OF LANSING, INC. --------------------------------------------- Name: Title: AMERICAN TELECASTING OF LINCOLN, INC. By: /s/ AMERICAN TELECASTING OF LINCOLN, INC. --------------------------------------------- Name: Title: AMERICAN TELECASTING OF LITTLE ROCK, INC. By: /s/ AMERICAN TELECASTING OF LITTLE ROCK, INC. --------------------------------------------- Name: Title: AMERICAN TELECASTING OF LOUISVILLE, INC. By: /s/ AMERICAN TELECASTING OF LOUISVILLE, INC. --------------------------------------------- Name: Title: AMERICAN TELECASTING OF MEDFORD, INC. By: /s/ AMERICAN TELECASTING OF MEDFORD, INC. --------------------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 301 -45- AMERICAN TELECASTING OF MICHIANA, INC. By: /s/ AMERICAN TELECASTING OF MICHIANA, INC. -------------------------------------------- Name: Title: AMERICAN TELECASTING OF MINNESOTA, INC. By: /s/ AMERICAN TELECASTING OF MINNESOTA, INC. -------------------------------------------- Name: Title: AMERICAN TELECASTING OF MONTEREY, INC. By: /s/ AMERICAN TELECASTING OF MONTEREY, INC. -------------------------------------------- Name: Title: AMERICAN TELECASTING OF NEBRASKA, INC. By: /s/ AMERICAN TELECASTING OF NEBRASKA, INC. -------------------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 302 -46- AMERICAN TELECASTING OF NORTH DAKOTA, INC. By: /s/ AMERICAN TELECASTING OF NORTH DAKOTA, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF OKLAHOMA, INC. By: /s/ AMERICAN TELECASTING OF OKLAHOMA, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF PORTLAND, INC. By: /s/ AMERICAN TELECASTING OF PORTLAND, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF RAPID CITY INC. By: /s/ AMERICAN TELECASTING OF RAPID CITY, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 303 -47- AMERICAN TELECASTING OF REDDING, INC. By: /s/ AMERICAN TELECASTING OF REDDING, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF ROCKFORD, INC. By: /s/ AMERICAN TELECASTING OF ROCKFORD, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SALEM/EUGENE, INC. By: /s/ AMERICAN TELECASTING OF SALEM/EUGENE, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SANTA BARBARA, INC. By: /s/ AMERICAN TELECASTING OF SANTA BARBARA, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SANTA ROSA, INC. By: /s/ AMERICAN TELECASTING OF SANTA ROSA, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 304 -48- AMERICAN TELECASTING OF SARASOTA, INC. By: /s/ AMERICAN TELECASTING OF SARASOTA, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SHERIDAN, INC. By: /s/ AMERICAN TELECASTING OF SHERIDAN, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SIOUX VALLEY, INC. By: /s/ AMERICAN TELECASTING OF SIOUX VALLEY, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF SOUTH DAKOTA, INC. By: /s/ AMERICAN TELECASTING OF SOUTH DAKOTA, INC. ----------------------------------- Name: Title: ______________________________________ Footnote continued from previous page. 305 -49- AMERICAN TELECASTING OF TOLEDO, INC. By: /s/ AMERICAN TELECASTING OF TOLEDO, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF YOUNGSTOWN, INC. By: /s/ AMERICAN TELECASTING OF YOUNGSTOWN, INC. ----------------------------------- Name: Title: AMERICAN TELECASTING OF YUBA CITY, INC. By: /s/ AMERICAN TELECASTING OF YUBA CITY, INC. ----------------------------------- Name: Title: BANQUE INDOSUEZ, NEW YORK BRANCH as Collateral Agent By: /s/ BANQUE INDOSUEZ ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: 306 ______________________________________ REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of February 26, 1997, is made and entered into by and among AMERICAN TELECASTING, INC., a Delaware corporation (the "Company"), and the holders (collectively, together with their assigns, the "Holders") of the Warrants (as defined herein). WHEREAS, concurrently with the issuance of the Warrants the Company is entering into this Agreement to define the rights which exist among the Holders, on the one hand, and the Company, on the other, with respect to the registration of the Common Stock (as defined herein) into which the Warrants are exercisable; NOW, THEREFORE, in consideration of the mutual premises, agreements and covenants hereinafter set forth, the parties hereto agree as follows: ARTICLE Definitions For purposes of this Agreement, the following terms shall have the following respective meanings (each such meaning to be equally applicable to the singular and plural forms thereof): "Agreement" means this Registration Rights Agreement. "Commission" shall mean the Securities and Exchange Commission, and any other similar or successor agency of the federal government at the time administering the Securities Act or the Securities Exchange Act. ______________________________________ Footnote continued from previous page. 307 ______________________________________ "Common Stock" means the Company's voting Common Stock, par value $0.01 per share, and any stock into which such Common Stock may hereafter be changed or for which such Common Stock may be exchanged after giving effect to the terms of such change or exchange (by way of reorganization, recapitalization, merger, consolidation or otherwise) and shall also include any Common Stock of the Company hereafter authorized which has ordinary voting power for the election of directors and any capital stock of the Company of any other class hereafter authorized which is not preferred as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company or which has ordinary voting power for the election of directors of the Company. "Company" has the meaning assigned such term in the preamble hereto. "Holders" has the meaning assigned such term in the preamble hereto. "Holders of Registrable Securities" shall mean a person who owns Registrable Securities or has the right to acquire such Registrable Securities, whether or not such acquisition has actually been effected and disregarding any legal restrictions upon the exercise of such right. "NASD" means the National Association of Securities Dealers, Inc. "Prospectus" means the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering, registering for sale any of the Registrable Securities and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. "Registrable Securities" means any Common Stock which may be acquired upon the exercise of the Warrants in accordance with their terms; provided, that any security's ______________________________________ Footnote continued from previous page. 308 ______________________________________ status as a Registrable Security shall cease when the registration rights with respect to such security shall have terminated pursuant to Section 2.6. "Registration Statement" means any registration statement of the Company which registers for sale any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. "Requisite Holders" means the holders, at any time, of the outstanding Warrants representing more than 50% of the aggregate of Registrable Securities at the time outstanding. "Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Warrants" means the warrants to purchase an aggregate of 141,667 shares of Common Stock issued by the Company to the Holders. ARTICLE ______________________________________ Footnote continued from previous page. 309 ______________________________________ Registration Rights SECTION .. Registration on Demand 2.1.1 Demand. At any time following six months from the date the Warrants become exercisable, upon the written request (the "Demand") of the Requisite Holders (the "Demand Holders") that the Company effect the registration under the Securities Act of the number of Registrable Securities specified by the Demand Holders, the Company shall, subject to the provisions hereof, use its best efforts to effect, as soon as practicable and in any event within 60 days after the Demand is received from the Demand Holders, the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register by the Demand Holders. 2.1.2 Shelf Registration. At any time that the Company is eligible to use a short-form registration statement for registering securities for sale to the public at large, the Demand Holders may, at their option, request (the "Shelf Demand") that any registration statement effected pursuant to a Demand be effected on a delayed or continuous basis, pursuant to Rule 415 under the Securities Act (the "Shelf Registration"). The Company agrees to keep effective such registration statement (the "Shelf Registration Statement") until the earlier of (i) such date as of which all the Registrable Securities under the Shelf Registration Statement have been disposed of in the manner described in such registration statement, and (ii) 180 days after the date on which such Shelf Registration Statement is declared effective. 2.1.3 Registration Statement Form. Registrations under this Section 2.1 shall be on such appropriate registration form of the Commission as shall be selected by the ______________________________________ Footnote continued from previous page. 310 ______________________________________ Company. The Company shall include in any such registration statement all information which, in the opinion of counsel to the Company, is required to be included. 2.1.4 Effective Registration Statement. A registration requested pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Holders and has not thereafter become effective, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Holders or (iv) if a Shelf Registration Statement, if such registration statement has not been kept effective until the earlier of (a) such date as of which all of the Registrable Securities under such Shelf Registration Statement have been disposed of in the manner described in such registration statement and (b) 180 days after the date on which such Shelf Registration Statement is declared effective. 2.1.5 Limitations on Registration on Demand, Shelf Registrations. The Company shall not be required to prepare and file a registration statement pursuant to this Section 2.1 which would become effective within 120 days following the effective date of a registration statement (other than pursuant to registrations on Form S-4 or Form S-8 or any successor form or other forms not available for registering securities for sale to the public at large) filed by the Company with the Commission pertaining to an underwritten public offering of convertible debt securities or equity securities for cash for the account of the Company or another holder of securities of the Company, and in such case the Holders are afforded the opportunity to include Registrable Securities in such registration pursuant to Section 2.2. Notwithstanding anything in this Section 2.1 to the contrary, in no event shall the Company be required to effect in the aggregate, more than one registration pursuant to this Section 2.1. 2.1.6 Holders' Ability to Withdraw Registration Statement. The Holders of a majority of the Registrable ______________________________________ Footnote continued from previous page. 311 ______________________________________ Securities to be included in such registration shall have the right to request that the Company not have a registration statement filed pursuant to a Demand declared effective. If the Demand Holders elect to pay or reimburse the Company for the Company's out-of-pocket expenses incurred in connection with such registration, such withdrawn registration statement shall not be counted for purposes of the requests for registration to which such Demanding Holder is entitled pursuant to Section 2.1.5 hereof. 2.1.7 Selection of Underwriter. If a registration under this Section 2.1 is an underwritten offering, the Holders of a majority of the Registrable Securities to be included in such registration shall select a managing underwriter or underwriters of recognized national standing reasonably acceptable to the Company to administer the offering. 2.1.8 Registration of Other Securities. A registration statement filed pursuant to the request of the Demand Holders may, subject to the provisions of Section 2.5 hereof, include (i) Registrable Securities of Holders not making a demand pursuant to this Section 2.1 and (ii) other securities of the Company with respect to which registration rights have been granted and may include securities of the Company being sold for the account of the Company. 2.1.9 Suspension. The Company may delay, suspend or withdraw the registration of the Registrable Securities required pursuant to this Section 2.1 or the preparation or furnishing of a supplemental or amended prospectus pursuant to Section 2.3(i) for a period not exceeding 90 days if the Company shall in good faith determine that any such registration would require the Company to include disclosure that would reasonably be expected to have a detrimental effect on any proposal, negotiations or plan by the Company or any of its subsidiaries to engage in any acquisition or disposition of assets or any merger, consolidation, tender offer, reorganization or similar transaction, or any other material corporate event contemplated by the Company. In addition, the Company shall not be required to register Registrable Securities on a date on which, under the general rules and regulations of the Commission as advised by counsel, the inclusion therein, by incorporation or by reference, of financial statements of the Company contained in the annual or ______________________________________ Footnote continued from previous page. 312 ______________________________________ quarterly report of the Company most recently filed with the Commission would not be permitted, provided that this exception shall not permit delay or suspension of registration beyond the filing of the next required annual or quarterly filing under the Securities Exchange Act. SECTION .. Incidental Registration. If the Company, at any time or any one or more occasions after the date of this Agreement, proposes to register (other than pursuant to Section 2.1) any of its equity securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (other than pursuant to registrations on Form S-4 or Form S-8 or any successor form or other forms not available for registering securities for sale to the public at large), the Company shall give not less than 30 days' nor more than 90 days' prior written notice to each Holder of Registrable Securities of its intention to do so. Upon the written request of any Holder of Registrable Securities given within 20 days after receipt of such notice from the Company, the Company will use its best efforts to cause the Registrable Securities requested to be registered to be so registered under the Securities Act. A request pursuant to this Section 2.2 shall state the number of Registrable Securities requested to be registered and the intended method of distribution thereof. In connection with any registration subject to this Section 2.2, the Holders shall enter into such underwriting, lock-up and other agreements, and shall execute and complete such questionnaires and other documents, as are customary in a secondary offering. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such registration whether or not any Holder has elected to include any securities in such registration. Notwithstanding any other provision of this Agreement, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the number of shares to be included in the underwriting or registration shall be allocated as set forth in Section 2.5 hereof. No registration effected under this Section 2.2 shall relieve the Company of its obligation to effect the registration required under Section 2.1. ______________________________________ Footnote continued from previous page. 313 ______________________________________ SECTION .. Registration Procedures. In connection with the registration of any Registrable Securities, the Company shall effect such registrations to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible: () prepare and file with the Commission within the time limits prescribed herein a Registration Statement with respect to such securities and use its best efforts to cause such Registration Statement to become effective and remain effective as provided herein; () prepare and file with the Commission such amendments and post-effective amendments to each Registration Statement as may be necessary and use its best efforts to keep such Registration Statement continuously effective; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Securities Exchange Act and the rules and regulations of the Commission promulgated thereunder applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented; the Company shall not be deemed to have used its best efforts to keep a registration statement effective during a period if it voluntarily takes any action that results in participating Holders not being able to sell such Registrable Securities during such period, unless such action (i) is required under applicable law or (ii) is determined in good faith by the Board of Directors of the Company to be in the Company's best interest; () notify the Holders of Registrable Securities and underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of the issuance (or, to the Company's best knowledge, the threat ______________________________________ Footnote continued from previous page. 314 ______________________________________ or contemplation) by the Commission of any stop order suspending the effectiveness of such Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; () use every reasonable effort to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; () furnish to each seller and to each duly authorized broker or underwriter of each seller such number of authorized copies of a prospectus, including copies of a preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other customary documents as such seller, broker or underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller; () use its best efforts to register or qualify (and to keep each such registration and qualification effective, including through new filings, renewals or amendments, during the period such registration statement is required to be kept effective) the securities covered by such Registration Statement under such securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other reasonable acts and things which may be necessary under such securities or blue sky laws to enable such seller to consummate the public sale or other disposition in such jurisdictions of the Registrable Securities to be sold by such seller, except that the Company shall not for any ______________________________________ Footnote continued from previous page. 315 ______________________________________ such purpose be required to qualify to do business as a foreign corporation, or to consent to the jurisdiction of any court or subject itself to suit in any jurisdiction wherein it is not qualified; () before filing the Registration Statement or Prospectus or amendments or supplements thereto, furnish to counsel for the Holders of Registrable Securities included in such Registration Statement copies of all such documents proposed to be filed, all of which shall be subject to the review and comment of such counsel in the exercise of their reasonable judgment; () use its best efforts to cause such Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities exercising jurisdiction over the Company as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; () notify each seller of any such Registrable Securities covered by such Registration Statement, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the Company's becoming aware that the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, at the written request of any such seller, promptly prepare and furnish to such seller and each underwriter a reasonable number of copies of a Prospectus supplemented or amended (whereupon all previous versions of the Prospectus shall not be used by such seller or underwriter and shall be promptly returned to the Company or destroyed) so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; ______________________________________ Footnote continued from previous page. 316 ______________________________________ () comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve consecutive months beginning with the first day of the Company's first calendar quarter after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; () use its best efforts to cause all such Registrable Securities covered by such Registration Statement to be listed or quoted on the principal securities exchange (including NASDAQ) on which similar securities issued by the Company are then listed or quoted, if the listing or quoting of such Registrable Securities is then permitted under the rules of such exchange; () provide a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement; () cooperate with the selling holders of Registrable Securities and the underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the underwriters, if any, or holders may reasonably request at least two business days prior to any sale of Registrable Securities in a firm commitment underwritten public offering, or at least ten business days prior to any other such sale; () enter into such reasonable and customary agreements (including an underwriting agreement in customary form) and take such other reasonable and customary actions as the Requisite Holders shall reasonably request in order to expedite or facilitate the ______________________________________ Footnote continued from previous page. 317 ______________________________________ registration and disposition of such Registrable Securities; () obtain an opinion from the Company's counsel and a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters as are customarily covered by such opinions and "cold comfort" letters; () upon execution and delivery of such confidentiality agreements as the Company shall reasonably request (which agreement shall not restrict any such person's obligations under applicable securities laws), make available for inspection by any seller of such Registrable Securities covered by such Registration Statement, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such Registration Statement, all as necessary to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; and () permit any Holder of Registrable Securities which Holder, in the sole reasonable judgment of such Holder, exercised in good faith, might be deemed to be a controlling person of the Company to participate through counsel in the preparation of such Registration Statement and, if specifically requested by such counsel, in discussions between the Company and the Commission or its staff with respect to such Registration Statement, to require the insertion therein of material, furnished in writing, which in the written opinion of such counsel is necessary to include in order to avoid a likelihood of potential liability for any such Holder of Registrable Securities or such counsel. ______________________________________ Footnote continued from previous page. 318 ______________________________________ If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state "blue sky" or securities law then in force, the deletion of the reference to such Holder. SECTION .. Expenses. All expenses incurred in effecting the registrations (whether or not such registrations are consummated) provided for in this Article II, including without limitation all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, expenses of any audits incident to or required by any such registration (including the costs of any comfort letter) and expenses of complying with the securities or blue sky laws of any jurisdictions pursuant to Subsection 2.3(f) hereof, the costs and expenses associated with the filing required to be made by the NASD (including, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel as may be required by the rules and regulations of the NASD, provided such fees and expenses are not paid by the underwriter), transfer taxes, fees of transfer agents and registrars, costs of insurance (but excluding underwriting discounts and commissions to the extent they relate to Registrable Securities), duplicating fees, delivery expenses, expenses incurred with the listing of the securities on any securities exchange, shall be paid by the Company, and the Company shall pay all reasonable fees and disbursements of one counsel for the Holders of Registrable Securities for the performance of the normal and customary functions of counsel for selling shareholders in each such registration. SECTION .. Marketing Restrictions. If (i) any Holder of Registrable Securities requests registration of Registrable Securities under Section 2.1 or 2.2, (ii) the offering proposed to be made is to be an underwritten public ______________________________________ Footnote continued from previous page. 319 ______________________________________ offering and (iii) the managing underwriters of such public offering furnish a written opinion that the total amount of securities to be included in such offering would exceed the maximum amount of securities (the "Maximum Amount") (as specified in such opinion) which can be marketed at a price reasonably related to the then current market value of such securities and without materially and adversely affecting such offering, then the rights of the Company, the Holders of Registrable Securities and the holders of other securities having the right to include such securities in such registration to participate in such offering shall be as follows: If such registration shall have been proposed by the Company, (i) the Company shall be entitled to participate in such registration first; (ii) then Holders of Registrable Securities under this Agreement shall be entitled to participate in such registration (pro rata based on the number of Registrable Securities or shares of Common Stock, respectively, held by each) and (iii) other security holders of the Company shall be entitled to participate in such registration (pro rata based on the number of securities held by each security holder and in accordance with the relative priorities, if any, as shall exist among them). If such registration shall have been requested by the Demand Holders of Registrable Securities pursuant to Section 2.1 hereof, (i) the Holders of Registrable Securities shall be entitled to participate in such registration (pro rata based on the number of Registrable Securities held by each) first; and (ii) then the Company and other security holders of the Company entitled to participate will be entitled to participate in such registration (with the holders of such securities being entitled to participate in accordance with the relative priorities, if any, as shall exist among them), in each case with further pro rata allocations to the extent any such person has requested registration of fewer securities than such person is entitled to have registered so that the number of securities to be included in such registration will not exceed the Maximum Amount. If such registration shall have been requested by the holders of other securities pursuant to a right granted by the Company to request such registration, (i) the holders requesting such registration shall be entitled to participate in such registration (with such holders being entitled to participate in accordance with the relative ______________________________________ Footnote continued from previous page. 320 ______________________________________ priorities, if any, as shall exist among them); (ii) then the Holders of Registrable Securities shall be entitled to participate in accordance with the number of shares held by them (pro rata based on the number of Registrable Securities or shares of Common Stock, respectively, held by each); and (iii) then the Company and other security holders of the Company entitled to participate will be entitled to participate in such registration (with the holders of such securities being entitled to participate in accordance with the relative priorities, if any, as shall exist among them), in each case with further pro rata allocations to the extent any such person has requested registration of fewer securities than such person is entitled to have registered so that the number of securities to be included in such registration will not exceed the Maximum Amount; and no securities (issued or unissued) other than those registered and included in the underwritten offering shall be offered for sale or other disposition in a transaction which would require registration under the Securities Act (but excluding any issuance of shares pursuant to registrations on Form S-4 or Form S-8 or any successor form or other forms not available for registering capital stock for sale to the public at large) until the expiration of 90 days after the effective date of the Registration Statement in which Registrable Securities were included pursuant to Section 2.2 or such shorter period as may be acceptable to the Company and the Holders of a majority of the Registrable Securities who may be participating in such offering. SECTION .. Termination of Rights. Notwithstanding the foregoing provisions of this Article II, the rights to registration shall terminate as to any particular Registrable Securities when (a) a Registration Statement covering such Registrable Securities has been declared effective and such Registrable Securities have been disposed of in accordance with such effective Registration Statement, (b) written opinion(s), to the effect that such Registrable Securities may be sold without registration under the Securities Act or applicable state law and without restriction as to the volume and timing of such sale, shall have been received from counsel for the Company reasonably acceptable to the Holders of a majority of such Registrable Securities, (c) the Warrants expire unexercised or are otherwise terminated or (d) such Registrable ______________________________________ Footnote continued from previous page. 321 ______________________________________ Securities have been sold through a broker, dealer or underwriter in a public distribution or a public securities transaction in which the transferee receives a certificate without a restrictive legend. SECTION .. Rule 144. The Company shall file the reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations promulgated thereunder (or, if the Company is not required to file such reports, it will, upon the written request of any Holder of Registrable Securities as soon as practicable, make publicly available other information so long as such information is necessary to permit sales under Rule 144), and will take such further actions as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemption provided by Rule 144. Upon the request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION .. Indemnification. () In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, the seller of any Registrable Securities covered by such Registration Statement, its directors and officers or general and limited partners (and the directors and officers thereof) (each, a "Person"), each person who participates as an underwriter or qualified independent underwriter/pricer ("independent underwriter"), if any, in the offering or sale of such securities, each officer, director or partner of such underwriter or independent underwriter, and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, against any and all losses, claims, damages or liabilities, joint or several, and expenses (including fees of counsel and any amounts paid in any settlement approved by the Company (which such approval shall not be unreasonably withheld or delayed)) to which such seller, any such director or officer or general or limited partner or any such underwriter or independent underwriter, such officer, director or partner of such underwriter or independent underwriter or controlling person may become subject under the Securities Act, common law or ______________________________________ Footnote continued from previous page. 322 ______________________________________ otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof), or expenses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary Prospectus (together with the documents incorporated by reference or filed with the Commission) and any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) any violation by the Company of any federal or state rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and the Company will reimburse as incurred such seller and each such director, officer, general or limited partner, underwriter, independent underwriter, director, or officer or partner of such underwriter or independent underwriter and controlling person for any legal or any other expenses incurred by any of them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, that the Company shall not be liable to any such seller or any such director, officer, general or limited partner, underwriter, independent underwriter, director or officer or partner of such underwriter or independent underwriter or controlling person in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding, whether commenced or threatened, in respect thereof) or expense arises out of or is based upon (i) any untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or amendment thereof or supplement thereto or in any such preliminary, final or summary Prospectus in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of any such seller or any such director, officer, general or limited partner, underwriter, independent underwriter, director or officer or partner of such underwriter or independent underwriter or controlling person, expressly for use in the preparation thereof or (ii) the failure of any such seller or any such director, officer, general or limited partner, underwriter, independent ______________________________________ Footnote continued from previous page. 323 ______________________________________ underwriter or controlling person, to comply with any legal requirement applicable to him to deliver a copy of a Prospectus or any supplements or amendments thereto after the Company has made such documents available to such Persons. Such indemnity and reimbursement of expenses shall remain in full force and effect following the transfer of such securities by such seller. () The Company, as a condition to including any Registrable Securities in any Registration Statement filed in accordance with this Agreement, shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities and any underwriter or independent underwriter, to indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.8) the Company and its directors and officers and all other prospective sellers and their directors, officers, general and limited partners and respective controlling Persons (within the meaning of the Securities Act) with respect to any statement or alleged statement in or omission or alleged omission from such Registration Statement, any preliminary, final or summary Prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or information has been furnished in writing to the Company or its representative by or on behalf of such seller or underwriter expressly for use in the preparation of such Registration Statement, preliminary, final or summary Prospectus or amendment or supplement; provided, however, that the aggregate amount which any such seller or prospective seller shall be required to pay pursuant to such undertaking shall be limited to the amount of the net proceeds received by such Person upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such claim. Such indemnity shall remain in full force and effect following the transfer of such securities by such seller. () As soon as possible after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.8, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, that the failure of any indemnified party to ______________________________________ Footnote continued from previous page. 324 ______________________________________ give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.8, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party; provided, that the indemnifying party shall not be entitled to so participate or so assume the defense if, in the indemnified party's reasonable judgment, a conflict of interest between the indemnified party and the indemnifying party exists or may exist in respect of such claim. After notice from the indemnifying party to such indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 2.8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof unless the indemnifying party has failed to assume the defense of such claim or to employ counsel reasonably satisfactory to such indemnified party; provided that the indemnified parties shall have the right to employ one counsel (in each case together with appropriate local counsel) (such counsel to be selected by the Holders of a majority of the Registrable Securities included in such registration) to represent such indemnified parties if, in such indemnified parties' reasonable judgment, a conflict of interest between the indemnified parties and the indemnifying parties exists or may exist in respect of such claim, and in that event the fees and expenses of such separate counsel shall be paid as incurred by the indemnifying party; and provided, further that if, in the reasonable judgment of any of the indemnified parties, a conflict of interest between such indemnified parties, and any other indemnified parties exists in respect of such claim, such indemnified parties shall be entitled to additional counsel or counsels and the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimants or plaintiffs to such indemnified party of an unconditional release from all liability in respect to such claim or litigation. No indemnifying party will be liable ______________________________________ Footnote continued from previous page. 325 ______________________________________ for any settlement effected without its prior written consent, which consent will not be unreasonably withheld or delayed. () Indemnification similar to that specified in the preceding paragraphs of this Section 2.8 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any state securities and "blue sky" laws. () If the indemnification provided for in this Section 2.8 is unavailable or insufficient to hold harmless an indemnified party under Section 2.8(a) or (b) of this Agreement, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Section 2.8(a) or (b) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or other omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statements or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 2.8(e) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this Section 2.8(e). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 2.8(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim (which shall be limited as provided in Section 2.8(c) if the indemnifying party has assumed the defense of any such action in accordance with the provisions thereof) which is the subject of this Section 2.8(e). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any ______________________________________ Footnote continued from previous page. 326 ______________________________________ person who was not guilty of such fraudulent misrepresentation. Promptly after receipt by an indemnified party under this Section 2.8(e) of notice of the commencement of any action against such party in respect of which a claim for contribution may be made against an indemnifying party under this Section 2.8(e), such indemnified party shall notify the indemnifying party in writing of the commencement thereof if the notice specified in Section 2.8(c) has not been given with respect to such action; provided that the omission so to notify the indemnifying party shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise under this Section 2.8(e), except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. Notwithstanding anything in this Section 2.8(e) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 2.8(e) to contribute any amount in excess of the proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate. () The provisions of this Section 2.8 shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain in full force and effect following the transfer of the Registrable Securities by any such party. ARTICLE Changes in Common Stock If, and as often as, there is any change in the Common Stock by way of a combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Registrable Securities as so changed. ______________________________________ Footnote continued from previous page. 327 ______________________________________ ARTICLE Representations and Warranties of the Company The Company represents and warrants to the Holders of the Registrable Securities as of the date of this Agreement as follows: () Due Authorization. The execution, delivery and performance of this Agreement by the Company has been duly authorized by all requisite action. () Binding Obligation. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. () No Violation. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated herein, by the Company does not violate any provision of law, any order of any court or other agency of government, any organizational document of the Company or any provision of any material indenture, agreement or other instrument to which the Company or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company which violation, conflict, breach or default or lien, charge, restriction or encumbrance would have a material adverse effect on the business, condition (financial or otherwise) of the Company taken as a whole. ______________________________________ Footnote continued from previous page. 328 ______________________________________ () Government Action. No action has been taken and no statute, rule or regulation or order has been enacted, no injunction, restraining order or order of any nature has been issued by a federal or state court of competent jurisdiction and no action, suit or proceeding is pending against or affecting or threatened against, the Company before any court or arbitrator or any governmental body, agency or official which, if adversely determined, would in any manner draw into question the validity of this Agreement. Other than filings required with the Commission and under state securities laws, no action or approval by, or filing or registration with, any court or governmental agency or body is required for the consummation of the transactions contemplated by this Agreement by the Company. ARTICLE Benefits of Agreement The obligations of the Company under this Agreement shall inure to the benefit of, and be enforceable by, the initial Holders and their successors and permitted assigns without any further action on the part of any party hereto. ARTICLE Miscellaneous SECTION .. Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall be effective upon delivery in person, faxed ______________________________________ Footnote continued from previous page. 329 ______________________________________ or telecopied, or mailed by certified or registered mail, return receipt requested, postage pre-paid, addressed as follows: () if to the Company, 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919, Attention: President; with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, NY 10022, Attention: Randall Doud, Esq. and McDermott, Will & Emery, 1850 K Street, N.W., Suite 450, Washington, D.C. 20006-2296, Attention: Robert Jensen, Esq.; () if to an initial Holder of Registrable Securities, at such address as may have been furnished to the Company in writing by such Holder; or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Registrable Securities) or to the Holders of Registrable Securities (in the case of the Company) in accordance with the provisions of this paragraph. SECTION .. Waivers; Amendments. No failure or delay of any Holder of Registrable Securities or the Company in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of such Holder and the Company are cumulative and not exclusive of any rights or remedies which it would otherwise have. The provisions of this Agreement may be amended, modified or waived with (and only with) the written consent of the Company and a majority of the Holders of Registrable Securities outstanding (exclusive of Registrable Securities then owned by the Company or any subsidiary thereof). No notice or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. SECTION .. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the ______________________________________ Footnote continued from previous page. 330 ______________________________________ State of New York without regard to principles of conflicts of law. SECTION .. Survival of Agreements; Representations and Warranties, etc. All warranties, representations and covenants made by the Company herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Holders of Registrable Securities and shall continue in full force and effect so long as this Agreement is in effect regardless of any investigation made by such Holders. All statements in any such certificate or other instrument shall constitute representations and warranties hereunder. SECTION .. Covenants to Bind Successors and Assigns. All the covenants, stipulations, promises and agreements in this Agreement contained by or on behalf of the parties hereto shall bind their successors and assigns, whether so expressed or not. SECTION .. Severability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION .. Section Headings. The section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of or be taken into consideration in interpreting this Agreement. SECTION .. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. ______________________________________ Footnote continued from previous page. 331 ______________________________________ SECTION .. Termination. The obligations of the Company to register the Registrable Securities hereunder shall terminate in accordance with the terms of this Agreement. SECTION .. Complete Agreement. This document and the documents referred to herein contain the complete agreement between the parties and supersede any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way, and any other agreements or understandings as to securities registration or similar rights among the parties hereto are hereby terminated. SECTION .. No More Favorable Agreements. The Company has not previously, and will not hereafter, enter into any agreement with respect to its securities with any person which grants such person rights that are, taken as a whole, more favorable than the rights granted to the Holders in this Agreement. SECTION .. Submission to Jurisdiction; Venue. () Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, the Company hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to CT Corporation Systems at its address at 1633 Broadway, New York, New York 10019, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of any Holder to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. () The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the ______________________________________ Footnote continued from previous page. 332 ______________________________________ courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. ______________________________________ Footnote continued from previous page. 333 ______________________________________ IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the date first set forth above. AMERICAN TELECASTING, INC. By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: HOLDERS: INDOSUEZ CM II, INC. By: /s/ INDOSUEZ CM II, INC. ---------------------------- By: ---------------------------- ______________________________________ Footnote continued from previous page. 334 ___________________________________________ EXHIBIT C-2 TO THE CREDIT AGREEMENT SECURITIES PLEDGE AGREEMENT This SECURITIES PLEDGE AGREEMENT (the "Agreement"), dated as of February 26, 1997, made by AMERICAN TELECASTING, INC., a Delaware corporation having an office at 5575 Tech Center Drive, Suite 300, Colorado Springs, CO 80919 (the "Pledgor"), in favor of BANQUE INDOSUEZ, NEW YORK BRANCH, having an office at 1211 Avenue of the Americas, New York, New York 10036, as pledgee, assignee and secured party, in its capacity as collateral agent (in such capacities and together with any successors in such capacities, the "Collateral Agent") for the lending institutions (the "Banks") under the Credit Agreement (as hereinafter defined). R E C I T A L S : A. Pursuant to a certain credit agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Credit Agreement), among the Pledgor, the Banks and Banque Indosuez, New York Branch, as Agent for the Banks, the Banks have agreed to make to or for the account of the Pledgor certain Loans up to an aggregate principal amount of $17,000,000. B. The Pledgor is the legal and beneficial owner of the Pledged Collateral (as hereinafter defined) pledged by it. C. It is a condition precedent to the obligations of the Banks to make the Loans under the Credit Agreement that the Pledgor execute and deliver the applicable Credit Documents, including this Agreement. ___________________________________________ Footnote continued from previous page. 335 ___________________________________________ D. This Agreement is given by the Pledgor in favor of Collateral Agent for its benefit and the benefit of the Banks and the Agent (collectively, the "Secured Parties") to secure the payment and performance of all of the Secured Obligations (as defined in Section 2). A G R E E M E N T : NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and Collateral Agent hereby agree as follows: Pledge. As collateral security for the payment and performance when due of all the Secured Obligations, the Pledgor hereby pledges, assigns, transfers and grants to Collateral Agent for the benefit of the Secured Parties, a continuing first priority security interest in and to all of the right, title and interest of the Pledgor in and to the following property, whether now existing or hereafter acquired, (collectively, the "Pledged Collateral"): the issued and outstanding shares of capital stock described on Schedule I hereto ("the Pledged Shares"), including the certificates representing the Pledged Shares and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares; all additional shares of capital stock of any issuer of the Pledged Shares from time to time acquired by the Pledgor in any manner (which securities shall be deemed to be part of the Pledged Shares) and the certificates representing such additional securities and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to such additional securities; all intercompany notes described on Schedule II hereto (the "Intercompany Notes") now owned or held by ___________________________________________ Footnote continued from previous page. 336 ___________________________________________ Pledgor and from time to time acquired by Pledgor in any way, and all certificates or instruments evidencing such Intercompany Notes and all proceeds thereof, all accessions thereto and substitutions therefor; all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital, income, profits and other property, interests or proceeds from time to time received, receivable or otherwise distributed to the Pledgor in respect of or in exchange for any or all of the Pledged Shares (collectively, "Distributions"); and all Proceeds (as defined under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "UCC") or under other relevant law) of any of the foregoing, and in any event, including, without limitation, any and all (i) proceeds of any insurance (except payments made to a Person which is not a party to this Agreement), indemnity, warranty or guarantee payable to Collateral Agent or to the Pledgor from time to time with respect to any of its respective Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to the Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of its respective Pledged Collateral by any Governmental Authority (or any person acting under color of a Governmental Authority), (iii) instruments representing obligations to pay amounts in respect of Pledged Shares, (iv) products of the Pledged Collateral and (v) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. Secured Obligations. This Agreement secures, and the Pledged Collateral is collateral security for, the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of (i) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement (including, without limitation, the obligations of the Pledgor to pay principal, interest and all other reasonable charges, fees, expenses, commissions, 337 __________________________________________ reimbursements, premiums, indemnities and other payments related to or in respect of the Obligations contained in the Credit Agreement), and (ii) without duplication of the amounts described in clause (i), all Obligations of the Pledgor now existing or hereafter arising under or in respect of this Agreement or any other Security Document, including, without limitation, with respect to all reasonable charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement (the obligations described in clauses (i) and (ii), collectively, the "Secured Obligations"). No Release. Subject to Section 18 of this Agreement, nothing set forth in this Agreement shall relieve the Pledgor from the performance of any term, covenant, condition on the Pledgor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to the Person under or in respect of any of the Pledged Collateral or shall impose any obligation on Collateral Agent or any Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor's part to be so performed or observed or shall impose any liability on Collateral Agent or any Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any representation or warranty on the part of the Pledgor contained in this Agreement, or any other Credit Document or under or in respect of the Pledged Collateral or made in connection herewith or therewith. Subject to Section 18 of this Agreement, the obligations of the Pledgor contained in this Section 3 shall survive the termination of this Agreement and the discharge of the Pledgors' other obligations under this Agreement and the other Credit Documents. Delivery of Pledged Collateral. All certificates, agreements or instruments representing or evidencing the Pledged Collateral, to the extent not previously delivered to Collateral Agent, shall immediately upon receipt thereof by the Pledgor be delivered to and held by or on behalf of Collateral Agent pursuant hereto. All Pledged Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank (with signatures appropriately guaranteed), all in form and substance ___________________________________________ Footnote continued from previous page. 338 ___________________________________________ satisfactory to Collateral Agent. Subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of an Event of Default, to endorse, assign or otherwise transfer to or to register in the name of Collateral Agent or any of its nominees any or all of the Pledged Collateral. Collateral Agent shall provide the Pledgor with notice of any endorsement, assignment or other transfer made pursuant to the preceding sentence. In addition, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right at any time to exchange certificates representing or evidencing Pledged Collateral for certificates of smaller or larger denominations. If an issuer of Pledged Shares is incorporated in a jurisdiction which does not permit the use of certificates to evidence equity ownership, then the Pledgor shall, to the extent permitted by applicable law, record such pledge on the stock register of such issuer, execute any customary stock pledge forms or other documents necessary or appropriate to complete the pledge and give Collateral Agent the right to transfer the Pledged Shares under the terms hereof and provide to Collateral Agent an opinion of counsel, in form and substance satisfactory to Collateral Agent, confirming such pledge. Notwithstanding any provision of this Section 4 to the contrary, if the exercise of any rights provided in this Section 4 or Section 10 relates to the ownership or control of any radio, television or other license, permit, certificate or approval granted or issued by the FCC or any other Governmental Authority (including, without limitation, any multichannel or single channel multipoint distribution service, local multipoint distribution service, operational-fixed microwave service, cable television relay service station, business radio, instructional television fixed service, earth station or experimental licenses or permits issued by the FCC) (each, a "Governmental License") held by the Pledgor or a subsidiary of the Pledgor and it may be necessary to obtain the consent or approval of the FCC prior to the exercise of such rights, the provisions of Section 29 of this Agreement shall apply. Supplements, Further Assurances. ___________________________________________ Footnote continued from previous page. 339 ___________________________________________ The Pledgor agrees that at any time and from time to time, at the sole cost and expense of such Pledgor, the Pledgor shall promptly execute and deliver all further instruments and documents, including, without limitation, supplemental or additional UCC-1 financing statements, and take all further action that may be necessary or that Collateral Agent may reasonably request, in order to perfect and protect the pledge, security interest and Lien granted or purported to be granted hereby or to enable Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. The Pledgor shall, upon obtaining any Pledged Shares of any Person promptly (and in any event within three Business Days) deliver to Collateral Agent a pledge amendment, duly executed by the Pledgor, in substantially the form of Exhibit 1 hereto (the "Pledge Amendment"), in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such Pledged Collateral. The Pledgor hereby authorizes Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder be considered Pledged Collateral. Representations, Warranties and Covenants. The Pledgor represents, warrants and covenants as follows (as to itself only): No Liens. The Pledgor is, and at the time of any delivery of any Pledged Collateral to Collateral Agent pursuant to Section 4 of this Agreement will be, the sole legal and beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. All Pledged Collateral is on the date hereof, and will be, so owned by the Pledgor, as applicable, free and clear of any Lien except for the Lien created by this Agreement. Authorization, Enforceability. The Pledgor has the requisite corporate power, authority and legal right to pledge and grant a security interest in all of the Pledged Collateral pledged by it pursuant to this Agreement, and ___________________________________________ Footnote continued from previous page. 340 ___________________________________________ this Agreement constitutes the legal, valid and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms. No Consents, etc. No consent of any party (including, without limitation, any stockholders or creditors of the Pledgor) and no consent, authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required either (x) for the pledge by the Pledgor of the Pledged Collateral pledged by it pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, or (y) for the exercise by Collateral Agent of the voting or other rights provided for in this Agreement, or (z) for the exercise by Collateral Agent of the remedies in respect of the Pledged Collateral pursuant to this Agreement; provided, however, that under the Communications Act and the rules and regulations of the FCC, FCC consent may be required prior to the transfer of control or assignment of any Governmental License issued by the FCC, or the exercise of any voting rights or management over the Pledgor or an issuer of Pledged Shares to the extent it holds, owns or controls any Governmental License issued by the FCC. Due Authorization and Issuance. All of the Pledged Shares have been, and to the extent hereafter issued will be upon such issuance, duly authorized and validly issued and fully paid and nonassessable. Chief Executive Office. The Pledgor's chief executive office is located at 5575 Tech Center Drive, Suite 300, Colorado Springs, Colorado 80919. Pledgor shall not move its chief executive office except to such new location as Pledgor may establish in accordance with the last sentence of this Section 6(e). Pledgor shall not establish a new location for its chief executive office nor shall it change its name until (i) it shall have given Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location or name and providing such other information in connection therewith as Collateral Agent or any Secured Party may request, and (ii) with respect to such new ___________________________________________ Footnote continued from previous page. 341 ___________________________________________ location or name, Pledgor shall have taken all action satisfactory to Collateral Agent and the Secured Parties to maintain the perfection and priority of the security interest of Collateral Agent for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby. Delivery of Pledged Collateral; Filings. The Pledgor has delivered to Collateral Agent all certificates representing the Pledged Shares and Intercompany Notes and has caused to be filed with the Secretary of State of the State of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor, UCC-1 financing statements evidencing the Lien created by this Agreement, and such delivery, filing and pledge of the Pledged Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations pursuant to the UCC, including, without limitation, the UCC as in effect in the States of New York, the State of incorporation of the Pledgor and the State of Colorado, which is the State of the chief executive office of the Pledgor. Pledged Collateral. All information set forth herein, including the Schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral is accurate and complete in all respects. No Violations, etc. The pledge of the Pledged Collateral pursuant to this Agreement does not violate Regulation G, T, U or X of the Federal Reserve Board. Ownership of Pledged Collateral. Except as otherwise permitted by the Credit Agreement, the Pledgor at all times will be the sole beneficial owner of the Pledged Collateral pledged by it pursuant to this Agreement. ___________________________________________ Footnote continued from previous page. 342 ___________________________________________ No Options, Warrants, etc. Except as disclosed in the Credit Agreement, there are no options, warrants, calls, rights, commitments or agreements of any character to which the Pledgor is a party or by which it is bound obligating the Pledgor to issue, deliver or sell or cause to be issued, delivered or sold, additional securities of any issuer of the Pledged Shares or obligating any issuer of the Pledged Shares to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no voting trusts or other agreements or understandings to which the Pledgor or any issuer of the Pledged Shares is a party with respect to the voting of the securities of any issuer of the Pledged Shares. Endorsement, Assignment or Pledge of Instruments. None of the Pledged Collateral is, as of the date of this Agreement, and as to Pledged Collateral which arises from time to time after such date will be, evidenced by any instrument, note or chattel paper, except such as have been or will be endorsed, assigned or pledged and delivered to Collateral Agent by Pledgors simultaneously with the creation thereof. Systems. The Pledged Shares include the Pledgor's interest in each Credit Party operating Systems or holding System Agreements. Voting Rights; Distributions; etc. So long as no Event of Default shall have occurred and be continuing: (i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Shares pledged by it pursuant to this Agreement or any part thereof for any purpose not inconsistent with the terms or purpose of this Agreement or any of the other Credit Documents and each Pledgor shall not in any event exercise such rights in any manner which may have an adverse effect on the value of its respective Pledged Collateral or the ___________________________________________ Footnote continued from previous page. 343 ___________________________________________ security intended to be provided by this Agreement. (ii) Subject to the terms of the Credit Agreement, each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Credit Agreement; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be, and shall be forthwith delivered to Collateral Agent to hold as Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of Collateral Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). (iii) Collateral Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of the Pledgor and at such Pledgor's sole cost and expense, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof. (b) Upon the occurrence and during the continuance of an Event of Default: ___________________________________________ Footnote continued from previous page. 344 ___________________________________________ (i) All rights of the Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights; provided, however, to the extent the Pledgor or an issuer of Pledged Shares hold, own or control any Governmental License issued by the FCC, if and to the extent required under the Communications Act or the FCC's rules, until the FCC has consented to a transfer of control or assignment of Pledgor, an issuer of Pledged Shares, or such Governmental License issued by the FCC, Pledgor shall continue to exercise the voting and other consensual rights. (ii) All rights of the Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof shall cease and all such rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. (iii) Subject to any necessary prior or subsequent FCC approval, Collateral Agent shall be entitled to the appointment, as a matter of right and without giving notice to the Pledgor, of a receiver with respect to the Pledged Collateral, without regard to the adequacy or inadequacy of any Pledged Collateral for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof, and each Pledgor does hereby irrevocably consent to such appointment. Any such receiver shall have all the usual qualifications, powers and duties of receivers in similar cases, including the full power to conduct the business of the Pledgors. (c) The Pledgor shall, at such Pledgor's sole cost and expense, from time to time execute and deliver to Collateral Agent and any other Person directed by Collateral ___________________________________________ Footnote continued from previous page. 345 ___________________________________________ Agent, appropriate instruments as Collateral Agent may request in order to permit Collateral Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 7(b)(i) hereof and to receive all Distributions which it may be entitled to receive under Section 7(b)(ii) hereof. (d) All Distributions which are received by the Pledgor contrary to the provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit of Collateral Agent, shall be segregated from other funds of such Pledgor and shall immediately be paid over to Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Transfers and Other Liens; Additional Shares; Principal Office. The Pledgor shall not (i) sell, convey, assign or otherwise dispose of, or grant any option, right or warrant with respect to, any of the Pledged Collateral pledged by it pursuant to this Agreement, (ii) create or permit to exist any Lien upon or with respect to any Pledged Collateral pledged by it pursuant to this Agreement other than the Lien granted to Collateral Agent under this Agreement, or (iii) permit any issuer of the Pledged Shares to merge, consolidate or change its legal form unless a majority of the outstanding capital stock of the surviving or resulting corporation is, upon such merger or consolidation, pledged to Collateral Agent pursuant to a pledge agreement in form and substance, satisfactory to Collateral Agent, and no cash, securities or other property is distributed in respect of the outstanding shares of any other constituent corporation. The Pledgor shall (i) cause each issuer of the Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to such Pledgor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of capital stock or other equity securities of any issuer of the Pledged Shares which are required to be pledged hereunder. ___________________________________________ Footnote continued from previous page. 346 ___________________________________________ Reasonable Care. Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Collateral Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Collateral Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Collateral Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Remedies Upon Default; Decisions Relating to Exercise of Remedies. If any Event of Default shall have occurred and be continuing, subject to the provisions of Section 29 of this Agreement, Collateral Agent shall have the right, in addition to other rights and remedies provided for herein or otherwise available to it to be exercised from time to time, (i) to retain and apply the Distributions to the Secured Obligations as provided in Section 11 hereof, and (ii) to exercise all the rights and remedies of a secured party on default under the UCC, and Collateral Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof (including, without limitation, any partial interest in the Pledged Shares) in one or more parcels at public or private sale, at any exchange, broker's board or at any of Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Collateral Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Collateral Agent or any other Secured Party or any of their respective Affiliates may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Pledged Collateral payable by such Person ___________________________________________ Footnote continued from previous page. 347 ___________________________________________ at such sale. Each purchaser at any such sale shall acquire the property sold absolutely free from any claim or right on the part of the Pledgor, and Pledgor hereby waives (to the fullest extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor acknowledges and agrees that, to the extent notice of sale shall be required by law, five (5) days' notice to such Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. No notification need be given to the Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Pledgor hereby waives any claims against Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Collateral Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. Notwithstanding any provision of this subsection 10(a) to the contrary, in the event of a private or public sale of the Pledged Collateral, prior to the consummation of the sale, to the extent required under the Communications Act of 1934, as amended, or any successor statute or law (the "Communications Act"), the prior consent of the FCC pursuant to the Communications Act and the rules and regulations of the FCC will be obtained. The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to Persons who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such ___________________________________________ Footnote continued from previous page. 348 ___________________________________________ restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. Notwithstanding the foregoing and to the extent commercially reasonable, each Pledgor shall, upon the occurrence and during the continuance of an Event of Default, at the request of Collateral Agent, for the benefit of Collateral Agent, cause any registration, qualification under or compliance with any federal or state securities law or laws to be effected with respect to all or any part of the Pledged Collateral as soon as practicable and at such Pledgor's sole cost and expense. The Pledgor will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Collateral, including, without limitation, registration under the Securities Act (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements. The Pledgor will cause Collateral Agent to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to Collateral Agent such number of prospectuses, offering circulars or other documents incident thereto as Collateral Agent from time to time may request, and will indemnify and will cause the issuer of the Pledged Collateral to indemnify Collateral Agent and all others participating in the distribution of such Pledged Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading. ___________________________________________ Footnote continued from previous page. 349 ___________________________________________ If Collateral Agent determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, each Pledgor shall from time to time furnish to Collateral Agent all such information as Collateral Agent may request in order to determine the number of securities included in the Pledged Collateral which may be sold by Collateral Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. The Pledgor recognizes that, by reason of certain prohibitions contained in laws, rules, regulations or orders of any foreign Governmental Authority, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such foreign Governmental Authority. The Pledgor acknowledges that any such sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales. In addition to any of the other rights and remedies hereunder, Collateral Agent shall have the right to institute a proceeding seeking specific performance in connection with any of the agreements or obligations hereunder. Without limiting the generality of the provisions in Section 15 hereof, Pledgor hereby constitutes and appoints Collateral Agent, with full power of substitution, its true and lawful attorney-in-fact, in its name, place and stead to take any action upon the occurrence and during the continuance of an Event of Default required to reflect the foreclosure sale of the Pledged Collateral or the exercise of any remedy hereunder. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. Application of Proceeds. All Distributions held from time to time by Collateral Agent and all cash proceeds received by Collateral Agent in respect of any sale of, collection from, ___________________________________________ Footnote continued from previous page. 350 ___________________________________________ or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Collateral Agent of its remedies as a secured creditor as provided in Section 10 hereof shall be applied, together with any other sums then held by Collateral Agent pursuant to this Agreement, promptly by Collateral Agent as follows: First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization, including, without limitation, reasonable compensation to Collateral Agent and its agents and counsel, and all reasonable expenses, liabilities and advances made or incurred by Collateral Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization, including, without limitation, reasonable compensation to the Banks and their agents and counsel and all reasonable expenses, liabilities and advances made or incurred by the Banks in connection therewith, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Third, to the indefeasible payment in full in cash of interest and all amounts other than principal under the Credit Agreement at any time and from time to time owing by the Pledgor under or in connection with the Credit Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind among amounts so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; Fourth, to the indefeasible payment in full in cash of principal at any time and from time to time owing by the Pledgor under or in connection with the Credit ___________________________________________ Footnote continued from previous page. 351 ___________________________________________ Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind, among amounts of principal so due and payable, together with interest on each such amount at the highest rate then in effect under the Credit Agreement from and after the date such amount is due, owing or unpaid until paid in full; and Fifth, to the applicable Pledgor, or its successors or assigns or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. Expenses. The Pledgor will upon demand pay to Collateral Agent the amount of any and all expenses, including the reasonable fees and expenses of its counsel and the fees and expenses of any experts and agents, which Collateral Agent may incur in connection with (i) the collection of the Secured Obligations, (ii) the enforcement and administration of this Agreement, (iii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iv) the exercise or enforcement of any of the rights of Collateral Agent or any Secured Party hereunder or (v) the failure by the Pledgor to perform or observe any of the provisions hereof. All amounts payable by the Pledgor under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. The Pledgor's obligations under this Section 12 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations hereunder. No Waiver; Cumulative Remedies. No failure on the part of Collateral Agent to exercise, no course of dealing with respect to, and no delay on the part of Collateral Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. ___________________________________________ Footnote continued from previous page. 352 ___________________________________________ In the event Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this instrument by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Collateral Agent, then and in every such case, each Pledgor, Collateral Agent and each holder of any of the Secured Obligations shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Collateral Agent and the Secured Parties shall continue as if no such proceeding had been instituted. Collateral Agent. Collateral Agent has been appointed as collateral agent pursuant to the Credit Agreement. The actions of Collateral Agent hereunder are subject to the provisions of the Credit Agreement. Collateral Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement and the Credit Agreement. Collateral Agent may resign and a successor Collateral Agent may be appointed in the manner provided in the Credit Agreement; provided, however, that at the time of appointment of a successor Collateral Agent, if Collateral Agent, through its possession, control, or ownership of Pledged Collateral or otherwise, holds, owns, or controls any Governmental License issued by the FCC such that the FCC must consent to the appointment of a successor Collateral Agent, until the FCC has consented to the appointment of a successor Collateral Agent the Collateral Agent shall retain control over such Pledged Collateral or Government Licenses. Upon the acceptance of any appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent under this Agreement, and the retiring Collateral Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Collateral Agent. ___________________________________________ Footnote continued from previous page. 353 ___________________________________________ Collateral Agent May Perform; Collateral Agent Appointed Attorney-in-Fact. If the Pledgor shall fail to do any act or thing that it has covenanted to do hereunder or any warranty on the part of such Pledgor contained herein shall be breached, Collateral Agent or any Secured Party may (but shall not be obligated to), subject to the provisions of Section 29 of this Agreement, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all amounts so expended by Collateral Agent or such Secured Party shall be paid by such Pledgor promptly upon demand therefor, with interest at the highest rate then in effect under the Credit Agreement during the period from and including the date on which such funds were so expended to the date of repayment. The Pledgor's obligations under this Section 15 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations under this Agreement, the Credit Agreement and any other Credit Document. The Pledgor hereby appoints Collateral Agent its attorney-in-fact with an interest, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time in Collateral Agent's discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the other Credit Documents which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement except that with respect to any FCC applications or filings or other action subject to FCC rules, regulations and policies, Collateral Agent shall serve as attorney-in-fact only to the extent permitted under the Communications Act and FCC rules, regulations and policies. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. The Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. Indemnity. Indemnity. The Pledgor agrees to indemnify, pay and hold harmless Collateral Agent and each of the Secured Parties and the officers, directors, employees, agents and affiliates of Collateral Agent and each of the Secured Parties (collectively called the "Indemnitees") from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or ___________________________________________ Footnote continued from previous page. 354 ___________________________________________ disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or any other Credit Document (including, without limitation, any misrepresentation by the Pledgor in this Agreement or any other Credit Document) (the "indemnified liabilities"); provided that the Pledgors shall not have any obligation to an Indemnitee hereunder with respect to indemnified liabilities if it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such indemnified liability arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, each Pledgor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all indemnified liabilities incurred by the Indemnitees or any of them. Survival. The obligations of each Pledgor contained in this Section 16 shall survive the termination of this Agreement and the discharge of each Pledgor's other obligations under this Agreement and under the other Credit Documents. Reimbursement. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by the Pledgor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Credit Agreement and unless in writing and signed by Collateral Agent and Pledgor. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Pledgor from the terms ___________________________________________ Footnote continued from previous page. 355 ___________________________________________ of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other Credit Document, no notice to or demand on the Pledgor in any case shall entitle any such Pledgor to any other or further notice or demand in similar or other circumstances. Termination; Release. When all the Secured Obligations have been indefeasibly paid in full and the Commitments of the Banks to make any Loan under the Credit Agreement shall have expired, this Agreement shall terminate. Upon termination of this Agreement or any release of Pledged Collateral in accordance with the provisions of the Credit Agreement, Collateral Agent shall, upon the request and at the sole cost and expense of the applicable Pledgor, forthwith assign, transfer and deliver to such Pledgor, against receipt and without recourse to or warranty by Collateral Agent, such of the Pledged Collateral to be released (in the case of a release) as may be in the possession of Collateral Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, on the order of and at the sole cost and expense of such Pledgor, and proper instruments (including UCC termination statements on Form UCC-3) acknowledging the termination of this Agreement or the release of such Pledged Collateral, as the case may be. Notices. Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner set forth in the Credit Agreement; provided that notices to Collateral Agent shall not be effective until received by Collateral Agent. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon each Pledgor, its respective successors and assigns, and (ii) inure, together with the rights and remedies of Collateral Agent hereunder, to the benefit of Collateral Agent and the other Secured Parties and each of their respective successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of the Pledgor) shall have any interest herein or any right or benefit with respect hereto. ___________________________________________ Footnote continued from previous page. 356 ___________________________________________ Without limiting the generality of the foregoing clause (ii), any Bank may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Bank, herein or otherwise, subject however, to the provisions of the Credit Agreement. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE PLEDGOR DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, WITH AN ADDRESS AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE PLEDGOR IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE PLEDGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE PLEDGOR AT ITS ADDRESS PROVIDED FOR IN SECTION 19 HEREOF EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE PLEDGOR REFUSES TO RECEIVE AND FORWARD SUCH SERVICE, THE PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ___________________________________________ Footnote continued from previous page. 357 ___________________________________________ Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Obligations Absolute. All obligations of the Pledgor hereunder shall be absolute and unconditional irrespective of: any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Pledgor or any other Credit Party; any lack of validity or enforceability of the Credit Agreement or any other Credit Document or any other agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Credit Document or any other agreement or instrument relating thereto; any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or ___________________________________________ Footnote continued from previous page. 358 ___________________________________________ consent to any departure from any guarantee, for all or any of the Secured Obligations; any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect of this Agreement, or any other Credit Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 17 hereof; or any other circumstances which might otherwise constitute a defense available to, or a discharge of, any other Pledgor. Collateral Agent's Right to Sever Indebtedness. The Pledgor acknowledges that (i) the Pledged Collateral does not constitute the sole source of security for the payment and performance of the Secured Obligations and that the Secured Obligations are also secured by other types of property of such Pledgor and its Affiliates in other jurisdictions (all such property, collectively, the "Collateral"), (ii) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to execute in respect of such item a separate credit agreement, and (iii) each Pledgor intends that Collateral Agent have the same rights with respect to the Pledged Collateral, in any judicial proceeding relating to the exercise of any right or remedy hereunder or otherwise, that Collateral Agent would have had if each item of collateral had been pledged or encumbered pursuant to a separate credit agreement and security instrument. In furtherance of such intent, each Pledgor agrees to the greatest extent permitted by law that Collateral Agent may at any time by notice (an "Allocation Notice") to the Pledgor allocate a portion of the Secured Obligations (the "Allocated Indebtedness") to the Pledged Collateral of such Pledgor and sever from the remaining Secured Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to the Pledged Collateral, the Secured Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate credit obligation ___________________________________________ Footnote continued from previous page. 359 ___________________________________________ of each Pledgor unrelated to the other transactions contemplated by the Credit Agreement or any other Credit Document or any document related to either thereof. To the extent that the proceeds of any judicial proceeding relating to the exercise of any right or remedy hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall belong to such Pledgor and shall not be available hereunder to satisfy any Secured Obligations of such Pledgor other than the Allocated Indebtedness. In any action or proceeding to exercise any right or remedy under this Agreement which is commenced after the giving by Collateral Agent of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Secured Obligations hereby secured, and the Pledgor may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 27, the proceeds received by Collateral Agent pursuant to this Agreement shall be applied by Collateral Agent in accordance with the provisions of Section 11 hereof. The Pledgor hereby waives to the greatest extent permitted under law the right to a discharge of any of the Secured Obligations under any statute or rule of law now or hereafter in effect which provides that the exercise of any particular right or remedy as provided for herein (by judicial proceedings or otherwise) constitutes the exclusive means for satisfaction of the Secured Obligations or which makes unavailable any further judgment or any other right or remedy provided for herein because Collateral Agent elected to proceed with the exercise of such initial right or remedy or because of any failure by Collateral Agent to comply with laws that prescribe conditions to the entitlement to such subsequent judgment or the availability of such subsequent right or remedy. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that such subsequent judgment or action is not available to Collateral Agent, no Pledgor shall (i) introduce in any other jurisdiction any judgment so holding as a defense to enforcement against such Pledgor of any remedy in the Credit Agreement or executed in connection with the Credit Agreement or (ii) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered and only with respect to the collateral referred to in such judgment. ___________________________________________ Footnote continued from previous page. 360 ___________________________________________ In the event any instrument in addition to the Allocation Notice is necessary to effectuate the provisions of this Section 27, including, without limitation, any amendment to this Agreement, any substitute promissory note or affidavit or certificate of any kind, Collateral Agent may execute and deliver such instrument as the attorney-in-fact of the Pledgor. Notwithstanding anything set forth herein to the contrary, the provisions of this Section 27 shall be effective only to the maximum extent permitted by law. Future Advances. This Agreement shall secure the payment of any amounts advanced from time to time pursuant to the Credit Agreement. Facilitating Governmental Approvals; Specific Performance. In connection with the exercise by Collateral Agent of its rights under this Agreement relating to the disposition of the Pledged Collateral as it may affect the control of any Governmental License issued by the FCC or any other authorizations, agreements, permits, licenses, and franchises of the Pledgor, it may be necessary to obtain the prior consent or approval of the FCC or other Governmental Authority to the exercise of Collateral Agent's rights with respect to the Pledged Collateral. To the extent that any such consent or approval is required for any action that Collateral Agent may take under this Agreement with respect to the Pledged Collateral, receipt of such FCC or Governmental Authority approval shall be a condition precedent to Collateral Agent's exercise of such rights. In furtherance of the first sentence of this Section, the Pledgor hereby agrees, at its own cost, to use its best efforts to take any and all actions which Collateral Agent may request in order to obtain such consents or approvals or any other governmental authorization as may be necessary to enable Collateral Agent to exercise and enjoy the full rights and benefits granted to it under this Agreement, the Credit Agreement, or any other Credit Document, including, without limitation, the preparation, execution, delivery or filing on the Pledgor's behalf and in such Pledgor's name, or in such other name as may be appropriate or required, or causing to be prepared, executed, delivered or filed, all ___________________________________________ Footnote continued from previous page. 361 ___________________________________________ applications, certificates, filings, instruments, information, reports and other documents (including, without limitation, any application for any assignment or transfer of control or ownership). The Pledgor hereby acknowledges that a breach of any of its respective obligations contained in this Agreement will cause irreparable injury to Collateral Agent, and that such a breach would not be adequately compensable in damages, and therefore Pledgors agree that their obligations under this Agreement shall be specifically enforceable. ___________________________________________ Footnote continued from previous page. 362 ___________________________________________ IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. AMERICAN TELECASTING, INC., as Pledgor By: /s/ AMERICAN TELECASTING, INC. ----------------------------------- Name: Title: BANQUE INDOSUEZ, NEW YORK BRANCH, as Collateral Agent By: /s/ BANQUE INDOSUEZ ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: Notice Address: Banque Indosuez, New York Branch 1211 Avenue of the Americas New York, N.Y. 10036 Attention: Michael Arougheti ___________________________________________ Footnote continued from previous page. 363 EXHIBIT D-1 TO THE ALIGN CREDIT AGREEMENT FORM OF NOTICE OF ASSIGNMENT [DATE] Banque Indosuez, New York Branch, as Agent 1211 Avenue of the Americas 7th Floor New York, New York 10036 Attention: Re: Credit Agreement dated as of February __, 1997 among American Telecasting, Inc., the lending institutions listed therein (the "Banks") and Banque Indosuez, New York Branch as Agent and Collateral Agent for the Banks. Reference is made to the above-referenced Credit Agreement (herein the "Credit Agreement"); all terms defined in the Credit Agreement shall have the same meanings when used herein. ________________ ("Assignor") has sold to ________________ ("Assignee") an assignment in the aggregate amount of $_________ representing an assignment of the total Commitment as set forth on Annex I]. The Assignee hereby elects to become party to, and be bound by each of the provisions of, the Credit Agreement as a "Bank," as defined in the Credit Agreement, with a Commitment as set forth in clause 2 above. Assignee hereby confirms, as to itself, that (i) it has received a copy of the Credit Agreement and such other information that it has deemed appropriate to make its own credit analysis and decision to purchase its assignment, (ii) will independently and without reliance upon the Agent or ______________________________________ Footnote continued from previous page. 364 ______________________________________ any other Bank and based on such documents and other information as it deems appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, (iii) it has purchased its assignment without recourse or warranty to the Agent or any of the other Banks and that all such Persons have made no representations or warranties, and have no responsibility, to the Assignee with respect to any representation or warranty in the Credit Documents, or the legality, enforceability or sufficiency of any thereof, the financial condition of any of the Borrower or any of the Guarantors or the performance or non-performance by the Borrower or any of the Guarantors of any of their respective obligations or duties under the Credit Documents, and (iv) effective on the Assignment Effective Date (as defined in the Assignment and Assumption Agreement) Assignor shall be released from all of its obligations under the Credit Agreement as relating to Assignee's Share (as defined in the Assignment and Assumption Agreement) pursuant to the terms of the Credit Agreement. The Assignee's address for purposes of notices under the Credit Agreement is listed on Annex I hereto. The recordation fee referred to in Section 10.04(b)(A) of the Credit Agreement is delivered herewith to the Agent. Very truly yours, [NAME OF ASSIGNOR] By: ----------------------------------- [NAME OF ASSIGNEE] By: ----------------------------------- ACCEPTED AND ACKNOWLEDGED: BANQUE INDOSUEZ, NEW YORK BRANCH ______________________________________ Footnote continued from previous page. 365 ______________________________________ By: ----------------------------- Date: --------------------------- ______________________________________ Footnote continued from previous page. EX-11.1 5 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 AMERICAN TELECASTING, INC. AND SUBSIDIARIES Earnings Per Share (Dollars in thousands except per share amounts)
------------------------------------------------ Years Ended December 31 ------------------------------------------------ 1994 1995 1996 ------------------------------------------------ Loss before extraordinary charge and cumulative effect of accounting change, net of income taxes . . . . . . . . . . . . . . $(15,478) $(55,696) $(98,380) Extraordinary charge on early retirement of debt. . . . . . . . . . . -- (11,541) -- Cumulative effect of accounting change, net of income taxes . . . . . -- 602 -- ------------------------------------------------ Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(15,478) $(66,635) $(98,380) Dividend embedded in conversion of Series B Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (6,250) ------------------------------------------------ Net Loss applicable to Class A Common Stock . . . . . . . . . . . . . $(15,478) $(66,635) $(104,630) ================================================ Weighted average number of shares outstanding . . . . . . . . . . . . 14,357,116 15,977,377 18,095,961 ================================================ Loss per share applicable to Class A Common Stock before extraordinary charge and cumulative effect of accounting change . . $(1.08) $(3.49) $(5.78) Loss per share from extraordinary charge . . . . . . . . . . . . . . -- (0.72) -- Income per share from cumulative effect of accounting change . . . . -- 0.04 -- ------------------------------------------------ Net loss per share applicable to Class A Common Stock . . . . . . . . $(1.08) $(4.17) $(5.78) ================================================ Pro Forma Unaudited Shares used to compute net loss per share . . . . . . . . . . . . . . 14,357,116 Incremental Common Shares for pro forma conversion of Series A Convertible Preferred Stock at beginning of period . . . . . . . . 88,289 ----------------- Shares used to compute pro forma net loss per share . . . . . . . . . 14,445,405 ================= Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . $(1.07) =================
EX-21.1 6 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT The following corporations and partnerships are all of the subsidiaries of ATI. Each subsidiary was incorporated or organized in Delaware (except where indicated otherwise), and they each do business only under their own name, "WANTV," "Choice TV," or "Superchannels of Las Vegas." American Telecasting Development, Inc. American Telecasting of Anchorage, Inc. American Telecasting of Bend, Inc. American Telecasting of Billings, Inc. American Telecasting of Bismarck, Inc. American Telecasting of Central Florida, Inc. American Telecasting of Cincinnati, Inc. American Telecasting of Colorado Springs, Inc. American Telecasting of Columbus, Inc. American Telecasting of Denver, Inc. American Telecasting of Fort Collins, Inc. American Telecasting of Fort Myers, Inc. American Telecasting of Green Bay, Inc. American Telecasting of Hawaii, Inc. American Telecasting of Jackson, Inc. American Telecasting of Jacksonville, Inc. American Telecasting of Lansing, Inc. American Telecasting of Lincoln, Inc. American Telecasting of Little Rock, Inc. American Telecasting of Louisville, Inc. American Telecasting of Medford, Inc. American Telecasting of Michiana, Inc. American Telecasting of Minnesota, Inc. American Telecasting of Monterey, Inc. American Telecasting of Nebraska, Inc. American Telecasting of North Dakota, Inc. American Telecasting of Oklahoma, Inc. American Telecasting of Portland, Inc. American Telecasting of Rapid City, Inc. American Telecasting of Redding, Inc. American Telecasting of Rockford, Inc. American Telecasting of Salem/Eugene, Inc. American Telecasting of Santa Barbara, Inc. American Telecasting of Santa Rosa, Inc. 2 American Telecasting of Sarasota, Inc. American Telecasting of Seattle, Inc. American Telecasting of Sheridan, Inc. American Telecasting of Sioux Valley, Inc. American Telecasting of South Dakota, Inc. American Telecasting of Toledo, Inc. American Telecasting of Youngstown, Inc. American Telecasting of Yuba City, Inc. FMA Licensee Subsidiary, Inc. (State of California) Fresno MMDS Associates, a general partnership (State of California) Fresno Wireless Cable Television, Inc. (State of Washington) Superchannels of Las Vegas, Inc. (State of Arizona) EX-23.1 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 21, 1997 (except with respect to the Facility and the BellSouth Transaction discussed in Notes 1 and 7, as to which the date is March 18, 1997), included in this Form 10-K into the Company's previously filed Registration Statements on Form S-8, File No. 33-86010 and Form S-8, File No. 333-05385. ARTHUR ANDERSEN LLP Washington, D.C. March 25, 1997 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 18,476 0 1,867 0 0 23,133 99,271 0 283,572 21,271 254,398 0 13,237 176,299 (186,423) 283,572 0 62,032 0 128,221 0 0 37,281 (101,677) (3,297) (98,380) 0 0 0 (98,380) (5.78) (5.78)
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