<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LENFEST COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 4841 23-2094942
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899
(302) 427-8602
(Address, including zip code, and
telephone number, including area code, of
Registrant's principal executive offices)
H. F. LENFEST
President and Chief Executive Officer
The Lenfest Group
200 Cresson Boulevard
Oaks, PA 19456
(610) 650-3000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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Copy to:
THOMAS K. PASCH, ESQ.
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, PA 19102
(215) 972-7188
Approximate date of commencement of proposed offer to the public: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Unit Price(1) Fee(1)
- --------------------------------------------------------------------------------
10 1/2 % Senior
Subordinated Notes Due
2006 .................... $300,000,000 100% $300,000,000 $33,736
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(1) Calculated in accordance with Rule 457(f)(2) under the Securities Act of
1933. Because the Registrant has an accumulated capital deficit, the filing
fee is based on a maximum aggregate offering price equal to one-third of the
Notes' par value ($293,500,000). Therefore, in accordance with Rule
457(f)(2), the maximum aggregate offering price for purposes of calculating
the registration fee is $97,833,333.33.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
LENFEST COMMUNICATIONS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K AND RULE 404(a)
SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN S-4
<TABLE>
<CAPTION>
Registration Statement Item and Heading Prospectus Caption
--------------------------------------- ------------------
<S> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus ......... Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus ................................... Inside Front and Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information .................. Prospectus Summary; Risk Factors; The Exchange Offer;
Selected Consolidated Financial and Operating Data
4. Terms of the Transaction ....................... Prospectus Summary; The Exchange Offer;
5. Pro Forma Financial Information ................ Pro Forma Financial Information
6. Material Contracts with the Company Being
Acquired........................................ Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters .. Not Applicable
8. Interests of Named Experts and Counsel ......... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
B. Information About the Registrant
10. Information With Respect to S-3 Registrants .... Not Applicable
11. Incorporation of Certain Information by Reference Not Applicable
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants..................... Prospectus Summary; Risk Factors;
Capitalization; Selected Consolidated Financial and
Operating Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; The Exchange Offer; Description of Notes;
Description of Other Debt Obligations
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies ...... Not Applicable
16. Information with Respect to S-2 or S-3 Companies. Not Applicable
<PAGE>
Registration Statement Item and Heading Prospectus Caption
--------------------------------------- ------------------
17. Information with Respect to Companies Other
than S-2 or S-3 Companies........................ Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited ............................ Not Applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer . Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted prior to the time the Registration Statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy, nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED AUGUST , 1996
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
10 1/2 % SENIOR SUBORDINATED NOTES DUE 2006
FOR
10 1/2 % SENIOR SUBORDINATED NOTES DUE 2006 LOGO
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
LENFEST COMMUNICATIONS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1996,
UNLESS EXTENDED.
Lenfest Communications, Inc. (the "Company") or ("Lenfest") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying letter of transmittal (the "Letter of Transmittal," and
together with this Prospectus, the "Exchange Offer"), to exchange its 10 1/2
% Senior Subordinated Notes Due 2006 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined) of which this
Prospectus is a part, for the outstanding 10 1/2 % Senior Subordinated Notes
Due 2006 (the "Old Notes" and, together with the Exchange Notes, the "Notes")
of the Company.
The Company will accept for exchange any and all Old Notes that are
validly tendered on or prior to 5:00 p.m. New York City time, on the date the
Exchange Offer expires, which will be , 1996, unless the Exchange Offer is
extended (the "Expiration Date"). The exchange of Exchange Notes for the Old
Notes will be made as soon as practicable after the close of the Exchange
Offer. The Company will accept for exchange all Old Notes tendered and not
validly withdrawn pursuant to the Exchange Offer and will deliver to the
Trustee (as defined) for cancellation all Old Notes so accepted for exchange.
The Company shall cause the Trustee to authenticate and deliver to each
holder of the Old Notes the Exchange Notes equal in principal amount to the
Old Notes of such holder so accepted for exchange. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer." The Company has agreed to pay the
expenses of the Exchange Offer.
The Exchange Notes will be obligations of the Company issued pursuant to
the Indenture (as defined) under which the Old Notes were issued. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Old Notes except that the Exchange Notes will not
contain terms with respect to transfer restrictions and the Exchange Notes
have been registered under the Securities Act. See "The Exchange Offer."
Interest on the Exchange Notes will be payable semi-annually on June 15
and December 15 of each year, commencing December 15, 1996. The Exchange
Notes will not be redeemable at the option of the Company prior to maturity.
Upon a Change of Control Triggering Event (as defined), holders of the
Exchange Notes may require the Company to purchase all or a portion of the
Exchange Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest (if any) to the date of purchase.
See "Description of Notes--Change of Control Offer."
The Exchange Notes will be general unsecured obligations of the Company
subordinated in right of payment to all present and future Senior
Indebtedness (as defined) of the Company. As of March 31, 1996, after giving
effect to the offering of the Old Notes (the "Old Notes Offering" and,
together with the Exchange Offer, the "Offering") and the other Transactions
(as defined), the total consolidated indebtedness of the Company would have
been $1,368 million, of which approximately $1,074 million is Senior
Indebtedness of the Company. See "Description of Other Debt Obligations." In
addition, all indebtedness and liabilities of the Company's subsidiaries will
be effectively senior in right of payment to the Exchange Notes. As of March
31, 1996, after giving effect to the Transactions, the total liabilities and
indebtedness of the Company's subsidiaries (including trade payables and
accrued liabilities), on an aggregate basis, would have been approximately
$96.5 million. See "Capitalization" and "Description of Notes."
Contemporaneously with the closing of the Old Notes Offering, the Company
entered into the New Bank Credit Facility (as defined) with a group of
lenders with a commitment in the aggregate amount of $450 million. The New
Bank Credit Facility replaced the Company's previously existing bank credit
facility (the "Old Bank Credit Facility").
<PAGE>
The Exchange Notes are being offered hereunder to satisfy certain
obligations of the Company contained in the Registration Agreement (as
defined). Based on existing interpretations of the Securities Act by the
staff of the Securities and Exchange Commission ("Commission") set forth in
several no-action letters to third parties, and subject to the immediately
following sentence, the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by the holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any holder of the Old Notes who is an "affiliate" of the Company or
who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation by the staff of the Commission set forth in the above
mentioned no-action letters, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes unless such sale or transfer is made pursuant to an
exemption from such requirements.
Each holder of the Old Notes (other than certain specified holders) who
wishes to exchange the Old Notes for Exchange Notes in the Exchange Offer is
required to represent to the Company that (i) it is not an affiliate of the
Company, (ii) any Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of the commencement of
the Exchange Offer, it has no arrangement with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Notes. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, ending on the close of business on
the 180th day following the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
See "The Exchange Offer" and "Plan of Distribution."
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer. See "Use
of Proceeds."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Exchange Notes are expected to be eligible for trading in the Private
Offerings Resales and Trading through Automated Linkages ("PORTAL") market.
See "Risk Factors" beginning on page 14 hereof for discussion of certain
factors that should be considered by prospective purchasers of the Exchange
Notes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August , 1996.
<PAGE>
[MAP OF LENFEST SYSTEMS]
<PAGE>
[MAP OF LENFEST SYSTEMS]
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW HAMPSHIRE
NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY
OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND
NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE
SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement", which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act and
the rules and regulations promulgated thereunder, covering the Exchange Notes
being offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement. For further information with respect
to the Company and the Exchange Offer, reference is made to the Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. The Registration Statement, including the exhibits thereto, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington. D.C. 20549, at
the Regional Offices of the Commission at 7 World Trade Center, 14th Floor,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Commission.
Such reports and other information may be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices: 7 World Trade Center, 14th Floor, New York, New York 10048 and 500
West Madison Street -- Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Commission by mail at prescribed rates.
Requests should be directed to the Commission's Public Reference Section,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Any such request and requests for the agreements summarized herein should be
directed to the Director of Investor Relations of the Company, care of The
Lenfest Group, 200 Cresson Boulevard, Oaks, Pennsylvania 19456 (telephone
(610) 650-3000).
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Unless otherwise indicated, all industry data set forth herein are based
upon information compiled by the National Cable Television Association
("NCTA"), Paul Kagan Associates or Warren Publishing Co.
3
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by reference to,
and should be read in conjunction with, the more detailed information and
financial statements appearing elsewhere in this Prospectus. The Company's
wholly owned cable television subsidiaries (the "Restricted Subsidiaries"
and, together with the Company, the "Restricted Group") generate almost all
of the Company's operating cash flow and therefore will be the primary source
of funds to service the Notes. Accordingly, the covenants in the Indenture
only restrict the activities of the Restricted Group. As used herein,
"EBITDA" represents operating income plus depreciation and amortization, and
"EBITDA margin" measures EBITDA as a percent of revenues. EBITDA, as used
herein, is not the defined term used in the Indenture governing the Notes,
but is included as supplemental disclosure because it is a widely accepted
financial indicator of a company's ability to incur and service debt. EBITDA,
however, is not a measure determined in accordance with generally accepted
accounting principles and should not be considered by an investor as an
alternative to net income (loss), as an indicator of the operating
performance of the Company or as an alternative to cash flows as a measure of
liquidity.
THE COMPANY
Lenfest Communications, Inc. ("Lenfest" or the "Company") acquires,
develops and operates cable television systems (principally through its
Suburban Cable subsidiary). Management believes the Company's wholly owned
and operated cable television systems (the "Core Cable Television
Operations") provide service to one of the largest contiguous blocks of
customers served by a single cable operator in the United States. As of March
31, 1996, the Company's Core Cable Television Operations served approximately
897,000 basic customers and passed approximately 1,236,000 homes. In
addition, the Company holds equity interests in other cable television
companies serving approximately 409,000 basic customers in areas near or
contiguous to its Core Cable Television Operations, of which the Company's
attributable portion is approximately 173,000 basic customers, giving the
Company a combined domestic base of 1,070,000 basic customers.
The Company's Core Cable Television Operations are located primarily in
the suburban areas surrounding Philadelphia (Southeastern Pennsylvania,
Southern New Jersey and Northern Delaware) in predominantly middle and
upper-middle income areas that in recent years have had favorable household
growth and income characteristics. Management believes the "clustering" of
its cable television systems and the favorable demographics of its service
area have contributed to its high operating cash flow growth and margins.
From January 1, 1991 through March 31, 1996, the Company's Core Cable
Television Operations have experienced a compound annual growth rate in
EBITDA of 16.3% (10.7% without reference to acquisitions) and an average
EBITDA margin of 50.0%.
H.F. (Gerry) Lenfest, President and Chief Executive Officer of the
Company, together with his children, and Tele-Communications, Inc. ("TCI"),
through an indirect wholly owned subsidiary, each beneficially owns 50% of
the Company's outstanding capital stock. Mr. Lenfest is a cable industry
pioneer who founded Lenfest in 1974 and has grown the Company both internally
and through acquisitions. TCI is the largest cable television operator in the
United States, with wholly owned and affiliated systems serving approximately
13.0 million customers. Lenfest believes that its affiliation with TCI
provides substantial benefits, including the ability to purchase programming
and equipment at rates approximating those available to TCI. See "Business --
Relationship with TCI" and "-- Programming and Equipment Supply."
4
<PAGE>
OPERATING STRATEGY
Management believes that the cable television industry has significant
growth potential in both the business of providing television programming
services and the business of providing new services such as telephony,
Internet access, near video-on-demand and interactive/transactional services.
Management believes that the Company's operating strategy will allow the
Company to take advantage of the industry's potential. The Company's
operating strategy for its Core Cable Television Operations includes the
following elements:
o Capturing the Benefits of Clustering. Management believes the
Company can derive significant economies of scale and operating
efficiencies from the operation of its cable television systems in a
single cluster. Operational advantages and cost savings associated
with clustering include centralized management, billing, marketing,
customer service, technical and administrative functions, and the
reduction of headends. Management also believes that clustering will
enable it to more effectively utilize capital by more efficiently
delivering cable and related services to a greater number of
households. Operation of its cable television systems in a single
cluster also will provide the Company with enhanced revenue
opportunities, including the ability to attract additional
advertising, and the potential to add residential and business
telephony services.
o Targeting Regions with Favorable Demographics. Management believes
that suburban households are more likely to subscribe to cable
television services and premium service packages and to take
advantage of new service offerings. Management attributes the
Company's growth and high customer penetration levels to its history
of acquiring and developing cable television systems in suburban
areas with favorable growth and income characteristics. In order to
build on the favorable demographic characteristics of the areas
contiguous to the Company's current cluster of cable television
systems, the Company will continue to opportunistically pursue
acquisitions of cable television systems near or contiguous to its
Core Cable Television Operations. This activity may include attempts
to acquire the balance of the shares of stock of Raystay Co. and
Susquehanna Cable Co. and its cable television operating
subsidiaries.
o Emphasis on Customer Service. The Company has sought to provide its
cable television customers with quality customer service and
attractive programming choices at reasonable rates. Among other
customer service initiatives, the Company has adopted the National
Cable Television Association ("NCTA") customer service standards and
implemented same-day, evening and weekend installation and repair
options. Management believes that these efforts have contributed to
its high customer penetration levels. Management believes that the
improved reliability and additional channel capacity expected to
result from the ongoing upgrade of the Company's cable television
systems will further increase customer satisfaction.
o Upgrade of Cable Television Systems. Management believes that
maintaining high technical standards is integral to increasing
programming choices, improving customer satisfaction and developing
new revenue streams. The Company recently commenced an upgrade of
the network architecture of its cable television systems by
increasing bandwidth, deploying fiber optic cable and reducing the
number of headend reception facilities. Successfully upgrading the
architecture of the Company's cable systems will result in expanded
channel capacity, two-way communication capability, enhanced network
quality and dependability, augmented addressability and the ability
to offer enhanced and new telecommunications services. These new
services could include additional channels and tiers, pay-per-view
(including near video-on-demand), high speed data services and
Internet access, digital advertisement insertion,
interactive/transactional services and telephony. In addition, the
successful upgrade should allow the Company to provide new
offerings, such as local and exclusive entertainment, news,
information and community-oriented programming services. Management
believes that these
5
<PAGE>
services will enable the Company to differentiate itself on a
competitive basis and increase penetration and revenue per customer
through more effective targeted marketing, greater bundling of
services and further development of the Company's brand name.
RECENT ACQUISITIONS
As part of its continuing strategy to develop and maintain a single
contiguous cluster of cable television systems, the Company recently
completed a series of acquisition transactions.
The TCI Exchange. On February 12, 1996, the Company completed an
acquisition (the "TCI Exchange") in which it received TCI's Wilmington,
Delaware area cable television systems (the "Wilmington System") in
exchange for the Company's cable television systems in the East San Francisco
Bay area, a 41.67% partnership interest in Bay Cable Advertising (an
advertising interconnect), and certain other non-contiguous cable television
properties having a net value of approximately $45 million. As of February
12, 1996, the Wilmington System passed approximately 193,000 homes and served
approximately 143,000 basic customers.
The Sammons Acquisition. On February 29, 1996, the Company acquired from
Sammons Communications, Inc. ("Sammons") its Bensalem and Harrisburg cable
television systems in Pennsylvania and its Vineland and Atlantic
City/Pleasantville systems (collectively, the "Sammons Systems") in New
Jersey (the "Sammons Acquisition"). The purchase price for the Sammons
Systems was approximately $531 million. As of February 29, 1996, the Sammons
Systems passed approximately 364,000 homes and served approximately 277,000
basic customers.
The Salem and Shore Acquisitions. On April 30, 1996, the Company acquired
from Tri-County Cable Television Company, an affiliate of Time Warner, its
Salem cable television system (the "Salem System") in New Jersey (the "Salem
Acquisition"). The purchase price for the Salem System was approximately $16
million. On the same date, the Company acquired from Shore Cable Company of
New Jersey its Shore cable television system (the "Shore System") in New
Jersey (the "Shore Acquisition"), which partially overbuilt the Company's
Atlantic City/Pleasantville system. The purchase price for the Shore System
was approximately $11 million.
Pending Acquisition. On March 28, 1996, the Company signed an agreement to
acquire from Cable TV Fund 14-A, Ltd., an affiliate of Jones Intercable,
Inc., its Turnersville cable television system (the "Turnersville System") in
New Jersey (the "Turnersville Acquisition"). The purchase price for the
Turnersville System is approximately $84.5 million, subject to certain
adjustments. At the closing, which the parties have agreed will occur in the
first quarter of 1997, the Company expects that the Turnersville System will
pass approximately 46,200 homes and serve approximately 36,300 basic
customers.
OTHER OPERATIONS AND INVESTMENTS
In addition to its Core Cable Television Operations, Lenfest has made
investments in other cable television and communications-related companies.
Lenfest holds a 50% interest in Garden State Cablevision L.P., which serves
approximately 201,000 basic customers in and around Cherry Hill, New Jersey;
a 30% interest in Susquehanna Cable Co., which serves approximately 139,000
basic customers, approximately 65,000 of whom are in York County,
Pennsylvania; and a 45% interest in Raystay Co., which serves approximately
69,000 basic customers in Pennsylvania and West Virginia. Lenfest also owns
StarNet, Inc., a provider of promotional services and equipment for the cable
television industry; MicroNet, Inc., a carrier of video, voice and data
transmission services; and Lenfest Programming Services, Inc., the provider
of a local cable news channel (NewsChannel) in Eastern Pennsylvania, Southern
New Jersey and Northern Delaware. In addition to its domestic holdings,
Lenfest also holds a 31.4% economic interest in Australis Media Limited, a
pay-television provider in Australia, and a 20.8% interest in Videopole, a
cable television operator in France serving approximately 67,000 customers.
6
<PAGE>
THE TRANSACTIONS
The Offering and the application of the net proceeds therefrom, the
closing of the New Bank Credit Facility and the application of the initial
borrowings thereunder, the consummation of the Turnersville Acquisition, the
TCI Exchange, the Sammons Acquisition and the Salem Acquisition, the purchase
of the Shore System, the borrowings under the New Bank Credit Facility to
finance the Turnersville Acquisition, the Sammons Acquisition, the Salem
Acquisition and the Shore Acquisition and the issuance of the 8 3/8 % Senior
Notes (as defined) in November 1995 and the application of the net proceeds
therefrom, are collectively referred to herein as the "Transactions." See
"Pro Forma Financial Information."
THE EXCHANGE OFFER
Securities Offered............. $300,000,000 aggregate principal amount of
10 1/2 % Senior Subordinated Notes Due 2006,
which have been registered under the
Securities Act (the "Exchange Notes", and,
together with the Old Notes, the "Notes").
The Exchange Offer............. Upon the terms and subject to the conditions
set forth in this Prospectus and the
accompanying Letter of Transmittal (the
"Letter of Transmittal"), the Company hereby
offers to exchange (the "Exchange Offer"),
$1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Old Notes that are validly tendered and not
withdrawn on or prior to the Expiration Date
(as defined). Holders of Old Notes whose Old
Notes are not tendered and accepted in the
Exchange Offer will continue to hold such
Old Notes and will be entitled to all the
rights and preferences and will be subject
to the limitations applicable thereto under
the Indenture governing the Old Notes and
the Exchange Notes.
Resale......................... Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company
believes the Exchange Notes issued pursuant
to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by any holder thereof
(other than broker-dealers, as set forth
below, and any such holder that is an
"affiliate" of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
requirements of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business
and that such holder has no arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes.
Any holder who tenders in the Exchange Offer
with the intention to participate, or for
the purpose of participating, in a
distribution of the Exchange Notes or who is
an affiliate of the Company may not rely
upon such interpretations by the staff of
the Commission and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any secondary resale
transaction. Failure to comply with such
requirements in such instance may result in
such holder incurring liabilities under the
Securities Act for which the holder is not
indemnified by the Company. Each
broker-dealer (other than an affiliate of
the Company) that receives Exchange Notes
for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver
a prospectus in connection with any resale
of such
7
<PAGE>
Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by
delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. The Company has agreed that,
for a period of 180 days after the
Expiration Date (as defined herein), it will
make this Prospectus available to any
broker-dealer for use in connection with any
such resale. See "Plan of Distribution". Any
broker-dealer who is an affiliate of the
Company may not rely on such no-action
letters and must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction. The Exchange Offer is not being
made to, nor will the Company accept
surrenders for exchange from, holders of Old
Notes in any jurisdiction in which this
Exchange Offer or the acceptance thereof
would not be in compliance with the
securities or blue sky laws of such
jurisdiction.
Expiration Date................ The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1996, unless
extended, in which case the term "Expiration
Date" shall mean the latest date and time to
which the Exchange Offer is extended.
Condition to the Exchange
Offer........................ The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer --
Conditions of the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered.
Procedures for Tendering Old
Notes........................ Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or facsimile thereof, together
with such Old Notes and any other required
documentation to The Bank of New York, the
Exchange Agent, at the address set forth
herein and therein. By executing the Letter
of Transmittal, each holder will represent
to the Company that, among other things, the
Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or
not such person is the holder, that neither
the holder nor any such other person has an
arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes and that neither the holder
nor any such other person is an "affiliate"
of the Company within the meaning of Rule
405 under the Securities Act or, that if
such holder or other person is an affiliate
of the Company, such holder or other person
will comply with the registration and
prospectus delivery requirements of the
Securities Act to the extent applicable. See
"The Exchange Offer -- Terms of the Exchange
Offer -- Procedures for Tendering Old Notes"
and "The Exchange Offer -- Terms of the
Exchange Offer -- Guaranteed Delivery
Procedures".
Special Procedures for
Beneficial Owners............ Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nomi-
8
<PAGE>
nee and who wishes to tender such Old Notes
in the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on his own
behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering his Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered
holder. The transfer of registered ownership
may take considerable time and may not be
able to be completed prior to the Expiration
Date. See "The Exchange Offer -- Terms of
the Exchange Offer -- Procedures for
Tendering Old Notes".
Guaranteed Delivery Procedures.. Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal
or any other documents required by the
Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, or who cannot
complete the procedure for book-entry
transfer on a timely basis, must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer -- Terms of the Exchange
Offer -- Guaranteed Delivery Procedures".
Acceptance of Old Notes and
Delivery of Exchange Notes... Subject to certain conditions (as described
more fully in "The Exchange Offer --
Conditions of the Exchange Offer"), the
Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer and not withdrawn, prior to
5:00 p.m., New York City time, on the
Expiration Date. The Old Notes issued
pursuant to the Exchange Offer will be
delivered as promptly as practicable
following the Expiration Date.
Withdrawal Rights.............. Except as otherwise provided herein, tenders
of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange Offer
-- Terms of the Exchange Offer -- Withdrawal
of Tenders of Old Notes".
Certain Federal Income Tax
Considerations............... For a discussion of certain federal income
tax considerations relating to the exchange
of the Exchange Notes for the Old Notes, see
"Certain Federal Income Tax Considerations".
Exchange Agent................. The Bank of New York is the Exchange Agent.
The address, telephone number and facsimile
number of the Exchange Agent are set forth
in "The Exchange Offer -- Exchange Agent".
Consequences of Failure to
Exchange Old Notes........... Holders of Old Notes who do not exchange
their Old Notes for Exchange Notes pursuant
to the Exchange Offer will continue to be
subject to the restrictions on transfer of
such Old Notes as set forth in the legend
thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from,
or in transactions not subject to, the
registration requirements of the Securities
Act and applicable state securities laws. In
general, the Old Notes may not be offered or
sold, unless registered under the Securities
Act, except pursuant
9
<PAGE>
to an exemption from, or in a transaction
not subject to, the Securities Act and
applicable state securities laws. The
Company does not currently anticipate that
it will register the Old Notes under the
Securities Act.
THE NOTES
The Notes ..................... $300,000,000 principal amount of 10 1/2 %
Senior Subordinated Notes Due 2006. The form
and terms of the Exchange Notes are
identical in all material respects to the
form and terms of the Old Notes (except that
the Exchange Notes will be registered under
the Securities Act) and, therefore, will be
treated as a single class under the
Indenture with any Old Notes that remain
outstanding. The Exchange Notes and the Old
Notes are herein collectively referred to as
the "Notes".
Maturity ...................... The Notes will mature on June 15, 2006.
Interest Payment Dates ........ Interest on the Notes is payable
semiannually on each June 15 and December
15, commencing December 15, 1996.
Optional Redemption ........... The Notes will not be redeemable at the
option of the Company prior to maturity.
Sinking Fund .................. None.
Change of Control.............. Upon a Change of Control Triggering Event,
the Company will be required to make an
offer to purchase the Notes at a purchase
price equal to 101% of the principal amount
thereof plus accrued and unpaid interest (if
any) to the date of purchase. See
"Description of Notes -- Change of Control
Offer."
Ranking ....................... The Notes will be general unsecured
obligations of the Company, subordinated in
right of payment to all existing and future
Senior Indebtedness of the Company. In
addition, the operations of the Company are
conducted through the Company's
subsidiaries. Because the assets of the
Company's subsidiaries constitute
substantially all of the assets of the
Company, and because those subsidiaries will
not guarantee the payment of principal of or
interest on the Notes, all indebtedness and
liabilities of such subsidiaries will be
effectively senior in right of payment to
the Notes. As of March 31, 1996, after
giving effect to the Transactions, the total
consolidated indebtedness of the Company
would have been $1,368 million, the total
amount of Senior Indebtedness of the Company
would have been $1,074 million and the total
liabilities and indebtedness of the
Company's subsidiaries (including trade
payables and accrued liabilities), on an
aggregate basis, would have been
approximately $96.5 million. See "Risk
Factors -- Substantial Leverage," "--
Subordination; Holding Company Structure"
and "Description of Notes."
Certain Covenants.............. The Indenture (as defined) for the Notes
contains limitations on, among other things,
(a) the incurrence of additional
indebtedness, (b) the incurrence of
indebtedness that is subordinate to Senior
Indebtedness but senior to the Notes, (c)
the incurrence of secured indebtedness that
is not Senior Indebtedness, (d) the payment
of dividends and other distributions with
respect to the Capital Stock of the Company
and the purchase, redemption or retirement
of Capi-
10
<PAGE>
tal Stock of the Company, (e) transactions
with Affiliates, (f) the designation of
Restricted and Unrestricted Subsidiaries and
(g) certain consolidations, mergers and
transfers of assets. During any period of
time the ratings assigned to the Notes are
Investment Grade Ratings, the covenants that
contain restrictions on the activities
described in clauses (a), (d) and (e) above
will cease to be in effect. All of these
limitations are subject to a number of
important qualifications. See "Description
of Notes -- Certain Covenants."
Use of Proceeds ............... The Company will not receive any proceeds
from this offering, and no underwriter is
being utilized in connection with the
Exchange Offer. See "Use of Proceeds."
Risk Factors .................. See "Risk Factors" for a discussion of
certain factors that should be considered by
prospective purchasers of the Exchange
Notes.
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS EXCEPT PER CUSTOMER DATA)
The summary consolidated financial data for and as of the end of each of
the years in the five-year period ended December 31, 1995 set forth below
have been derived from the audited consolidated financial statements of
Lenfest. The summary consolidated financial data set forth below for and as
of the end of the three-month period ended March 31, 1996 have been derived
from the unaudited consolidated financial statements of Lenfest. The pro
forma summary financial data set forth below have been derived from the pro
forma financial information included elsewhere in this Prospectus. See "Pro
Forma Financial Information." The pro forma statement of operations data give
effect to the Transactions as if they had occurred as of January 1, 1995 and
the pro forma balance sheet data and pro forma summary customer data give
effect to the Transactions as if they occured on March 31, 1996. The pro
forma summary financial data do not purport to represent what Lenfest's
results of operations or financial condition would actually have been had the
Transactions occurred on such dates or to project Lenfest's results of
operations or financial condition for any future period or date.
<TABLE>
<CAPTION>
Year Ended December 31, Pro Forma
------------------------------------------------------------------- Year Ended
Statement of Operations Data 1991 1992 1993 1994 1995 December 31, 1995
---------- ----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ........................ $161,365 $179,940 $213,240 $236,195 $266,249 $394,413
Programming expenses ............ 35,495 43,388 51,783 59,352 65,423 92,964
Selling, general & administrative . 39,681 41,455 49,743 53,767 59,310 78,442
Technical and other ............. 16,321 15,075 16,533 21,420 29,174 42,013
Depreciation and amortization ... 51,596 56,192 65,195 75,518 77,700 120,255
---------- ----------- ----------- ----------- ----------- -----------------
Operating income ............... 18,272 23,830 29,986 26,138 34,642 60,739
Interest expense ................ (35,138) (32,563) (35,090) (47,749) (61,538) (126,476)
Other income (expense) .......... (11,915) (13,645) (9,797) (7,017) 4,306 3,873
---------- ----------- ----------- ----------- ----------- -----------------
Loss from continuing operations . (28,781) (22,378) (14,901) (28,628) (22,590) (61,864)
Discontinued operations ......... 20,565 -- -- -- -- --
Income tax benefit (expense) .... (1,616) 5,408 3,034 9,729 11,095 24,330
Extraordinary loss, net of taxes . -- -- -- -- (6,739) --
---------- ----------- ----------- ----------- ----------- -----------------
Net loss ....................... $(9,832) $(16,970) $(11,867) $(18,899) $(18,234) $(37,534)
========== =========== =========== =========== =========== =================
Balance Sheet Data
(end of period)
Total assets .................... $377,183 $424,733 $635,761 $665,346 $851,748
Total debt ...................... 356,086 406,038 612,392 626,121 817,725
Stockholders' equity (deficit) .. (27,189) (44,162) (56,029) (49,609) (45,192)
Core Cable Television Operations (Restricted Group)
Financial Ratios and Other
Data (a)
Revenues ........................ $148,985 $166,081 $197,630 $212,800 $232,155 $360,319
EBITDA (b) ...................... 73,805 83,449 100,476 105,711 115,261 183,913
EBITDA margin (c) ............... 49.5% 50.2% 50.8% 49.7% 49.6% 51.0%
Interest expense ................ $34,882 $32,749 $34,699 $47,016 $59,966 $124,904
Capital expenditures (d) ........ 29,176 43,463 41,658 42,162 40,168 48,754
Total debt ...................... 366,848 403,760 609,156 616,657 807,535 --
Ratio of total debt to EBITDA ... 4.97x 4.84x 6.06x 5.83x 7.01x --
Monthly revenue per average basic
customer ....................... $28.79 $30.18 $32.05 $31.44 $32.97 $32.63
Annual EBITDA per average basic
customer ....................... 171.14 181.97 195.51 187.42 196.40 199.89
Annual capital expenditures per
average basic customer (d) ..... 67.65 94.78 81.06 74.75 68.44 52.99
Summary Customer Data
(end of period) (a)
Homes passed .................... 705,985 759,635 870,718 892,549 904,753 1,280,577
Basic customers ................. 440,045 477,130 550,703 577,377 596,366 937,724
Basic penetration ............... 62.3% 62.8% 63.2% 64.7% 65.9% 73.2%
Premium units ................... 393,310 393,689 420,630 426,092 426,345 610,385
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Pro Forma
March 31, Three Months
-------------------------- Ended
Statement of Operations Data 1995 1996 March 31, 1996
---------- ------------ --------------
<S> <C> <C> <C>
Revenues .......................... $64,106 $80,367 $103,858
Programming expenses .............. 16,140 19,231 24,244
Selling, general & administrative . 13,681 18,151 21,705
Technical and other ............... 6,866 8,267 10,963
Depreciation and amortization ..... 18,058 21,775 31,853
---------- ------------ --------------
Operating income ................. 9,361 12,943 15,093
Interest expense .................. (14,279) (20,221) (30,241)
Other income (expense) ............ 11,208 3,761 (4,325)
---------- ------------ --------------
Income (loss) before income taxes . 6,290 (3,517) (19,473)
Income tax benefit (expense) ...... (2,283) 350 6,061
---------- ------------ --------------
Net income (loss) ................ $4,007 $(3,167) $(13,412)
========== ============ ==============
Balance Sheet Data
(end of period)
Total assets ...................... $1,249,000 $1,357,813
Total debt ........................ 1,256,824 1,367,824
Stockholders' equity (deficit) .... (103,658) (105,845)
Core Cable Television Operations (Restricted Group)
Financial Ratios and Other
Data (a)
Revenues .......................... $55,217 $69,073 $92,564
EBITDA (b) ........................ 27,654 34,353 46,581
EBITDA margin (c) ................. 50.1% 49.7% 50.3%
Adjusted EBITDA (e) ............... $27,654 $44,511 $46,581
Interest expense .................. 13,885 19,861 29,881
Capital expenditures (d) .......... 9,615 6,409 7,201
Total debt ........................ 640,897 1,227,856 1,338,856
Total senior debt ................. 640,897 1,227,856 1,045,356
Ratio of total debt to annualized
adjusted EBITDA (f) .............. 5.79x 6.90x 7.19x
Ratio of total senior debt to annualized
adjusted EBITDA (f) .............. 5.79x 6.90x 5.61x
Monthly revenue per average basic
customer ......................... $31.76 $33.05(g) $32.77
Annualized adjusted EBITDA per average
basic customer (f) ............... 190.87 199.31 197.87
Annualized capital expenditures per
average basic customer (d)(f) .... 66.36 36.80(g) 30.59
Summary Customer Data
(end of period) (a)
Homes passed ...................... 904,412 1,235,613 1,298,618
Basic customers ................... 581,708 897,157 945,556
Basic penetration ................. 64.3% 72.6% 72.8%
Premium units ..................... 422,926 561,729 609,817
</TABLE>
- ------
(a) The Core Cable Television Operations (Restricted Group) following the
consummation of the Transactions will consist of the Company and all of
the Company's wholly owned cable television subsidiaries. Financial
ratios and other information are presented for the Restricted Group to
enable prospective investors to evaluate the results of operations of
those operating entities on which the Company will rely to service its
obligations under the Notes.
(b) EBITDA represents operating income plus depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to incur and service debt. EBITDA should not be
considered by an investor as an alternative to net income (loss), as an
indicator of the operating performance of the Company or as an
alternative to cash flows as a measure of liquidity. EBITDA is not a
measure under generally accepted accounting principles.
(c) EBITDA margin measures EBITDA as a percentage of revenues.
(d) Excludes the purchase price of acquisitions consummated during the
period.
(e) Adjusted EBITDA for the three months ended March 31, 1996 was calculated
by adding to EBITDA of the Company the EBITDA of the Wilmington System
and the Sammons Systems for the preacquisition portion of the period, and
by giving effect to the pro forma adjustments set forth in notes (j),
(k), (l), (m) and (t) of the notes to Pro Forma Financial Information.
Adjusted EBITDA is presented in order to provide a more meaningful
comparison to total debt and senior debt at the period end, and does not
necessarily reflect what the Company's EBITDA would have been for such
period had such acquisitions actually occurred at the beginning of such
period. Adjusted EBITDA for the three months ended March 31, 1995
reflects no changes to EBITDA, since none of the Transactions occurred
during such period.
(f) For comparative purposes, EBITDA and capital expenditures have been
annualized.
(g) Per customer data for the three months ended March 31, 1996 was computed
based on a weighted average number of basic customers during the period.
13
<PAGE>
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, along with other matters referred to in this Prospectus,
the following:
SUBSTANTIAL LEVERAGE
The Company has a significant amount of leverage. As of March 31, 1996,
after giving effect to the Transactions, the Company's total consolidated
indebtedness would have been approximately $1,368 million, with a
stockholders' deficit of $105.8 million. The degree to which the Company is
leveraged could have important consequences to holders of the Notes,
including (i) the ability of the Company to obtain any necessary financing in
the future for working capital, capital expenditures, debt service
requirements or other purposes may be limited; (ii) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
the principal of and interest on its indebtedness and will not be available
for other purposes; (iii) the Company's level of indebtedness could limit its
flexibility in planning for, or reacting to changes in, its business; (iv)
the Company is more highly leveraged than some of its competitors, which may
place it at a competitive disadvantage; and (v) the Company's high degree of
indebtedness will make it more vulnerable in the event of a downturn in its
business.
NET LOSSES/DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES
The Company has experienced net losses for each of the five years in the
five-year period ended December 31, 1995. For the year ended December 31,
1995 and for the three months ended March 31, 1996, the Company's earnings
were insufficient to cover its fixed charges by approximately $34.2 million
and $6.3 million, respectively, and, in addition, after giving pro forma
effect to the Transactions as if they had occurred on January 1, 1995, the
Company's earnings would have been insufficient to cover its fixed charges by
approximately $73.5 million and $22.3 million for the year ended December 31,
1995, and the three months ended March 31, 1996, respectively. Historically,
the Company's cash generated from operating activities and borrowings has
been sufficient to meet its debt service, working capital and capital
expenditure requirements. If the Company were unable to meet its debt service
obligations or working capital requirements, the Company would attempt to
refinance its indebtedness or obtain new financing. There can be no assurance
that the Company would be able to do so in the future or that, if the Company
were able to do so, the terms available would be favorable to the Company.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
SUBORDINATION; HOLDING COMPANY STRUCTURE
The indebtedness evidenced by the Notes will constitute general unsecured
obligations of the Company, but the payment of the principal of and premium
(if any) and interest on the Notes will be subordinate in right of payment,
as set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness of the Company. As of March 31, 1996, after giving pro forma
effect to the Transactions, the Company's Senior Indebtedness would have been
approximately $1,074 million. Although the Indenture contains limitations on
the amount of additional indebtedness that the Company may incur, the amount
of such indebtedness could be substantial under certain circumstances and, in
certain cases, such indebtedness may be Senior Indebtedness. See "Description
of Notes -- Certain Covenants -- Limitation on Indebtedness." As of March 31,
1996, after giving pro forma effect to the Transactions, the Company would
have had approximately $192.5 million of borrowing availability under the New
Bank Credit Facility.
The operations of the Company are conducted through its subsidiaries. As a
holding company, the Company has no operations and, therefore, is dependent
on the cash flow of its subsidiaries and other entities to meet its own
obligations, including the payment of interest and principal obligations on
the Notes when due. Because the Company's subsidiaries do not guarantee the
payment of principal of or interest on the Notes, the claims of creditors of
the Company's subsidiaries, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by such subsidiaries,
and claims of preferred stockholders (if any) of such subsidiaries generally
will have priority with respect to the assets and earnings of such
subsidiaries over the claims of creditors of the Company, including holders
of the Notes, even though such claims will not constitute Senior
Indebtedness. The Notes, therefore, will be effectively subordinated to
creditors (including trade creditors) and
14
<PAGE>
preferred stockholders (if any) of subsidiaries of the Company. At March 31,
1996, and after giving effect to the Transactions, the total liabilities of
the Company's subsidiaries would have been approximately $96.5 million,
including trade payables and accrued liabilities. Although the Indenture
limits the incurrence of indebtedness and the issuance of preferred stock of
certain subsidiaries, such limitation is subject to a number of significant
qualifications. Moreover, the Indenture does not impose any limitation on the
incurrence by subsidiaries of liabilities that are not considered
indebtedness under the Indenture. See "Description of Notes -- Certain
Covenants -- Limitation on Indebtedness."
In the event of the bankruptcy, liquidation or reorganization of the
Company, the assets of the Company will be available to pay the Notes only
after all Senior Indebtedness has been paid in full. Sufficient funds may not
exist to pay amounts due on the Notes in such event. In addition, the
subordination provisions of the Indenture provide that no payment may be made
with respect to the Notes during the continuance of a payment default under
any Senior Indebtedness. Furthermore, if certain nonpayment defaults exist
with respect to certain Senior Indebtedness, the holders of such Senior
Indebtedness will be able to prevent payments on the Notes for certain
periods of time. See "Capitalization," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Description of Notes."
REGULATION OF THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, state and local levels, and many aspects of such regulation are
currently the subject of judicial proceedings and administrative or
legislative proposals. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") significantly expanded the
scope of cable television regulation. In particular, pursuant to the 1992
Cable Act, the Federal Communications Commission (the "FCC") adopted
regulations that limit the Company's ability to set and increase rates for
the Company's basic and cable programming service ("CPS") packages and for
the provision of cable television-related equipment. The 1992 Cable Act
permits certified local franchising authorities to order refunds of rates
paid in the previous twelve-month period determined to be in excess of the
permitted reasonable rates. It is possible that future rate reductions or
refunds of previously collected fees may be required in the future. See
"Legislation and Regulation."
The Telecommunications Act of 1996 (the "1996 Act"), which became law on
February 8, 1996, materially alters federal, state and local laws and
regulations pertaining to cable television, telecommunications and other
related services and, in particular, substantially amends the Communications
Act of 1934 (the "Communications Act"), including the re-regulation of
customer rate provisions under the 1992 Cable Act. The 1996 Act imposes
certain new requirements on operators of cable television systems, which may
increase operating expenses for operators of cable television systems,
including the Company, and may provide a competitive advantage to less
regulated providers of video programming services.
Certain provisions of the 1996 Act could materially affect the growth and
operation of the cable television industry and the cable services provided by
the Company. Although the new legislation may substantially lessen regulatory
burdens, the cable television industry may be subject to additional
competition as a result thereof. See "Business -- Competition." There are
numerous rulemakings to be undertaken by the FCC which will interpret and
implement the provisions of the 1996 Act. In addition, certain provisions of
the new legislation (such as the deregulation of rates for CPS packages) will
not immediately be effective. Furthermore, certain provisions of the 1996 Act
have been, and likely will be, subject to judicial challenge. The Company is
unable at this time to predict the outcome of such rulemakings or litigation
or the short and long-term effect (financial or otherwise) of the 1996 Act
and FCC rulemakings on the Company. See "Legislation and Regulation."
COMPETITION
The cable television systems owned by the Company compete with Direct
Broadcast Satellite Systems ("DBS") and Multichannel Multipoint Distribution
Systems ("MMDS"). Three companies recently have launched, and three companies
have announced their intention to launch, DBS services that compete with the
Company for multichannel video entertainment customers, and additional
entrants into the DBS market are expected. In addition, the former Regional
Bell Telephone Companies (the "RBOCs") and other local telephone
15
<PAGE>
companies are in the process of entering the cable television business. The
RBOCs have significant access to capital, and several have expressed their
intention to enter the video-to-home business as an adjunct to their existing
voice and data transmission businesses. In addition, the RBOCs and local
telephone companies have in place facilities which are capable of delivering
cable television service.
The 1996 Act repealed the prohibition on RBOCs and other local exchange
companies ("LECs") from providing cable service directly to customers in
their local telephone service areas. Thus, LECs may now acquire, construct
and operate cable systems both inside and outside their service areas. The
1996 Act also authorizes LECs to operate quasi-common carrier "open video
systems" without obtaining a local cable franchise.
Most of the Company's cable television assets are located in the Bell
Atlantic Corporation ("Bell Atlantic") operating area. Bell Atlantic recently
announced its intention to merge with NYNEX Corporation ("NYNEX"). Both Bell
Atlantic and NYNEX have previously made investments in CAI Wireless Systems,
Inc. ("CAI") in order to finance CAI's development of digital wireless
television. It is not clear at this time how the pending Bell Atlantic/NYNEX
merger will impact competition or whether Bell Atlantic (or the new Bell
Atlantic/NYNEX entity) intends to compete with the Company indirectly through
its investment in CAI, directly by constructing hardwired broadband systems
within the Company's service area or through a combination of both.
The Company also faces competition from other communications and
entertainment media, including conventional off-air television broadcasting
services, newspapers, movie theaters, live sporting events and home video
products. The Company cannot predict the extent to which such competition may
effect the Company. See "Business -- Competition" and "Legislation and
Regulation."
FUTURE CAPITAL REQUIREMENTS
As a result of existing and potential competition, cable television
operators are experiencing increased pressure to expand and upgrade their
cable television plant to increase channel capacity and to provide the
capacity for the delivery of local telephone service over the cable
television system. The Company expects to upgrade its systems with a high
capacity, broadband hybrid coaxial/fiber optic cable to accomplish these
purposes. The Company currently estimates such an upgrading will take
approximately five years and the Company expects to spend approximately $300
million over that period. Although the Company has taken steps to begin the
upgrading process and anticipates that it will continue to upgrade portions
of its systems over the next several years, there can be no assurance that
the Company will be able to upgrade its cable television systems at a rate
which will allow it to remain competitive with other competitors which either
do not rely on cable into the home (e.g., MMDS and DBS) or have access to
significantly greater amounts of capital and an existing communications
network. In addition, the Company currently estimates that it will make other
capital expenditures over the next five years of approximately $150 million,
principally for maintenance of its cable television plant and other fixed
assets. Such capital expenditures are in addition to those expected to be
incurred in connection with the upgrading of the Company's cable television
systems described above. Furthermore, new services could require additional
incremental capital. There can be no assurance that the Company will be able
to fund its planned capital expenditures. The Company's inability to upgrade
its cable television systems or make its other planned capital expenditures
could adversely affect the Company's operations and competitive position.
RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S DEBT INSTRUMENTS
The terms of the Company's debt instruments, including the terms of the
New Bank Credit Facility which was entered into contemporaneously with the
closing of the Old Notes Offering, the agreements governing the Private
Placement Notes (as defined), the indenture governing the 8 3/8 % Senior
Notes and the Indenture, contain a number of significant covenants that,
among other things, restrict the ability of the Company and its Restricted
Subsidiaries to dispose of assets or merge, incur debt, pay dividends,
repurchase or redeem capital stock and indebtedness, create liens, make
capital expenditures and make certain investments or acquisitions and
otherwise restrict corporate activities. In addition, the terms of such debt
instruments contain, among other covenants, requirements that the Company
maintain specified financial ratios, including, under the terms of the New
Bank Credit Agreement, maximum leverage and minimum interest coverage, and
minimum working capital. The ability of the Company to comply with such
provisions may be affected by events beyond the Company's control.
16
<PAGE>
The breach of any of these covenants could result in a default under the
Company's Senior Indebtedness (including the New Bank Credit Facility). In
the event of any such default, holders of such Senior Indebtedness could
elect to declare all amounts outstanding thereunder, together with accrued
interest and other fees, to be due and payable.
If the indebtedness under the New Bank Credit Facility, the Private
Placement Notes, the 8 3/8 % Senior Notes or the Notes were to be
accelerated, there can be no assurance that the assets of the Company would
be sufficient to repay such other indebtedness and the Notes in full. See "--
Subordination; Holding Company Structure," "Description of Other Debt
Obligations" and "Description of Notes."
INVESTMENT IN AUSTRALIS MEDIA LIMITED
The Company currently holds a 31.4% aggregate economic interest in
Australis Media Limited, a pay-television provider in Australia
("Australis"), for an aggregate investment of approximately $91 million, and
the Company has loaned Australis (through the Company's Lenfest Australia,
Inc. subsidiary) approximately $18.5 million on an unsecured basis. In
addition, the Company has guaranteed up to $75 million of a new $125 million
Australis bank facility as part of recapitalization plans currently being
pursued by Australis. Australis has announced that it plans to repay the
Australis bank facility with the proceeds of long-term debt and equity
financing in conjunction with its proposed recapitalization. In connection
with such long-term financing, the Company has agreed to make an additional
$20 million equity investment in Australis, subject to a number of
conditions, including the completion of the recapitalization and the equity
contributions of certain other investors. If the Australis long-term
financing is completed, Australis will repay the $18.5 million loan, with
interest, and the $75 million guaranty will expire. There can be no assurance
that the Australis long-term financing will be completed or completed on a
timely basis. The board of directors of Australis has publicly stated that if
Australis is unable to obtain the long-term financing prior to the expiration
of the Australis bank facility (scheduled to expire on October 31, 1996),
there is substantial doubt as to Australis' ability to continue as a going
concern. If the Australis long-term financing is not completed, the $18.5
million loan will not be repaid, the $75 million guaranty may be drawn in
whole or in part and the Company's existing equity investment in Australis
may lose all or a substantial portion of its value. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Business -- Lenfest Australia, Inc."
and "-- Legal Proceedings."
Additionally, in November 1994, Mr. Lenfest and TCI International, Inc.
jointly and severally guaranteed up to $67 million in program license payment
obligations of the distributor of Australis' movie programming. The Company
has agreed to indemnify Mr. Lenfest against loss from such guaranty to the
fullest extent permitted under the Company's debt obligations. The Company
has neither sought nor obtained any consents which may be required in
connection with this indemnification obligation. The terms of the guarantees
provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with the provision of one or more letters of credit,
which may not exceed $33.5 million. The Company is currently in discussions
with Australis and a bank with regard to obtaining a letter of credit in the
amount of $33.5 million for the benefit of the beneficiaries under the
guarantees. If the Company obtains such a letter of credit facility, the
Company would be directly obligated for $33.5 million and may remain
indirectly obligated for the balance of the program license payment
obligations. Under the terms of the New Bank Credit Facility, however, Mr.
Lenfest's claims for indemnification are limited to $33.5 million, which amount
will be further reduced by the aggregate face amount of any letters of credit
issued under the New Bank Credit Facility with respect to the program license
payment obligations guarantees.
CONCENTRATION OF CONTROL IN SINGLE STOCKHOLDER
As a result of the stock ownership of the Company by H.F. Lenfest, proxies
(irrevocable until March 30, 2000) granted to him by certain stockholders, an
agreement between Mr. Lenfest and LMC Lenfest, Inc., the owner of 50% of the
outstanding common stock of the Company, and the amended and restated
Articles of Incorporation of the Company, Mr. Lenfest has the right to
designate a majority of the Board of Directors of the Company until January
1, 2002. During such period, vacancies in respect of directors designated by
Mr. Lenfest shall be filled by designees of Mr. Lenfest or, in the event of
Mr. Lenfest's death, of The Lenfest Foundation. Thereafter, certain members
of the Lenfest family and The Lenfest Foundation (collectively, the "Lenfest
Family") and LMC Lenfest, Inc. will have the right to appoint an equal number
of members of the Company's Board
17
<PAGE>
of Directors. This right will continue for so long as any member of the
Lenfest Family owns any stock in the Company. By virtue of this agreement,
Mr. Lenfest effectively is able to direct and control certain fundamental
policy and management decisions of the Company and its subsidiaries. See
"Principal Stockholders."
LOSS OF FAVORABLE PROGRAMMING SUPPLY
Through an agreement with Satellite Services, Inc. (a wholly owned
subsidiary of TCI), the Company is able to purchase almost all of its
programming services at rates closely approximating those paid by TCI. The
three cable television operators in which the Company has a 50% or less
ownership interest (Garden State Cablevision L.P., Susquehanna Cable Co. and
Raystay Co.) also obtain their programming pursuant to this agreement. In
addition, pursuant to an agreement between the Company and TCI, TCI must
provide the programming services available to TCI to the Company at rates
closely approximating those paid by TCI. As management believes that the
rates at which it purchases programming from Satellite Services, Inc. (and
the rates at which the Company could purchase programming from TCI) are
significantly less than the Company could obtain independently, loss of
access to programming at such favorable rates could materially adversely
affect the financial position or results of operations of the Company.
ABSENCE OF ACTIVE TRADING MARKET
The Exchange Notes are a new issue of securities for which there is
currently no active trading market. If the Exchange Notes are traded after
their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for
similar securities and other factors, including general economic conditions
and the financial condition of the Company. The Company does not intend to
apply for a listing or quotation of the Exchange Notes, on any securities
exchange or stock market. No assurance can be given as to the liquidity of
the trading market for the Exchange Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer.
18
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization and cash
and cash equivalents of the Company as of March 31, 1996, (i) on a historic
basis and (ii) on a pro forma basis after giving effect to the Transactions.
See "Pro Forma Financial Information."
<TABLE>
<CAPTION>
March 31, 1996
---------------------------
Actual Pro Forma
------------ -----------
( dollars in thousands )
<S> <C> <C>
Cash and Cash Equivalents $ 19,469 $ 15,267
============ ===========
Total Debt
Notes payable to banks ................................ $ 25,720 $ 25,720
Old Bank Credit Facility .............................. 420,000 --
New Bank Credit Facility .............................. -- 237,500
11.84% Senior Notes(a) ................................ 31,500 31,500
11.30% Senior Notes ................................... 75,000 75,000
9.93% Senior Notes .................................... 14,250 14,250
8 3/8 % Senior Notes, net of discount ................. 685,083 685,083
Obligations under capital leases ...................... 5,271 5,271
The Notes, net of discount ............................ -- 293,500
------------ -----------
Total debt ..................................... 1,256,824 1,367,824
------------ -----------
Minority Interest ..................................... 3,565 3,565
Stockholders' Equity (Deficit)
Common stock .......................................... 2 2
Additional paid-in capital ............................ 50,747 50,747
Unrealized loss on marketable securities, net ......... (18,371) (18,371)
Cumulative foreign currency translation adjustment, net . 11,042 11,042
Accumulated deficit ................................... (147,078) (149,265)
------------ -----------
Total stockholders' equity (deficit) ............. (103,658) (105,845)
------------ -----------
Total capitalization ........................... $1,156,731 $1,265,544
============ ===========
</TABLE>
- ------
(a) Does not reflect mandatory principal repayments made in May 1996 of $10.5
million on the 11.84% Senior Notes. See "Description of Other Debt
Obligations."
19
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information is based on the historical
financial statements of Lenfest and the historical financial statements of the
cable television systems acquired or to be acquired by the Company, adjusted to
give effect to (i) the Offering and the application of the net proceeds
therefrom, (ii) the closing of the New Bank Credit Facility and the application
of the initial borrowings thereunder, (iii) the Turnersville Acquisition, (iv)
the TCI Exchange, (v) the Sammons Acquisition, (vi) the Salem Acquisition, (vii)
the purchase of the Shore System, (viii) the borrowings under the New Bank
Credit Facility to finance the Turnersville Acquisition, the Sammons
Acquisition, the Salem Acquisition and the Shore Acquisition and (ix) the
issuance of the 8 3/8 % Senior Notes and the application of the net proceeds
therefrom (all of the foregoing are collectively, the "Transactions"). A
complete set of historical financial statements of the Shore System is not
available and, therefore, such historical financial statements are not included
in the pro forma presentation. The pro forma adjustments to the Pro Forma
Condensed Consolidated Balance Sheet do, however, reflect the purchase of the
assets by the Company in the Shore Acquisition (and related purchase accounting
adjustments) and the incurrence of indebtedness to finance the Shore
Acquisition. The omission of the Shore System historical financial statements
and the related adjustments to the Pro Forma Condensed Consolidated Statements
of Operations does not materially affect the Company's pro forma financial
position or pro forma results of operations.
The Pro Forma Condensed Consolidated Statements of Operations give effect to
the Transactions as if they had occurred as of January 1, 1995, and the Pro
Forma Condensed Consolidated Balance Sheet gives effect to the Transactions as
if they had occurred as of March 31, 1996. The pro forma adjustments are
described in the accompanying notes and are based upon available information and
certain assumptions that management believes are reasonable. The Pro Forma
Condensed Consolidated Financial Statements do not purport to represent what
Lenfest's results of operations or financial condition would actually have been
had the Transactions in fact occurred on such dates or to project Lenfest's
results of operations or financial condition for any future date or period. The
Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the historical financial statements of Lenfest, the Wilmington
System and the Sammons Systems included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." There can be no assurance that the Turnersville Acquisition will be
consummated.
The TCI Exchange involved a transaction between related parties, Lenfest
and a subsidiary of TCI. TCI is an indirect 50% stockholder of Lenfest.
Lenfest and TCI are not entities under common control. Lenfest is accounting
for the exchange of the cable systems' assets as a nonmonetary exchange of
productive assets in accordance with Accounting Principles Board Opinion
Number 29. For financial statement purposes, Lenfest is not recording a gain
or loss on the cable television assets exchanged, but is recognizing a gain
of approximately $7 million on the exchange of its approximately 42% general
partnership interest in Bay Cable Advertising that is included in the TCI
Exchange. Lenfest has allocated the net book values of the assets exchanged
to the identifiable tangible and intangible assets acquired. For tax
purposes, the TCI Exchange has been structured in such a way that, to the
greatest extent possible, the transfer qualifies as a tax-free exchange of
like-kind assets under Section 1031 of the Internal Revenue Code. The taxable
gain recognized on this transaction is presently estimated to be $1 million
to $2 million on the cable television assets and $7 million on the
partnership interest.
The Sammons, Salem, Shore and Turnersville Acquisitions are or will be
accounted for under the purchase method of accounting. The total purchase
prices for the acquisitions have been allocated to the identifiable tangible
and intangible assets and liabilities of the acquired business based upon
Lenfest's preliminary estimate of their fair values with the remainder
allocated to goodwill. The allocations of the purchase prices are subject to
revision when additional information concerning asset and liability
valuations is obtained. In the opinion of Lenfest's management, the final
asset and liability valuations for the Acquisitions will not result in any
material change to the pro forma financial data presented.
The Pro Forma Condensed Consolidated Financial Statements give effect only
to the adjustments set forth in the accompanying notes and do not reflect any
other benefits anticipated by Lenfest's management as a result of the TCI
Exchange or the Sammons, Salem, Shore or Turnersville Acquisitions.
20
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------
Lenfest (a) (b)
------------------------------ Turners-
Restricted Unrestricted Salem (b) ville (b)
------------ -------------- --------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ......... $ 15,039 $ 4,430 $ 10 $ 282
Receivables, inventory and prepaids 9,965 43,449 185 707
Marketable securities ............. 3,783 79,559 -- --
Property and equipment, net of
accumulated depreciation ......... 352,766 28,451 3,212 18,196
Other investments ................. 425 50,932 -- --
Goodwill, net ..................... 69,210 6,700 -- 2,367
Deferred franchise costs, net ..... 509,645 -- 5 --
Other intangible assets, net ...... 19,529 2,785 -- --
Deferred tax asset ................ 21,223 24,011 -- --
Other assets ...................... 7,003 95 -- 7
------------ -------------- --------- ----------
$1,008,588 $ 240,412 $3,412 $21,559
============ ============== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
(DEFICIT)
Debt .............................. $1,227,856 $ 28,968 $ -- $ 148
Intercompany payable (receivable) . (329,641) 329,641 -- --
Payables and accruals ............. 47,546 9,399 305 295
Deferred tax liability ............ 8,475 666 -- --
Other liabilities ................. 7,962 18,221 -- 29
------------ -------------- --------- ----------
Total liabilities ............ 962,198 386,895 305 472
Minority interest ................. -- 3,565 -- --
Stockholders' equity (deficit)
Common stock .................... 2 -- -- --
Additional paid-in capital ...... 50,747 -- -- --
Unrealized gain (loss) on
marketable securities ........ 728 (19,099) -- --
Cumulative foreign currency
translation adjustment ....... -- 11,042 -- --
Accumulated net assets of
systems acquired or to be
acquired ..................... -- -- 3,107 21,087
Accumulated deficit ............. (5,087) (141,991) -- --
------------ -------------- --------- ----------
46,390 (150,048) 3,107 21,087
------------ -------------- --------- ----------
$1,008,588 $ 240,412 $3,412 $21,559
============ ============== ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------------------
Offering & New
Salem & Shore Bank Credit Turnersville
Acquisitions Facility (f) Acquisition Pro Forma
--------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ......... $ (10)(c) (4,202) $ (282)(g) $ 15,267
Receivables, inventory and prepaids (7)(c) (53)(g) 54,246
Marketable securities ............. 83,342
Property and equipment, net of
accumulated depreciation ......... 3,788(d) 7,155(h) 413,568
Other investments ................. 51,357
Goodwill, net ..................... (2,367)(g) 75,910
Deferred franchise costs, net ..... 19,817(d) 58,495(h) 587,962
Other intangible assets, net ...... $ 338 22,652
Deferred tax asset ................ 1,177 46,411
Other assets ...................... (7)(g) 7,098
--------------- -------------- -------------- ------------
$23,588 $(2,687) $62,941 $1,357,813
=============== ============== ============== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
(DEFICIT)
Debt .............................. $27,000(e) $ (500) $ (148)(g) $1,367,824
84,500(i)
Intercompany payable (receivable) . --
Payables and accruals ............. (305)(c) (295)(g) 56,945
Deferred tax liability ............ 9,141
Other liabilities ................. (29)(g) 26,183
--------------- -------------- -------------- ------------
Total liabilities ............ 26,695 (500) 84,028 1,460,093
Minority interest ................. 3,565
Stockholders' equity (deficit)
Common stock .................... 2
Additional paid-in capital ...... 50,747
Unrealized gain (loss) on
marketable securities ........ (18,371)
Cumulative foreign currency
translation adjustment ....... 11,042
Accumulated net assets of
systems acquired or to be
acquired ..................... (3,107)(c) (21,087)(g) --
Accumulated deficit ............. (2,187) (149,265)
--------------- -------------- -------------- ------------
(3,107) (2,187) (21,087) (105,845)
--------------- -------------- -------------- ------------
$23,588 $(2,687) $ 62,941 $1,357,813
=============== ============== ============== ============
</TABLE>
See notes to pro forma financial information.
21
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
( DOLLARS IN THOUSANDS )
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments
-------------------------------------------------------------- -------------
Lenfest (a)
-------------------------- Turners- TCI Exchange
Wilmington & Salem ville & Sammons
Restricted Unrestricted Sammons (b) (b) (b) Acquisition
---------- ------------ ------------ ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ......................... $232,155 $ 34,094 $158,649 $3,017 $15,680 $ (49,182)(j)
Programming expenses ............. 55,322 10,101 39,944 683 4,517 (12,965)(j)
111 (k)
(4,749)(k)
Selling, general & administrative 45,902 13,408 32,848 415 4,521 (11,681)(j)
(5,037)(l)
(1,114)(m)
Technical and other .............. 15,670 13,504 15,407 483 1,012 (3,477)(j)
(586)(m)
Depreciation and amortization .... 71,054 6,646 26,032 413 3,632 (9,013)(j)
19,529 (n)
562 (o)
(4,340)(o)
---------- ------------ ------------ ------- -------- -------------
Total operating expenses ....... 187,948 43,659 114,231 1,994 13,682 (32,760)
---------- ------------ ------------ ------- -------- -------------
Operating income (loss) ........ 44,207 (9,565) 44,418 1,023 1,998 (16,422)
Interest expense ................. (59,966) (1,572) (21,563) (395) (13) 17 (j)
(1,064)(o)
(44,830)(o)
21,563 (p)
Other income (expense) ........... 15,555 (11,249) 615 -- -- 33 (j)
(1,081)(q)
---------- ------------ ------------ ------- -------- -------------
Income (loss) before taxes and
extraordinary loss .......... (204) (22,386) 23,470 628 1,985 (41,784)
Income tax benefit (expense) ..... -- 11,095 (9,639) -- -- 14,624(r)
---------- ------------ ------------ ------- -------- -------------
Income (loss) before
extraordinary loss .......... $ (204) $(11,291) $ 13,831 $ 628 $ 1,985 $(27,160)
========== ============ ============ ======= ======== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Offering & New
Salem Bank Credit Turnersville
Acquisition Facility (f) Acquisition Pro Forma
----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ......................... $ 394,413
Programming expenses ............. 92,964
Selling, general & administrative $ (820)(l) 78,442
Technical and other .............. 42,013
Depreciation and amortization .... $ 933(n) $ 13 4,794(n) 120,255
----------- -------------- ------------ -----------
Total operating expenses ....... 933 13 3,974 333,674
----------- -------------- ------------ -----------
Operating income (loss) ........ (933) (13) (3,974) 60,739
Interest expense ................. (1,296)(e) (10,907) (6,845)(i) (126,476)
395(p)
Other income (expense) ........... 3,873
----------- -------------- ------------ -----------
Income (loss) before taxes and
extraordinary loss .......... (1,834) (10,920) (10,819) (61,864)
Income tax benefit (expense) ..... 642(r) 3,822 3,786(r) 24,330
----------- -------------- ------------ -----------
Income (loss) before
extraordinary loss .......... $ (1,192) $ (7,098) $ (7,033) $ (37,534)(s)
=========== ============== ============ ===========
</TABLE>
See notes to pro forma financial information.
22
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
( DOLLARS IN THOUSANDS )
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------
Lenfest (a) (b) Turners-
-------------------------- Wilmington & Salem ville
Restricted Unrestricted Sammons (b) (b) (b)
---------- ------------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Revenues ......................... $ 69,073 $11,294 $23,460 $ 816 $4,180
Programming expenses ............. 16,137 3,094 5,981 221 1,287
Selling, general & administrative 13,532 4,619 5,420 105 797
Technical and other .............. 5,051 3,216 3,111 94 280
Depreciation and amortization .... 19,982 1,793 3,826 110 896
---------- ------------ ------------ ------- --------
Total operating expenses ....... 54,702 12,722 18,338 530 3,260
---------- ------------ ------------ ------- --------
Operating income (loss) ........ 14,371 (1,428) 5,122 286 920
Interest expense ................. (19,861) (360) (957) (128) --
Other income (expense) ........... 8,222 (4,461) 110 -- --
- -----------------................. ---------- ------------ ------------ ------- --------
Income (loss) before taxes ..... 2,732 (6,249) 4,275 158 920
Income tax benefit (expense) ..... (770) 1,120 (1,747) -- --
---------- ------------ ------------ ------- --------
Net income (loss) .............. $ 1,962 $(5,129) $ 2,528 $ 158 $ 920
========== ============ ============ ======= ========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------------------------
TCI Exchange Offering & New
& Sammons Salem Bank Credit Turnersville
Acquisition Acquisition Facility (f) Acquisition Pro Forma
------------ ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues ......................... $ (4,965)(j) $103,858
Programming expenses ............. (1,676)(j) 24,244
(800)(k)
Selling, general & administrative (1,583)(j) 21,705
(827)(l)
(186)(m)
(172)(t)
Technical and other .............. (510)(j) 10,963
(98)(m)
(181)(t)
Depreciation and amortization .... (1,070)(j) $ 233 (n) $ 3 $ 1,198 (n) 31,853
4,882 (n)
------------ ----------- -------------- ------------ -----------
Total operating expenses ....... (2,221) 233 3 1,198 88,765
------------ ----------- -------------- ------------ -----------
Operating income (loss) ........ (2,744) (233) (3) (1,198) 15,093
Interest expense ................. (5,250)(o) (324)(e) (2,735) (1,711)(i) (30,241)
957 (p) 128 (p)
Other income (expense) ........... (7,024)(j) (4,325)
(1,172)(q)
- -----------------................. ------------ ----------- -------------- ------------ -----------
Income (loss) before taxes ..... (15,233) (429) (2,738) (2,909) (19,473)
Income tax benefit (expense) ..... 5,332 (r) 150(r) 958 1,018(r) 6,061
------------ ----------- -------------- ------------ -----------
Net income (loss) .............. $ (9,901) $ (279) $(1,780) $ (1,891) $(13,412)(s)
============ =========== ============== ============ ===========
</TABLE>
See notes to pro forma financial information.
23
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(a) The historical financial statements of Lenfest have been segregated
between the Restricted Group and Unrestricted Subsidiaries. The
Restricted Group consists of all wholly owned cable television
subsidiaries of the Company as of March 31, 1996. The Unrestricted
Subsidiaries consist of all other consolidated subsidiaries of the
Company. Substantially all of Lenfest's investments in unconsolidated
subsidiaries, including Garden State Cablevision L.P., are held by
Unrestricted Subsidiaries.
(b) As of March 31, 1996, the assets and liabilities of the Wilmington and
Sammons Systems are included in the Lenfest Restricted Group historical
balance sheet. The assets and liabilities of the California systems (the
"California Systems") transferred to TCI in the TCI Exchange are not
included.
Included in the Restricted Group's historical statement of operations for
the three months ended March 31, 1996, are the revenues and expenses of
the Wilmington and Sammons Systems from their respective dates of
acquisition of February 12 and February 29, 1996. Also included are the
revenues and expenses of the California systems up to February 12, 1996,
the date of the TCI Exchange.
The pro forma presentation includes the historical statements of
financial position and operations of the Salem and Turnersville Systems.
The pro forma presentation also includes the preacquisition historical
statements of operations of the Wilmington and Sammons Systems.
(c) Represents the elimination of historical assets not purchased and
historical liabilities not assumed and the elimination of historical
accumulated net assets related to the Salem Acquisition.
(d) Represents the increase from historical amounts to the estimated fair
market value of all tangible and intangible assets acquired and
liabilities assumed upon consummation of the Salem and Shore Acquisitions
comprised of the following:
<TABLE>
<CAPTION>
Salem Shore Total
---------- ---------- ----------
<S> <C> <C> <C>
Purchase price ....................................... $16,000 $11,000 $27,000
Net book value of acquired tangible and intangible
assets included in historical information ........... 3,395 -- 3,395
---------- ---------- ----------
Excess of purchase price over book value of assets
acquired............................................. $12,605 $11,000 $23,605
========== ========== ==========
Allocation of excess purchase price to estimated
fair market value:
Property and equipment .............................. $ 1,588 $ 2,200 $ 3,788
Deferred franchise costs ............................ 11,017 8,800 19,817
---------- ---------- ----------
$12,605 $11,000 $23,605
========== ========== ==========
</TABLE>
The asset acquisitions are subject to post-closing working capital and
other adjustments, as defined in the related asset purchase agreements.
(e) The Company drew $27 million under the Old Bank Credit Facility to
finance the Salem and Shore Acquisitions. For pro forma purposes, these
borrowings are reflected as a draw under the New Bank Credit Facility.
Interest is based on LIBOR plus an applicable margin ranging from 3/4 %
to 2 3/8 %. Interest on the Salem Acquisition is calculated at an
estimated average rate of 8.1%. Interest on the Shore Acquisition is not
included, due to the omission of the Shore System historical statements.
However, such pro forma interest would have amounted to approximately
$0.9 million and $0.2 million for the year ended December 31, 1995, and
the three months ended March 31, 1996, respectively.
24
<PAGE>
(f) Gives effect to the consummation of the Offering and the New Bank Credit
Facility and the application of the estimated proceeds therefrom as
follows:
Source of proceeds:
Gross proceeds from the Offering ............... $300,000
Initial borrowings under the New Bank Credit Facility 126,000
----------
$426,000
==========
Use of proceeds:
Initial Purchasers' discount ................... $ 6,000
Prepayment of Old Bank Credit Facility ......... 420,000
----------
$426,000
==========
The pro forma adjustments to the Pro Forma Condensed Consolidated
Balance Sheet for the Offering and the New Bank Credit Facility are as
follows:
<TABLE>
<CAPTION>
New Bank
Credit
Offering Facility Total
----------- ----------- -----------
<S> <C> <C> <C>
Cash:
Payment of debt issuance costs ....................... $ (500) $ (3,702) $ (4,202)
=========== =========== ===========
Other intangible assets, net:
Write-off of unamortized debt issuance costs of the Old
Bank Credit Facility ............................... $ -- $ (3,364) $ (3,364)
Deferred debt issuance costs ......................... -- 3,702 3,702
----------- ----------- -----------
Total ........................................... $ -- $ 338 $ 338
=========== =========== ===========
Deferred tax assets:
Increase in deferred tax asset ....................... $ -- $ 1,177 $ 1,177
Debt:
Gross proceeds/initial borrowings .................... $ 300,000 $ 126,000 $ 426,000
Prepayment of Old Bank Credit Facility ............... (294,000) (126,000) (420,000)
Initial Purchasers' discount ......................... (6,000) -- (6,000)
Debt issuance costs paid from existing cash .......... (500) -- (500)
----------- ----------- -----------
Total ........................................... $ (500) $ -- $ (500)
=========== =========== ===========
Accumulated deficit:
Write-off of unamortized debt issuance costs of the Old
Bank Credit Facility ............................... $ -- $ (3,364) $ (3,364)
Increase in deferred tax asset ....................... -- 1,177 1,177
----------- ----------- -----------
Total ........................................... $ -- $ (2,187) $ (2,187)
=========== =========== ===========
</TABLE>
The $1.2 million pro forma deferred tax asset adjustment relating to the
adjustment to record the write-off of unamortized debt issuance costs of the
Old Bank Credit Facility has been calculated at the federal tax rate of 35%.
A deferred tax asset has not been recorded for state taxes.
25
<PAGE>
The pro forma adjustments to the Pro Forma Condensed Consolidated
Statements of Operations for the Offering and the New Bank Credit
Facility are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
--------------------------------------
New Bank
Credit
Offering Facility Total
---------- ---------- -----------
<S> <C> <C> <C>
Depreciation and amortization:
Amortization of debt issuance costs ............... $ -- $ 511 $ 511
Elimination of amortization of debt issuance costs of
the Old Bank Credit Facility .................... -- (498) (498)
---------- ---------- -----------
Total ........................................ $ -- $ 13 $ 13
========== ========== ===========
Interest expense:
Increase in interest expense ......................... $(9,480) $(1,041) $(10,521)
Amortization of debt discount ........................ (386) -- (386)
---------- ---------- -----------
$(9,866) $(1,041) $(10,907)
========== ========== ===========
Income tax benefit (expense):
Increase in deferred tax asset ....................... $ 3,453 $ 369 $ 3,822
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
-------------------------------------
New Bank
Credit
Offering Facility Total
---------- ---------- ----------
<S> <C> <C> <C>
Depreciation and amortization:
Amortization of debt issuance costs ............... $ -- $ 128 $ 128
Elimination of amortization of debt issuance costs of
the Old Bank Credit Facility .................... -- (125) (125)
---------- ---------- ----------
Total ........................................ $ -- $ 3 $ 3
========== ========== ==========
Interest expense:
Increase in interest expense ......................... $(2,371) $(260) $(2,631)
Amortization of debt discount ........................ (104) -- (104)
---------- ---------- ----------
$(2,475) $(260) $(2,735)
========== ========== ==========
Income tax benefit (expense):
Increase in deferred tax asset ....................... $ 866 $ 92 $ 958
</TABLE>
Debt issuance costs of the New Bank Credit Facility are capitalized and will
be amortized over 7.25 years. Debt issuance costs of the Notes are treated
as a discount and will be amortized using the interest method. The
amortization of the debt issuance costs of the Old Bank Credit Facility
included in the historical statement of operations are eliminated.
Interest on the Notes (10.5%) and the New Bank Credit Facility (at the
estimated rate of 8.1%) in excess of the interest included in the historical
statement of operations on the debt under the Old Bank Credit Facility
(average rate of 7.5%) and interest on the additional debt incurred in
connection with the gross proceeds and initial borrowings under the Notes
and the New Bank Credit Facility are presented as pro forma adjustments.
The pro forma adjustments to income tax benefit (expense) reflect the tax
effect of the Offering and the closing of the New Bank Credit Facility.
(g) Represents the elimination of historical assets not being purchased and
historical liabilities not being assumed and the elimination of
historical net assets related to the Turnersville Acquisition.
26
<PAGE>
(h) Represents the increase from historical amounts to the estimated fair
market value of all tangible and intangible assets acquired and
liabilities assumed upon consummation of the Turnersville Acquisition
comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Purchase price ....................................................................... $84,500
Net book value of acquired tangible and intangible assets included in historical
information ......................................................................... 18,850
----------
Excess of purchase price over book value of assets acquired .......................... $65,650
==========
Allocation of excess purchase price to estimated fair market value:
Property and equipment .............................................................. $ 7,155
Intangible assets ................................................................... 58,495
----------
$65,650
==========
</TABLE>
The asset acquisition is subject to post-closing working capital and
other adjustments, as defined in the related asset purchase agreement.
(i) The Company anticipates that it will borrow up to $84.5 million under the
New Bank Credit Facility to finance the Turnersville Acquisition.
Interest is based on LIBOR plus an applicable margin ranging from 3/4 %
to 2 3/8 %. Interest is calculated on $84.5 million at an estimated
average rate of 8.1%.
(j) These pro forma adjustments remove the revenues and expenses of the
California Systems that are included in the historical statements of
operations of Lenfest.
(k) The Company obtains most of its cable television programming from
Satellite Services, Inc. a subsidiary of TCI, pursuant to an agreement.
The Company's costs for programming that it obtains from Satellite
Services, Inc. are based upon TCI's costs plus an administrative fee. For
the year ended December 31, 1995, the pro forma statement of operations
reflects the Company's estimate of these administrative fees as an
increase in programming expenses for the Wilmington System. For the
preacquisition period ended February 12, 1996, no estimate is provided
because these fees would not have been material.
The benefits of the Satellite Services, Inc. agreement are also available
with respect to the Sammons Systems. The pro forma adjustments to
programming expenses in the pro forma statements of operations reflect
the Company's estimates of programming expense savings using the rates at
which the Company obtained its programming. For the year ended December
31, 1995 and the preacquisition period ended February 29, 1996, these
savings on the Sammons Systems are estimated to be $4.7 million and $0.8
million, respectively.
(l) The management fees paid by the Sammons and Turnersville Systems to their
affiliates in the amounts of $5.0 and $0.8 million, respectively, for the
year ended December 31, 1995 are eliminated. Management fees paid by the
Sammons Systems to their affiliates in the amount of $0.8 million for the
two months ended February 29, 1996 are also eliminated.
(m) Reflects the savings of salary and benefits resulting from the
elimination of 46 positions at the Sammons Systems by the Company
immediately upon the closing of the Sammons Acquisition.
(n) Adjustments to depreciation and amortization represent the incremental
depreciation and amortization charges resulting from the net increase in
historical amounts to fair market value related to the TCI Exchange and
the Sammons, Salem and Turnersville Acquisitions.
(o) The Company drew $420 million under the Old Bank Credit Facility to
complete the Sammons Acquisition. Interest is calculated on such $420
million at an estimated average rate of 7.5% for 1995. On June 27, 1996,
the Company entered into the New Bank Credit Facility with a commitment
in the aggregate amount of $450 million, consisting of a $150 million
term loan facility and a $300 million revolving credit facility. Interest
is based on LIBOR plus an applicable margin ranging from 3/4 % to 2 3/8 %.
For purposes of the pro forma adjustments, the incremental interest
attributable to the Notes and the New Bank Credit Facility has been
reflected above. (See Note (f).)
27
<PAGE>
In November 1995, the Company issued $700 million principal amount of 8
3/8 % Senior Notes. The net proceeds of the 8 3/8 % Senior Notes,
approximately $685.7 million, was used to prepay certain debt, including
a prepayment penalty of approximately $10 million, and provided funding
for the TCI Exchange and provided partial funding for the Sammons
Acquisition. Discount and debt issuance costs of $15.6 million are being
amortized using the interest method. In addition, debt issuance costs of
$4.1 million in connection with the Old Bank Credit Facility are being
amortized over 7.25 years. The 1995 amortization of these deferred debt
costs in excess of amortization included in the historical information
are approximately $1.6 million and are presented as pro forma
adjustments.
Interest on the above debt in excess of interest included in the
historical information on debt repaid amounts to $44.8 million for the
year ended December 31, 1995 and $5.25 million for the three months ended
March 31, 1996 and is presented as a pro forma adjustment. Amortization
of debt issuance costs, relating to the debt repaid, included in the
historical statement of operations totaled $4.3 million and has been
eliminated as a pro forma adjustment.
(p) Represents the elimination of the historical interest on intercompany
debt and advances to the Wilmington, Sammons and Salem Systems. The
Company has not and will not assume any intercompany debt in the
Transactions.
(q) Represents the elimination of excess interest income included in the
historical financial statements of the Company. This interest income
resulted from investing a portion of the net proceeds from the issuance
of the 8 3/8 % Senior Notes in November 1995 in marketable securities
pending the application of such proceeds in connection with the Sammons
Acquisition on February 29, 1996.
(r) The pro forma tax benefits relate to pro forma adjustments and have been
calculated at the federal tax rate of 35%.
(s) After giving pro forma effect to the Transactions as if they had occurred
on January 1, 1995, the Company's earnings would have been insufficient
to cover its fixed charges by $73.5 million and $22.3 million for the
year ended December 31, 1995, and the three months ended March 31, 1996,
respectively.
(t) Represents the elimination of vacation compensation not previously
accrued but paid by the prior owners of the Wilmington System upon the
closing of the TCI Exchange.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS EXCEPT PER CUSTOMER DATA)
The selected consolidated financial data as of and for each of the five
years in the period ended December 31, 1995 have been derived from the
audited Consolidated Financial Statements of the Company. These data should
be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements for each of the three years in the period ended December 31, 1995
included elsewhere in this Prospectus, which includes a discussion of events
that affect the comparability of the information presented below. The
statement of operations data with respect to the fiscal year ending December
31, 1991 and 1992 have been derived from audited consolidated financial
statements of the Company not included herein. The balance sheet data as of
March 31, 1996 and the statement of operations data with respect to the three
months ended March 31, 1995 and 1996 are unaudited; however, in the opinion
of management, such data reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the data for such interim
periods. Operating results for interim periods are not necessarily indicative
of the results that may be expected for a full year.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
Statement of Operations Data 1991 1992 1993 1994 1995
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues ......................................... $161,365 $179,940 $213,240 $236,195 $266,249
Programming expenses ............................. 35,495 43,388 51,783 59,352 65,423
Selling, general & administrative ................ 39,681 41,455 49,743 53,767 59,310
Technical and other .............................. 16,321 15,075 16,533 21,420 29,174
Depreciation and amortization .................... 51,596 56,192 65,195 75,518 77,700
-------- -------- -------- ------- --------
Operating income ................................ 18,272 23,830 29,986 26,138 34,642
Interest expense ................................. (35,138) (32,563) (35,090) (47,749) (61,538)
Other income (expense) ........................... (11,915) (13,645) (9,797) (7,017) 4,306
--------- ------- -------- ------- --------
Loss from continuing operations ................. (28,781) (22,378) (14,901) (28,628) (22,590)
Discontinued operations .......................... 20,565 -- -- -- --
Income tax benefit (expense) ..................... (1,616) 5,408 3,034 9,729 11,095
Extraordinary loss, net of taxes ................. -- -- -- -- (6,739)
-------- -------- -------- ------- --------
Net loss ........................................ $ (9,832) $ (16,970) $(11,867) $(18,899) $(18,234)
======== ======== ======== ======== =========
Deficiency of earnings available to cover fixed
charges (a) ..................................... $8,440 $9,615 $5,079 $18,444 $34,197
Balance Sheet Data (end of period)
Total assets ..................................... $377,183 $424,733 $635,761 $665,346 $851,748
Total debt ....................................... 356,086 406,038 612,392 626,121 817,725
Stockholders' equity (deficit) ................... (27,189) (44,162) (56,029) (49,609) (45,192)
Core Cable Television Operations (Restricted Group)
Financial Ratios and Other Data (b)
Revenues ......................................... $148,985 $166,081 $197,630 $212,800 $232,155
EBITDA (c) ....................................... 73,805 83,449 100,476 105,711 115,261
EBITDA margin (d) ................................ 49.5% 50.2% 50.8% 49.7% 49.6%
Interest expense ................................. $34,882 $32,749 $34,699 $47,016 $59,966
Capital expenditures (e) ......................... 29,176 43,463 41,658 42,162 40,168
Total debt ....................................... 366,848 403,760 609,156 616,657 807,535
Ratio of total debt to EBITDA .................... 4.97x 4.84x 6.06x 5.83x 7.01x
Monthly revenue per average basic customer ....... $28.79 $30.18 $32.05 $31.44 $32.97
Annual EBITDA per average basic customer ......... 171.14 181.97 195.51 187.42 196.40
Annual capital expenditures per average basic
customer (e) .................................... 67.65 94.78 81.06 74.75 68.44
Summary Customer Data (end of period) (b)
Homes passed ..................................... 705,985 759,635 870,718 892,549 904,753
Basic customers .................................. 440,045 477,130 550,703 577,377 596,366
Basic penetration ................................ 62.3% 62.8% 63.2% 64.7% 65.9%
Premium units .................................... 393,310 393,689 420,630 426,092 426,345
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
Statement of Operations Data 1995 1996
---------- ------------
<S> <C> <C>
Revenues ................................................ $64,106 $80,367
Programming expenses .................................... 16,140 19,231
Selling, general & administrative ....................... 13,681 18,151
Technical and other ..................................... 6,866 8,267
Depreciation and amortization ........................... 18,058 21,775
---------- ------------
Operating income ....................................... 9,361 12,943
Interest expense ........................................ (14,279) (20,221)
Other income (expense) .................................. 11,208 3,761
---------- ------------
Income (loss) before income taxes ...................... 6,290 (3,517)
Income tax benefit (expense) ............................ (2,283) 350
---------- ------------
Net income (loss) ...................................... $4,007 $(3,167)
========== ============
Deficiency of earnings available to cover fixed
charges (a) ............................................ $6,458 $6,343
Balance Sheet Data (end of period)
Total assets ............................................ $1,249,000
Total debt .............................................. 1,256,824
Stockholders' equity (deficit) .......................... (103,658)
Core Cable Television Operations (Restricted Group)
Financial Ratios and Other
Data (b)
Revenues ................................................ $55,217 $69,073
EBITDA (c) .............................................. 27,654 34,353
EBITDA margin (d) ....................................... 50.1% 49.7%
Adjusted EBITDA (f) ..................................... $27,654 $44,511
Interest expense ........................................ 13,885 19,861
Capital expenditures (e) ................................ 9,615 6,409
Total debt .............................................. 640,897 1,227,856
Ratio of total debt to annualized adjusted EBITDA (g) ... 5.79x 6.90x
Monthly revenue per average basic customer .............. $31.76 $33.05(h)
Annualized adjusted EBITDA per average basic customer (g) . 190.87 199.31
Annualized capital expenditures per average basic
customer (e)(g) ........................................ 66.36 36.80(h)
Summary Customer Data (end of period) (b)
Homes passed ............................................ 904,412 1,235,613
Basic customers ......................................... 581,708 897,157
Basic penetration ....................................... 64.3% 72.6%
Premium units ........................................... 422,926 561,729
</TABLE>
- ------
(a) For purposes of computing the deficiency of earnings available to cover
fixed charges, earnings represents the sum of income from continuing
operations before income taxes for the Company and its subsidiaries plus
fixed charges, minority interest in the loss of consolidated
subsidiaries, undistributed losses of equity method investments and
distributed income of equity method investments; less undistributed
income of equity method investments. Fixed charges represent interest
paid or accrued on indebtedness of the Company and its subsidiaries,
amortization of debt discount and deferred loan charges and one-third
(the portion deemed representative of the interest factor) of rents. In
1995, the Company increased its ownership in Garden State Cablevision
L.P. to 50%. For 1995 and the three months ended March 31, 1995 and 1996,
the equity loss from Garden State Cablevision L.P. has not been added
back for purposes of this calculation. Also, in 1995, the Company sold
marketable securities and recognized a $13.1 million gain, and in 1996,
the Company recognized a gain of $7 million on the exchange of a
partnership interest in connection with the TCI Exchange. These gains
have been excluded from earnings for purposes of this calculation.
<PAGE>
(b) The Core Cable Television Operations (Restricted Group) following the
consummation of the Transactions will consist of the Company and all of
the Company's wholly owned cable television subsidiaries. Financial
ratios and other information are presented for the Restricted Group to
enable prospective investors to evaluate the results of operations of
those operating entities on which the Company will rely to service its
obligations under the Notes.
(c) EBITDA represents operating income plus depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to incur and service debt. EBITDA should not be
considered by an investor as an alternative to net income (loss), as an
indicator of the operating performance of the Company or as an
alternative to cash flows as a measure of liquidity. EBITDA is not a
measure under generally accepted accounting principles.
(d) EBITDA margin measures EBITDA as a percentage of revenues.
(e) Excludes the purchase price of acquisitions consummated during the
period.
(f) Adjusted EBITDA for the three months ended March 31, 1996 was calculated
by adding to EBITDA of the Company the EBITDA of the Wilmington System
and the Sammons Systems for the preacquisition portion of the period, and
by giving effect to the pro forma adjustments set forth in notes (j),
(k), (l), (m) and (t) of the notes to Pro Forma Financial Information.
Adjusted EBITDA is presented in order to provide a more meaningful
comparison to total debt at the period end, and does not necessarily
reflect what the Company's EBITDA would have been for such period had
such acquisitions actually occurred at the beginning of such period.
Adjusted EBITDA for the three months ended March 31, 1995 reflects no
changes to EBITDA, since none of the Transactions occurred during such
period.
(g) For comparative purposes, EBITDA and capital expenditures have been
annualized.
(h) Per customer data for the three months ended March 31, 1996 was computed
based on a weighted average number of basic customers during the period.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Substantially all of the Company's revenues are earned from customer fees
for cable television programming services, the sale of advertising,
commissions for products sold through home shopping networks and ancillary
services (such as rental of converters and remote control devices and
installations). Federal law and regulations, including the decision to
re-regulate certain aspects of the cable television industry, have affected
the Company's ability to increase or restructure its rates for certain
services. These re-regulation activities are intended to reduce customer
rates for basic cable television service and limit future rate increases. See
"Legislation and Regulation."
The Company has generated increases in revenues and EBITDA for the three
months ended March 31, 1996 and in each of the past three fiscal years,
primarily through internal customer growth, acquisitions, increases in
monthly revenue per basic customer and, to a lesser extent, through growth in
advertising and pay-per-view revenues. EBITDA represents earnings before
interest, income taxes, depreciation, amortization and equity in net losses
of unconsolidated affiliates. EBITDA also excludes non-operating revenue and
expenses, such as interest income, capital gains and gains on sale of
equipment. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. EBITDA should not
be considered by an investor as an alternative to net income, as an indicator
of the operating performance of the Company or as an alternative to cash
flows as a measure of liquidity. EBITDA is not a measure under generally
accepted accounting principles. Since January 1, 1993, the Company's Core
Cable Television Operations have experienced a compound annual growth rate in
EBITDA of 16.5% (7.7% without reference to acquisitions). The high level of
depreciation and amortization associated with the Company's acquisitions and
capital expenditures, and interest costs related to its financing activities
have caused the Company to report net losses. Management believes that such
net losses are common for cable television companies and that the Company may
continue to incur net losses in the near future. Management does not expect
the Company to generate net income prior to 1998.
RESULTS OF OPERATIONS
The following tables, which are derived from, and should be read in
conjunction with, the Company's Consolidated Financial Statements included
elsewhere in this Propectus, set forth the historical percentage relationship
of the components of operating income for the periods indicated. The tables
provide information on the Company's predominant business unit, its Core
Cable Television Operations, and for the Company as a whole. The Core Cable
Television Operations historically have achieved better results than have the
Company's non- cable, communications-related business subsidiaries.
31
<PAGE>
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
Percentage of Revenues
-----------------------------------------------------
Three
Year Ended Months Ended
December 31, March 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Programming expenses ............. 24.3 25.1 24.6 25.2 23.9
Selling, general & administrative . 23.3 22.8 22.3 21.3 22.6
Technical and other .............. 7.7 9.1 10.9 10.7 10.3
Depreciation and amortization .... 30.6 32.0 29.2 28.2 27.1
-------- -------- -------- -------- --------
85.9 89.0 87.0 85.4 83.9
-------- -------- -------- -------- --------
Operating income ................. 14.1% 11.0% 13.0% 14.6% 16.1%
======== ======== ======== ======== ========
EBITDA ........................... 44.7% 43.0% 42.2% 42.8% 43.2%
</TABLE>
CORE CABLE TELEVISION OPERATIONS (RESTRICTED GROUP)
<TABLE>
<CAPTION>
Percentage of Revenues
-----------------------------------------------------
Three
Year Ended Months Ended
December 31, March 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Programming expenses ............. 22.3 23.2 23.8 24.3 23.4
Selling, general & administrative . 20.8 20.5 19.7 19.2 19.6
Technical and other .............. 6.1 6.6 6.8 6.4 7.3
Depreciation and amortization .... 30.6 33.3 30.6 29.8 28.9
-------- -------- -------- -------- --------
79.8 83.6 80.9 79.7 79.2
-------- -------- -------- -------- --------
Operating income ................. 20.2% 16.4% 19.1% 20.3% 20.8%
======== ======== ======== ======== ========
EBITDA ........................... 50.8% 49.7% 49.7% 50.1% 49.7%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
CONSOLIDATED RESULTS
Assets for the Company increased 46.6% to $1,249 million over the December
31, 1995 year-end. There were large increases in deferred franchise costs of
282% to $510.0 million and in property, plant and equipment of 80.0% to
$381.0 million. In both cases, the increases were primarily attributable to
the TCI Exchange and the Sammons Acquisition. Notes receivable increased to
$26.6 million due to loans to Australis (which notes were subsequently
reduced to $18.5 million). Likewise, the total liabilities of the Company
increased 51.0% to $1,349 million over the December 31, 1995 year end due
largely to the TCI Exchange and the Sammons Acquisition. The largest
increases were in accounts payable of 38.5% to $57.0 million, and an increase
of 54.0% to $1,252 million for notes payable, in each case as a result of the
foregoing transactions.
Revenues for the Company increased 25.4% to $80.4 million in the 1996
three-month period as compared to the 1995 three-month period, primarily as a
result of a 25.1% increase in revenues from the Company's Core Cable
Television Operations. The increase was primarily attributable to the TCI
Exchange and the Sammons Acquisition.
Operating expenses increased 23.2% to $67.4 million (83.9% of total
revenues) in the 1996 three-month period. Depreciation and amortization
increased 20.6% to $21.8 million (27.1% of total revenues) in the 1996
three-month period. All increases were due largely to the TCI Exchange and
the Sammons Acquisition.
Interest expense increased 41.6% to $20.2 million in the 1996 three-month
period. The increase was primarily the result of additional indebtedness
associated with the 8 3/8 % Senior Notes issued in November 1995 and
borrowings under the Old Bank Credit Facility for the purpose of funding
acquisitions.
32
<PAGE>
Other income decreased by $7.4 million to $3.8 million in the 1996
three-month period due largely to losses on equity investments in
unconsolidated affiliates held by the Company's Unrestricted Subsidiaries. In
addition, in the comparable 1995 three-month period other income included a
$13.1 million gain on the sale of marketable securities.
Income before income taxes decreased from $6.3 million in the 1995
three-month period to a loss of $3.5 million in the 1996 three-month period.
EBITDA increased $7.3 million to $34.7 million in the 1996 three-month
period as compared to the 1995 three-month period. The increase was primarily
attributable to the TCI Exchange and the Sammons Acquisition.
CORE CABLE TELEVISION OPERATIONS
Revenues increased 25.1% to $69.0 million in the 1996 three-month period
as compared to the 1995 three-month period. Premium service revenues grew by
43.8% to $17.3 million. Pay-per-view revenues increased 93.4% to $2.0
million. Equipment rental revenue increased by 49.1% to $2.2 million. All the
increases are primarily attributable to the acquisition of cable television
systems serving 294,000 customers as well as internal growth of 6,800
customers during the first quarter of 1996.
In the 1996 three-month period, programming expense increased 20.2% to
$16.1 million (23.4% of revenues of Core Cable Television Operations) as a
result of an increase in rates charged to the Company by the suppliers of
services in proportion to the increase in the number of basic cable
television subscribers served by the Company. Selling, general and
administrative expense increased 27.5% to $13.5 million (19.6% of total
revenues of Core Cable Television Operations) as a result of cost of living
increases related to employee salaries and increased number of employees
attributable to the acquisitions. Technical and other expenses increased
43.0% to $5.0 million (7.3% of total revenues of Core Cable Television
Operations) in the 1996 three-month period as compared to the 1995
three-month period. Depreciation and amortization increased 21.6% to $20.0
million as a result of acquisitions.
Operating income increased 28.1% to $14.4 million (20.8% of total revenues
of Core Cable Television Operations), as the increase in revenues more than
offset the increases in other operating expenses due largely to the
acquisition of 277,000 customers in the last month of the 1996 three-month
period.
UNRESTRICTED SUBSIDIARIES
The largest of the Company's unrestricted subsidiaries are MicroNet, Inc.
("MicroNet"), StarNet, Inc. ("StarNet") and StarNet Development, Inc.
("StarNet Development"). Revenues increased 27.1% to $11.3 million in the
1996 three-month period as compared to the 1995 three-month period, primarily
as a result of increased activity in the satellite transmission, promotional
services, and increased equipment sales of the Company's MicroNet and StarNet
subsidiaries.
Programming expense increased 13.8% to $3.1 million; selling, general and
administrative expense increased 50.4% to $4.6 million; and technical and
other expense decreased 3.5% to $3.2 million. Depreciation and amortization
increased 10.7% to $1.8 million in the 1996 three-month period as compared to
the 1995 three-month period.
Operating loss was $1.4 million as compared to a $1.9 million loss in the
prior period.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
CONSOLIDATED RESULTS
Revenues for the Company increased 12.7% to $266.2 million in 1995 as
compared to 1994, primarily as a result of an 9.1% increase in revenues from
the company's Core Cable Television Operations.
Operating expenses increased to $231.6 million (87.0% of total revenues)
in 1995. Depreciation and amortization increased 2.9% to $77.7 million (29.2%
of total revenues) in 1995.
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Interest expense increased 28.9% to $61.5 million in 1995. The increase
was primarily the result of additional indebtedness associated with the
Company's acquisition of an additional 10.0% interest in Garden State
Cablevision L.P.; the acquisition of the minority interest in South Jersey
Cablevision; borrowings to provide interim financing to Australis, an
affiliate of the Company; and because of higher effective interest rates.
Equity in net losses of unconsolidated affiliates increased by $2.7
million. The Company's unconsolidated affiliates include several cable TV
operators which incur high levels of depreciation, amortization and interest
expenses. The Company's equity in net losses of the Company's largest
unconsolidated affiliate, Garden State Cablevision, L.P., in which the
Company holds partnership interests totaling 50.0%, increased to $8.5 million
in 1995 from $7.5 million in 1994.
On November 14, 1995, the Company issued $700.0 million in principal
amount of the 8 3/8 % Senior Notes. Net proceeds to the Company, after debt
issuance costs and discount, were approximately $685.7 million. Proceeds were
used to repay the outstanding balance of approximately $440.4 million under
its then-existing bank credit facility which carried a lower floating
interest rate of 7.375%. Proceeds from the offering were also used to repay
approximately $80.8 million of the Company's 9.93% Senior Notes due 2001. The
Company incurred a prepayment premium of $10.4 million and, consequently, has
reported an extraordinary loss of $6.7 million, net of deferred tax benefit,
in its consolidated statement of operations. The issuance of the 8 3/8 %
Senior Notes increased the Company's total debt level by approximately $150.0
million, resulting in increased interest expenses over the last forty-five
days of the year of $1.6 million. The Company invested the excess proceeds in
short-term treasury bills and commercial paper. These investments yielded
over $1.0 million of investment income over the last forty-five days of the
year.
Other income increased to nearly $15.0 million for 1995, up from $1.0
million in 1994. This increase was attributable to the tendering of the
Company's holding of QVC, Inc. stock in connection with the takeover of QVC
by Comcast Corporation. The Company recognized a gain of approximately $13.1
million from the sale of the QVC stock. As mentioned above, the Company
realized additional investment income from the investment of excess proceeds
of the 8 3/8 % Senior Notes.
As a result of the factors discussed above and below, and especially as a
result of the gain from the sale of QVC, Inc. stock, the Company's loss
before extraordinary loss decreased to $11.5 million for 1995 from $18.9
million in 1994.
Loss before income taxes decreased $6.0 million to $22.6 million for the
year ended December 31, 1995.
EBITDA increased 10.5% to $112.3 million for the year ended December 31,
1995 as compared to 1994. The increase was primarily attributable to
increases in revenues due to customer rate increases and increases in the
number of basic cable television customers.
CORE CABLE TELEVISION OPERATIONS
Revenues increased 9.1% to $232.1 million in 1995 as compared to 1994. The
increase is primarily attributable to a 3.3% increase in the number of basic
cable television customers served by the Company and a weighted average CPS
rate increase of $1.95 per subscriber per month that became effective on
February 15, 1995. Premium service revenues grew by 11.8% due to a premium
rate increase of $1.00 per month per premium channel for substantially all
premium channels that went into effect June 1, 1995. Pay-per-view revenues
increased 12.4% to $5.4 million for the year as a result of increased
customer buy rates. Advertising and home shopping revenues increased 14.7% to
$7.4 million due to an increase in customer buy rates and the launching of a
new home shopping channel. Equipment rental revenue increased by 9.6% to $6.2
million due to an increase in the number of addressable converters deployed.
Addressable converters allow customers to access pay-per-view services.
In 1995, programming expense increased 12.3% to $55.3 million (23.8% of
revenues of Core Cable Television Operations) as a result of an increase in
rates charged to the Company by the programmers and to the increase in the
number of basic cable television customers served by the Company. Selling,
general and administrative expense increased 5.0% to $45.9 million (19.7% of
total revenues of Core Cable Television Operations) as a result of cost of
living increases related to employee salaries and increased regulatory
compliance costs;
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and technical and other expense increased 11.0% to $15.7 million (6.8% of
revenues of Core Cable Television Operations), in each case, as compared to
1994. Depreciation and amortization increased 0.3% to $71.1 million as a
result of a one-time write-off in 1994 of deferred loan acquisition costs in
the amount of approximately $2.7 million.
Operating income increased 26.9% to $44.2 million (19.1% of revenues of
Core Cable Television Operations), as the increase in revenues offset the
increases in depreciation and amortization as well as other operating
expenses.
EBITDA increased 9.0% to $115.3 million for the year ended December 31,
1995 as compared to 1994. The increase was primarily attributable to
increases in revenues due to customer rate increases.
UNRESTRICTED SUBSIDIARIES
MicroNet revenues increased 30.0% to $13.0 million in 1995. The growth
rate was primarily due to increased activity in satellite transmission
services and increased tower rental revenue resulting from the acquisition of
a partnership with a tower rental business in the eastern shore areas of
Delaware, Maryland and Virginia. Selling, general and administrative expenses
increased 15.4% to $3.9 million due to added staff. Depreciation and
amortization increased 42.1% to $3.8 million as a result of increased capital
expenditure and the acquisition of the tower rental business. Operating
income was $292,000 for 1995 as compared to an operating loss of $320,000 for
1994. Interest expense increased by $0.6 million to $1.8 million due to the
incurrence of $7.0 million of bank debt used to finance the acquisition of
the tower rental business. MicroNet's loss before income taxes was $1.5
million for 1995, down from $1.6 million for 1994.
StarNet revenues decreased 5.7% to $10.5 million in 1995 as compared to
1994 primarily due to decreased transponder sub-lease revenue. StarNet
operating expenses were $14.0 million, resulting in an operation loss of $3.4
million in 1995 compared to $0.9 million in 1994. Depreciation expense
increased to $1.4 million from $1.1 million.
Due to the transition from research and development to production, StarNet
Development, Inc. revenues increased to $9.5 million in 1995 from $3.8
million in 1994. Gross profit on sales increased to 26.0% in 1995 from 12.0%
in 1994. Cost of sales included a $1.5 million write off of obsolete
inventory in 1995. The operating loss for 1995 was $3.0 million compared to
$3.7 million in 1994. Depreciation and amortization increased to $0.9 million
from $0.5 million.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
CONSOLIDATED RESULTS
Revenues for the Company increased 10.8% to $236.2 million for the year
ended December 31, 1994 as compared to 1993, primarily as a result of a 7.7%
increase in revenues from the Company's Core Cable Television Operations and,
to a lesser extent, an increase in revenues from the Company's Unrestricted
Subsidiaries.
Operating expenses increased 14.6% to $210.0 million (89.0% of total
revenues) for the year ended December 31, 1994 as compared to 1993, primarily
due to a 12.8% increase in operating expenses in the Company's Core Cable
Television Operations and a 26.0% increase in the operating expenses of the
Company's Unrestricted Subsidiaries. Depreciation and amortization increased
15.8% to $75.5 million (32.0% of total revenues) for the year ended December
31, 1994 as compared to 1993, primarily as a result of increased capital
expenditures and acquisitions, and the recognition of deferred loan costs as
a result of refinancing certain debt of the Company's Core Cable Television
Operations.
Interest expense increased 36.1% to $47.7 million for the year ended
December 31, 1994 as compared to 1993. The increase was primarily the result
of a 35.5% increase in interest expense related to acquisitions of cable
television assets, investments in international holdings and higher effective
interest rates.
Other expense was $7.0 million as a result of losses on equity investments
in unconsolidated affiliates held by the Company's Unrestricted Subsidiaries.
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Loss before income taxes increased by $13.7 million to a loss of $28.6
million in 1994. Income tax benefit was $9.7 million. Net loss for the year
ended December 31, 1994 increased $7.0 million to a net loss of $18.9
million.
EBITDA increased 6.8% to $101.7 million for the year ended December 31,
1994 as compared to 1993. The increase was primarily attributable to internal
customer growth and acquisitions.
CORE CABLE TELEVISION OPERATIONS
Revenues increased 7.7% to $212.8 million for the year ended December 31,
1994 as compared to 1993. The increase is primarily attributable to a 4.8%
increase in the number of basic cable television customers served by the
Company and a full year of revenues from cable systems acquired in 1993. The
increase in revenues from customer growth was offset, in part, by a full
year's impact of FCC regulations implemented on September 1, 1993 and a
partial year's impact of additional FCC regulations implemented on July 14,
1994. The effect of these regulations was to reduce the rates that the
Company is allowed to charge its basic customers. As a result of FCC
regulations, revenues, other than those arising as a result of acquisitions,
increased less than 0.5%. All of this increase was the result of additional
equipment rental. See "Legislation and Regulation." Premium service revenues
grew by 4.6% to $47.8 million due to an increase in premium units.
Pay-per-view revenues increased 7.8% to $4.8 million as a result of increased
customer buy rates. Advertising and home shopping revenues grew by a rate of
32.8% to $6.4 million due to an increase in customer buy rates and the
launching of a new home shopping channel. Equipment rental revenue increased
by 28.7% to $5.6 million. Approximately 70.0% of this increase was the result
of FCC regulation and the balance of the increase was the result of
additional converters deployed.
In 1994, programming expense increased 11.9% to $49.3 million (23.2% of
total revenues of Core Cable Television Operations), selling, general and
administrative expense increased 6.6% to $43.7 million (20.5% of total
revenues of Core Cable Television Operations), and technical and other
expense increased 16.3% to $14.1 million (6.6% of total revenues of Core
Cable Television Operations), in each case, as compared to 1993. All variable
expenses increased in proportion to the increase in revenues as a result of
the increase in the number of basic cable television customers served by the
Company. Other expenses have increased as a result of inflation or cost of
living adjustments. Depreciation and amortization increased 16.9% to $70.9
million for the year ended December 31, 1994 as compared to 1993 as a result
of increased capital expenditures and acquisitions and the recognition of
deferred loan costs as a result of refinancing certain debt.
Operating income was $34.8 million (16.4% of total revenues of Core Cable
Television Operations), as the increase in revenues more than offset the
increase in operating expenses.
EBITDA increased 5.2% to $105.7 million for the year ended December 31,
1994 as compared to 1993, as a result of increased revenues due to increases
in the number of basic cable television customers. EBITDA as a percentage of
revenues declined by 1.1% as a result of the Company's inability to increase
rates due to rate re-regulation.
UNRESTRICTED SUBSIDIARIES
Revenue increased 49.9% to $23.4 million for the year ended December 31,
1994 as compared to 1993, primarily as a result of increased activity in the
satellite transmission, tower rental and promotional services businesses of
the Company's MicroNet and StarNet subsidiaries. Programming expense
increased 30.1% to $10.1 million, selling, general and administrative expense
increased 14.8% to $10.1 million and technical and other expense increased
66.1% to $7.3 million. Programming expense increases are primarily
attributable to additional expenses related to cost of sales of manufactured
equipment in the Company's StarNet and StarNet Development subsidiaries. All
other expenses increased as a result of the Company expanding its operations
of the Unrestricted Subsidiaries. Depreciation and amortization increased
1.9% to $4.6 million for the year ended December 31, 1994 as compared to
1993.
Operating loss was $8.7 million as compared to a $9.9 million loss in the
prior year.
Interest expense increased by $0.3 million to $0.7 million.
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RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued its Statement 123 on
accounting for stock-based compensation, which encourages employers to
account for stock compensation awards based on their fair value at the date
the awards are granted. Statement 123 is effective for calendar year 1996;
however, it will not apply since the Company does not have stock options or
stock compensation.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's businesses require cash for operations and for capital
expenditures. In addition, the Company has followed a strategy of expansion
through selective acquisitions of cable television systems and
communications-related businesses for cash. As of March 31, 1996, the Company
had commitments to purchase three cable television systems for an aggregate
cash purchase price of approximately $111.5 million. On April 30, 1996, the
Company completed two of the acquisitions for an aggregate purchase price of
approximately $27.0 million.
To date, cash requirements have been funded by cash flow from operations
and borrowings. At March 31, 1996, the Company had aggregate Senior
Indebtedness of approximately $1,225.8 million and bank debt at the
subsidiary level of approximately $25.7 million. The Company's Senior
Indebtedness consisted of (i) three debt obligations in the amount of
approximately $75.0 million, $31.5 million and $14.2 million (collectively,
the "Private Placement Notes"), (ii) $700.0 million in principal amount of 8
3/8 % Senior Notes and (iii) the $600.0 million Old Bank Credit Facility,
consisting of a $400.0 million term loan and $20.0 million borrowed under the
$200.0 million revolving credit facility portion thereof. The Company issued
the Private Placement Notes from 1988 to 1991 in connection with refinancing
of revolving bank debt, initially incurred to make acquisitions. The Company
issued the 8 3/8 % Senior Notes on November 14, 1995 pursuant to a
registration statement on Form S-1 and used a portion of the approximately
$685.7 million in net proceeds (a) to retire then-existing bank debt and a
portion of the Private Placement Notes, (b) to fund the Company's obligation
to deliver cable television system assets at a net cost to the Company of
approximately $45.0 million in order to complete the TCI Exchange and (c) to
fund approximately $106.6 million of the approximately $531.0 million
(including the reimbursement of approximately $2.0 million in capital
expenditures) purchase price for the Sammons Acquisition. On February 29,
1996, the Company borrowed $400.0 million under the term loan portion of the
Old Bank Credit Facility and $20.0 million under the revolving credit portion
of the Old Bank Credit Facility to fund a portion of purchase price for the
Sammons Acquisition.
On June 27, 1996, the Company issued $300,000,000 in principal amount of
10 1/2 % Senior Subordinated Notes Due 2006. The net proceeds from the Old
Notes Offering (approximately $293.5 million) were used, together with $150
million of proceeds from initial borrowings under the New Bank Credit
Facility and cash on hand in the amount of $1 million, to prepay all amounts
outstanding under the Old Bank Credit Facility. Simultaneously with the
closing of the Old Notes Offering, the Company entered into the New Bank
Credit Facility. The New Bank Credit Facility provides a commitment in the
aggregate amount of $450 million, consisting of a $150 million term loan
facility and a $300 million revolving credit facility. As of March 31, 1996,
after giving pro forma effect to the Transactions, the Company would have had
approximately $192.5 million of borrowing availability under the New Bank
Credit Facility.
The Company's operations are conducted through its direct and indirect
subsidiaries. As a holding company, the Company has no independent operations
and, therefore, is dependent on the cash flow of its subsidiaries to meet its
own obligations, including the payment of interest and principal obligations
on the Notes, the Private Placement Notes, the 8 3/8 % Senior Notes and the
New Bank Credit Facility when due. See "Risk Factors -- Subordination;
Holding Company Structure." There are no restrictions relating to the payment
to the Company of dividends, advances or other payments by the Restricted
Subsidiaries.
Cash flow generated from continuing operations was approximately $71.4
million for the year ended December 31, 1995 compared to the approximately
$54.1 million of cash generated during the year ended December 31, 1994 and
$52.9 million of cash generated during the year ended December 31, 1993.
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Cash flow generated from continuing operations, excluding changes in
operating assets and liabilities that result from timing issues and
considering only adjustments for noncash charges was approximately $16.5
million for the three months ended March 31, 1996 compared to approximately
$13.7 million for the three months ended March 31, 1995. The increase in cash
flow was a result of the completion of the TCI Exchange and the Sammons
Acquisition and the realization of the full effect of rate increases which
were implemented in 1995. During the 1996 three-month period the Company was
required to make interest payments of approximately $3.9 million on its
outstanding debt, whereas during the 1995 three-month period, due to the
timing of its interest payments and the existence of borrowings outstanding
under its then existing bank credit facility, the Company was required under
its then existing debt obligations to make interest payments of approximately
$16.7 million.
For the period 1996 through 2000, the Company's Core Cable Television
Operations expect to incur approximately $300.0 million in capital
expenditures related to its upgrade program and approximately $150.0 million
for routine maintenance capital expenditures. As of March 31, 1996, the
Company has expended approximately $6.4 million for capital expenditures in
1996 for Core Cable Television Operations.
The Company made investments of $7.2 million in 1995 related to its
indirect investment in Videopole, including payments of $3.6 million made on
behalf of TCI. The Company is obligated to make additional investments of
FF63.7 million in 1996 and 1997 (approximately $12.2 million in the
aggregate, subject to currency exchange rate fluctuations). The foregoing
amounts assume that the Company will continue to be required to make the
investments required to be provided by the Company's joint venture partner,
TCI. Any funds provided by the Company as a result of the failure by TCI to
make its required investments will result in an adjustment to the partnership
interests.
Future minimum lease payments under all capital leases and noncancellable
operating leases for each of the years 1996 through 1999 are $6.6 million (of
which $845,000 is payable to a principal stockholder), $5.1 million (of which
$891,000 is payable to a principal stockholder), $4.4 million (of which
$938,000 is payable to a principal stockholder) and $2.3 million (of which
$988,000 is payable to a principal stockholder), respectively.
The Company has net operating loss carryforwards which it expects to
utilize notwithstanding recent and expected near term losses. The net
operating losses begin to expire in the year 2001 and will fully expire in
2009. Management bases its expectation on its belief that depreciation and
amortization expense will level off and that interest expense will decline as
debt is repaid, resulting in higher levels of pretax income.
The Company is a party to interest rate cap agreements to reduce the
impact of changes in interest rates on its floating rate indebtedness. The
Company does not ordinarily enter into interest rate or currency hedge
agreements except as described above.
The Turnersville Acquisition is expected to be completed in the first
quarter of 1997 for approximately $84.5 million. Under the terms of the New
Bank Credit Facility, the Company is required to obtain the consent of the
lenders thereunder to acquire cable television assets in an aggregate amount
in excess of $100 million.
LENFEST AUSTRALIA, INC.
The Company, through its Lenfest Australia, Inc. subsidiary, holds an
approximately 31.4% aggregate equity investment in Australis Media Limited, an
Australian public company which provides pay television programming and services
to substantially all of Australia's major population centers. The Company
acquired its interest in Australis for an aggregate investment of approximately
U.S.$91.0 million. As of March 22, 1996, the investment had a market value of
approximately U.S.$74.9 million. On March 29, 1996, Australis' securities were
suspended from trading on the Australian stock exchange pending an announcement
from Australis regarding its recapitalization plans. On April 22, 1996, the
securities were reinstated for trading. On July 25, 1996, Australis requested
that its securities be suspended from trading, and trading was suspended on July
29, 1996. Australis stated that it had requested the trading halt to provide it
with an opportunity to correct information concerning its recapitalization plans
and operations which Australis believed was being incorrectly reported by the
press. On July 31, 1996, Australis issued a press release, and its securities
were reinstated for trading. As of August 1, 1996, the investment had a market
value of approximately U.S.$25.6 million.
On January 19, 1996, Lenfest Australia, Inc. loaned Australis
approximately $18.5 million on an unsecured basis. Such loan had an original
due date of February 26, 1996, but has been extended to the earlier of August
29, 1996 or the refinancing by Australis of the Australis Credit Facility (as
defined). The Company loaned the funds to Lenfest Australia, Inc., a
subsidiary of the Company (but not part of the Restricted Group), on an
intercompany basis. On February 29, 1996, Lenfest Australia, Inc. entered
into a credit facility (as subsequently amended, the "Lenfest Australia
Credit Facility") with two of the banks which are parties to the New Bank
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Credit Facility. The amount borrowed, approximately $18.7 million, was used
to repay the intercompany advance from the Company and transaction costs
associated with the loan to Lenfest Australia, Inc. The Lenfest Australia
Credit Facility is an unsecured facility which must be repaid on the earlier
of repayment of the loans by Australis and August 29, 1996. The full payment
and performance of the Lenfest Australia Credit Facility was guaranteed by
Mr. Lenfest. As a condition to granting their consent to the entering into of
the Lenfest Australia Credit Facility, the lenders under the New Bank Credit
Facility required the Company to agree to reduce the aggregate principal
amount available for advances under the revolving credit portion of the New
Bank Credit Facility by $20.0 million so long as any portion of the Lenfest
Australia Credit Facility remains outstanding. In March and April 1996, the
Company loaned an additional $15.5 million to Australis from cash on hand.
These loans were repaid, with interest, on May 11, 1996.
The Company and certain other investors in Australis (collectively, the
"Australis Guarantors") have agreed to assist in a recapitalization of
Australis. On May 10, 1996, Australis, Toronto Dominion Australia Limited
("TDAL") and the Australis Guarantors entered into agreements which provided
for TDAL to lend Australis up to $125.0 million (the "Australis Bank
Facility") and for the Australis Guarantors to severally guarantee borrowings
under the Australis Bank Facility. The terms of the agreements provide that
the Company's several portion (the "Australis Guaranty") of the guaranty is
up to $75.0 million of the Australis Bank Facility. The Australis Bank
Facility requires that it be repaid on or before October 31, 1996. In
connection with the closing on the Australis Bank Facility, Australis repaid
the $15.5 million of loans made by the Company in March and April 1996.
Australis has announced that it plans to repay the Australis Credit Facility
with the proceeds of long-term debt and equity financing in conjunction with
a proposed recapitalization. If the long-term financing is completed, the
$18.5 million loan to Australis by Lenfest Australia, Inc. will be repaid
from the proceeds of such financing. In connection with such long-term
financing, the Company has agreed to make an additional $20.0 million equity
investment in Australis, subject to a number of conditions, including the
completion of the recapitalization and the equity contributions of certain
other investors.
In connection with the Australis Guaranty, the Company entered into a
stand-by $75.0 million senior subordinated credit facility (the "Stand-by
Facility") on May 2, 1996 with The Toronto-Dominion Bank (the Administrative
Agent under the Existing Bank Credit Facility and an affiliate of TDAL) in
order to provide any required funding under the Australis Guaranty. The terms
of the Stand-by Facility provide that any loan will be subordinated to the
senior lenders to the Company, be unsecured and be due on the first to occur
of November 18, 1996, the issuance of public debt by Australis in an amount
sufficient to repay the Australis Bank Facility or the issuance of additional
public securities by the Company. In addition, any such loan will not require
principal amortization prior to maturity.
There can be no assurances that the Australis long-term financing will be
completed or completed on a timely basis. The board of directors of Australis
has publicly stated that if Australis is unable to obtain the long- term
financing prior to the expiration of the Australis Bank Facility (scheduled
to expire on October 31, 1996), there is substantial doubt as to Australis'
ability to continue as a going concern. See "Risk Factors -- Investment in
Australis Media Limited."
Additionally, in November 1994, Mr. Lenfest and TCI International, Inc.
jointly and severally guaranteed $67.0 million in program license payment
obligations of the distributor of Australis' movie programming. The Company
has agreed to indemnify Mr. Lenfest against loss from such guaranty to the
fullest extent permitted under the Company's debt obligations. The Company
has neither sought nor obtained any consents which may be required in
connection with this indemnification obligation. The terms of the guarantees
provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with the provision of one or more letters of credit,
which may not exceed $33.5 million. The Company is currently in discussions
with Australis and a bank with regard to obtaining a letter of credit
in the amount of $33.5 million for the benefit of the beneficiaries under the
guarantees. If the Company obtains such a letter of credit facility, the
Company would be directly obligated for $33.5 million and may remain
indirectly obligated for the balance of the program license payment
obligations. Under the terms of the New Bank Credit Facility, however, Mr.
Lenfest's claims for indemnification are limited to $33.5 million, which amount
will be further reduced by the aggregate face amount of any letters of credit
issued under the New Bank Credit Facility with respect to the program license
payment obligations guarantees.
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FUTURE CAPITAL REQUIREMENTS
Management believes that cash flow generated from the operating activities
of the Core Cable Television Operations will be sufficient to enable the
Company for the foreseeable future to make capital expenditures, to meet
operating expenses and pay the taxes of the Company and to service its
indebtedness. The Company's ability to borrow funds to make additional
investments in or acquisitions of cable television systems, and to borrow
funds under the New Bank Credit Facility if required to repay the Lenfest
Australia Credit Facility, will require that the Company be in compliance
with the Senior and Total Debt Leverage Ratios or obtain the consent of the
holders of the Company's indebtedness to a waiver or amendment of the
applicable Senior or Total Debt Leverage Ratio. Management believes that the
Company will either be in compliance with such Debt Leverage Ratios or obtain
the required consents. See "--Liquidity and Capital Resources -- New Bank
Credit Facility."
INFLATION
The net impact of inflation on operations has not been material in the
last three years due to the relatively low rates of inflation during this
period. If the rate of inflation increases the Company may increase customer
rates to keep pace with the increase in inflation, although there may be
timing delays.
40
<PAGE>
BUSINESS
GENERAL
The Company acquires, develops and operates cable television systems
(principally through its wholly owned subsidiary, Suburban Cable TV Co. Inc.
("Suburban"). Management believes the Company's Core Cable Television
Operations provide service to one of the largest contiguous blocks of
customers served by a single cable operator in the United States. As of March
31, 1996, the Company's Core Cable Television Operations served approximately
897,000 basic customers and passed approximately 1,236,000 homes. In
addition, the Company holds equity interests in other cable television
companies serving approximately 409,000 basic customers in areas near or
contiguous to its Core Cable Television Operations, of which the Company's
attributable portion is approximately 173,000 basic customers, giving the
Company a combined domestic base of 1,070,000 basic customers.
The Company's Core Cable Television Operations are located primarily in
the suburban areas surrounding Phildelphia (Southeastern Pennsylvania,
Southern New Jersey and Northern Delaware), in predominantly middle and
upper-middle income areas that in recent years have had favorable household
growth and income characteristics. Management believes the "clustering" of
its cable television systems and the favorable demographics of its service
area have contributed to its high operating cash flow growth and margins.
Since January 1, 1991, the Company's Core Cable Television Operations have
experienced a compound annual growth rate in EBITDA of 16.3% (10.7% without
reference to acquisitions) and an average EBITDA margin of 50.0%.
H.F. (Gerry) Lenfest, President and Chief Executive Officer of the
Company, together with his children, and TCI, through an indirect wholly
owned subsidiary, each beneficially owns 50% of the Company's outstanding
capital stock. Mr. Lenfest is a cable industry pioneer who founded Lenfest in
1974 and has grown the Company both internally and through acquisitions. TCI
is the largest cable television operator in the United States, with wholly
owned and affiliated systems serving approximately 13.0 million customers.
Lenfest believes that its affiliation with TCI provides substantial benefits,
including the ability to purchase programming and equipment at rates
approximating those available to TCI. See "-- Relationship with TCI" and "--
Programming and Equipment Supply."
OPERATING STRATEGY
Management believes that the cable television industry has significant
growth potential in both the business of providing television programming
services and the business of providing new services such as telephony,
Internet access, near video-on-demand and interactive/transactional services.
Management believes that the Company's operating strategy will allow the
Company to take advantage of the industry's potential. The Company's
operating strategy for its Core Cable Television Operations includes the
following elements:
o Capturing the Benefits of Clustering. Management believes the
Company can derive significant economies of scale and operating
efficiencies from the operation of its cable television systems in a
single cluster. Operational advantages and cost savings associated
with clustering include centralized management, billing, marketing,
customer service, technical and administrative functions, and the
reduction of headends. Management also believes that clustering will
enable it to more effectively utilize capital by more efficiently
delivering cable and related services to a greater number of
households. Operation of its cable television systems in a single
cluster also will provide the Company with enhanced revenue
oportunities, including the ability to attract additional
advertising, and the potential to add residential and business
telephony services.
o Targeting Regions with Favorable Demographics. Management believes
that suburban households are more likely to subscribe to cable
television services and premium service packages and to take
advantage of new service offerings. Management attributes the
Company's growth and high customer penetration levels to its history
of acquiring and developing cable television systems in suburban
areas with favorable growth and income characteristics. In order to
build on the favorable demographic characteristics of the areas
contiguous to the Company's current cluster of cable tele-
41
<PAGE>
vision systems, the Company will continue to pursue opportunistic
acquisitions of cable television systems near or contiguous to its
Core Cable Television Operations. This activity may include attempts
to acquire the balance of the shares of stock of Raystay Co. and
Susquehanna Cable Co. and its cable television operating
subsidiaries.
o Emphasis on Customer Service. The Company has sought to provide its
cable television customers with quality customer service and
attractive programming choices at reasonable rates. Among other
customer service initiatives, the Company has adopted the NCTA
customer service standards and implemented same-day, evening and
weekend installation and repair options. Management believes that
these efforts have contributed to its high customer penetration
levels. Management believes that the improved reliability and
additional channel capacity expected to result from the ongoing
upgrade of the Company's cable television systems will further
increase customer satisfaction.
o Upgrade of Cable Television Systems. Management believes that
maintaining high technical standards is integral to increasing
programming choices, improving customer satisfaction and developing
new revenue streams. The Company recently commenced an upgrade of
the network architecture of its cable television systems by
increasing bandwidth, deploying fiber optic cable and reducing the
number of headend reception facilities. Successfully upgrading the
architecture of the Company's cable systems will result in expanded
channel capacity, two-way communication capability, enhanced network
quality and dependability, augmented addressability and the ability
to offer enhanced and new telecommunications services. These new
services could include additional channels and tiers, pay-per-view
(including near video-on-demand), high speed data services and
Internet access, digital advertisement insertion,
interactive/transactional services and telephony. In addition, the
successful upgrade should allow the Company to provide new
offerings, such as local and exclusive entertainment, news,
information and community-oriented programming services. Management
believes that these services will enable the Company to
differentiate itself on a competitive basis and increase penetration
and revenue per customer through more effective targeted marketing,
greater bundling of services and further development of the
Company's brand name.
RECENT ACQUISITIONS
As part of its continuing strategy to develop and maintain a single
contiguous cluster of cable television systems, the Company recently
completed a series of acquisition transactions.
THE TCI EXCHANGE
On February 12, 1996, the Company completed an acquisition in which it
received TCI's Wilmington System in exchange for the Company's cable
television systems in the East San Francisco Bay area, a 41.67% partnership
interest in Bay Cable Advertising (an advertising interconnect) and cable
television properties located in Ft. Collins, Colorado having a net value of
approximately $45 million (which were acquired from The World Company for the
purpose of completing the exchange). As of February 12, 1996, the Wilmington
System passed approximately 193,000 homes and served approximately 143,000
basic customers.
THE SAMMONS ACQUISITION
On February 29, 1996, the Company acquired from Sammons its Bensalem and
Harrisburg cable television systems in Pennsylvania and its Vineland and
Atlantic City/Pleasantville systems in New Jersey. The purchase price for the
Sammons Systems was approximately $531 million. The Company also acquired the
right to take ownership of Sammons' Gettysburg, Pennsylvania cable television
system. Under the terms of the purchase agreement, the Company, through its
Suburban subsidiary, is managing the Gettysburg System until it is
transferred to the Company, or at its direction to a third party. The Company
has signed an agreement to transfer the Gettysburg System to GS
Communications, Inc. for $4.5 million and certain other assets. As of
February 29, 1996, the Sammons Systems (excluding the Gettysburg System)
passed approximately 364,000 homes and served approximately 277,000 basic
customers.
42
<PAGE>
THE SALEM AND SHORE ACQUISITIONS
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, the Salem System. The purchase price
for the Salem System was approximately $16 million. On the same date, the
Company acquired from Shore Cable Company of New Jersey the Shore System,
which partially overbuilt the Company's Atlantic City/Pleasantville system.
The purchase price for the Shore System was approximately $11 million.
PENDING ACQUISITION
On March 28, 1996, the Company signed an agreement to acquire the
Turnersville System from Cable TV Fund 14-A, Ltd., an affiliate of Jones
Intercable, Inc. The purchase price for the Turnersville System is
approximately $84.5 million, subject to certain adjustments. At the closing,
which the parties have agreed will occur in the first quarter of 1997, the
Company expects that the Turnersville System will pass approximately 46,200
homes and have approximately 36,300 basic customers.
OTHER OPERATIONS AND INVESTMENTS
In addition to its Core Cable Television Operations, Lenfest has made
investments in other cable television and communications-related companies.
Lenfest holds a 50% interest in Garden State Cablevision L.P., which serves
approximately 201,000 basic customers in and around Cherry Hill, New Jersey;
a 30% interest in Susquehanna Cable Co., which serves approximately 139,000
basic customers, approximately 65,000 of whom are in York County,
Pennsylvania; and a 45% interest in Raystay Co., which serves approximately
69,000 basic customers in Pennsylvania and West Virginia. Lenfest also owns
StarNet, Inc., a provider of promotional services and equipment for the cable
television industry; MicroNet, Inc., a carrier of video, voice and data
transmission services; and Lenfest Programming Services, Inc., the provider
of a local cable news channel (NewsChannel) in Eastern Pennsylvania, Southern
New Jersey and Northern Delaware. In addition to its domestic holdings,
Lenfest also holds a 31.4% economic interest in Australis Media Limited, a
pay-television provider in Australia, and a 20.8% interest in Videopole, a
cable television operator in France serving approximately 67,000 customers.
RELATIONSHIP WITH TCI
LMC Lenfest, Inc., an indirect wholly owned subsidiary of TCI, owns 50% of
the outstanding common stock of the Company. The Company's relationship with
TCI dates to 1982 when a subsidiary of TCI acquired a 15.1% interest in the
Company. That sale of shares by the Company, as well as the subsequent sale
in 1986 of an additional 28.6% interest to a TCI subsidiary, was made to
provide the Company with funds for the acquisition of additional cable
television systems. In addition, in 1986 (in a secondary transaction), Mr.
Lenfest sold an 8.3% interest from his holdings to an indirect wholly owned
subsidiary of TCI, one-half of which interest was subsequently repurchased by
the Company and held as treasury shares. In 1992, Mr. Lenfest and his family
sold an additional 2.1% interest in the Company to the TCI subsidiary. LMC
Lenfest Inc. holds all of TCI's interest in the Company.
Throughout the period that TCI has had an equity interest in the Company,
the Company has operated independently. Although each of John Malone, the
Chief Executive Officer and President of TCI, and Brendan Clouston, Executive
Vice President and Chief Operating Officer of TCI, is a member of the
Company's Board of Directors, no other representative of TCI or its
subsidiaries participates in the management, operation or planning of the
Company. Mr. Lenfest and LMC Lenfest, Inc., as successor in interest to the
earlier TCI subsidiaries through a series of TCI internal reorganizations,
have an agreement that provides, together with the amended and restated
Articles of Incorporation of the Company, that Mr. Lenfest has the right to
designate a majority of the Board of Directors of the Company until January
1, 2002. During such period, vacancies in respect of the directors designated
by Mr. Lenfest shall be filled by designees of Mr. Lenfest or, in the event
of Mr. Lenfest's death, of The Lenfest Foundation.
Pursuant to other contractual arrangements with TCI and its affiliates,
the Company has the right to purchase cable programming at a fixed rate
calculated as a percentage in excess of the rate available to TCI. In
addition, TCI has granted the Company a right of first refusal to purchase
any cable television system which
43
<PAGE>
TCI or its subsidiaries has a right to acquire if such cable television
system is located within 25 miles of any existing Company-owned cable
television system. The Company also has the right to receive the same
discounts on equipment purchases as are received by TCI. See "Principal
Stockholders."
OVERVIEW OF CABLE TELEVISION SYSTEMS
DEVELOPMENT OF THE SYSTEMS
The Company has grown since its founding in 1974 both through the internal
growth of its owned and operated cable television systems and through
acquisitions. Lenfest has acquired numerous cable television systems since
1983. Through its selection of cable systems to acquire, the Company has
successfully developed a substantial cluster of contiguous cable operating
systems, which comprise the Company's Core Cable Television Operation. This
single cluster is located in the suburban areas surrounding Philadelphia.
The following table provides customer data at year-end for each of the
years in the five-year period ended December 31, 1995 and at March 31, 1996,
for the Company's owned and operated and affiliated cable television systems
and for the Company after giving effect to the Transactions.
<TABLE>
<CAPTION>
Year Ended December 31, Period Period
---------------------------------------------------------- Ended Ended
1991 1992 1993 1994 1995 March 31, 1996 March 31, 1996
--------- --------- --------- --------- --------- -------------- --------------
Actual Pro Forma
-------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Owned and Operated
------------------
Homes passed
Beginning of period ...... 686,927 705,985 759,635 870,718 892,549 904,753 967,758
Internal growth .......... 15,058 18,850 48,283 21,831 12,204 12,860 12,860
% Internal growth ........ 2.19% 2.67% 6.36% 2.51% 1.37% 1.42% 1.33%
Acquired ................. 4,000 34,800 62,800 -- -- 318,000 318,000
End of period ............ 705,985 759,635 870,718 892,549 904,753 1,235,613 1,298,618
Basic customers
Beginning of period ...... 422,452 440,045 477,130 550,703 577,377 596,366 644,765
Internal growth .......... 14,893 13,085 31,573 26,674 18,989 6,791 6,791
% Internal growth ........ 3.53% 2.97% 6.62% 4.84% 3.29% 1.14% 1.05%
Acquired ................. 2,700 24,000 42,000 -- -- 294,000 294,000
End of period ............ 440,045 477,130 550,703 577,377 596,366 897,157 945,556
Affiliated Systems
-------------
Homes passed
Beginning of period ...... 479,426 487,114 491,003 505,521 518,425 538,082
Internal growth .......... 7,688 3,889 14,518 12,904 19,657 30,280
% Internal growth ........ 1.60% 0.80% 2.96% 2.55% 3.79% 5.63%
End of period ............ 487,114 491,003 505,521 518,425 538,082 568,362
Attributable homes passed at
end of period (a) ..... 111,989 112,858 163,258 185,457 229,390 243,002
Basic customers
Beginning of period ...... 319,252 327,502 336,388 353,935 366,041 384,480
Internal growth .......... 8,250 8,886 17,547 12,106 18,439 24,682
% Internal growth ........ 2.58% 2.71% 5.22% 3.42% 5.04% 6.42%
End of period ............ 327,502 336,388 353,935 366,041 384,480 409,162
Attributable customers at
end of period (a) ..... 73,030 74,998 113,294 130,247 162,338 173,412
</TABLE>
- ------
(a) For each affiliated cable television system, the number of attributable
homes passed and attributable basic customers is determined by
multiplying the Company's percentage equity interest in such cable
television system by the actual homes passed and actual basic customers
of such system. As of March 31, 1996, the Company held a 50% equity
interest in Garden State Cablevision L.P., a 30% equity interest in
Susquehanna Cable Co. and a 45% equity interest in Raystay Co. See " --
Non-Consolidated Cable Television Systems."
44
<PAGE>
TECHNICAL OVERVIEW
Lenfest has attempted to achieve high technical standards in the
development of its cable television systems. Approximately 92% of the
Company's cable television systems have a minimum of 52 or greater channel
capacity and approximately 23% of the Company's cable television systems have
a minimum of 78 channel capacity. In addition, the Company is able to offer
addressable converters to all of its customers. Addressable converters allow
for remote authorization of premium services and pay-per-view events and
movies.
UPGRADE STRATEGY AND CAPITAL EXPENDITURES
Lenfest recently has begun the process of upgrading the architecture of
its cable television systems to a broadband hybrid coaxial/fiber optic cable
network. This upgrade is expected to increase channel capacity, reduce the
number of amplification devices subject to failure and allow for two-way
communications. A broadband hybrid coaxial/fiber optic cable network
architecture utilizes fiber optic cable to carry video and data signals from
a headend to nodes. Nodes are mini-headends which distribute the video and
data signals from the fiber optic cable to groups of 500-600 homes over
coaxial cable. The Company expects that the network architecture it will
utilize to carry video and data transmissions from the node to the customer's
home will have 750 MHz of bandwidth, which permits the transmission of 110
uncompressed channels. Management plans to utilize 550 MHz of this capacity
(or 78 channels) until sufficient consumer demand for increased channels
and/or new services develops. Approximately 23% of the Company's cable
television systems have 78 channel capacity (550 MHz or greater), including
4% that have been upgraded to 750 MHz of bandwidth. The Company's capital
expenditure program contemplates spending $300 million through the end of the
year 2000 on upgrade activities. See "Risk Factors -- Future Capital
Requirements," "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
With the adoption of digital compression technology, channel capacity
could be further expanded by 300% to 500%. Management believes one of the
first uses of such expanded channel capacity will be to offer video-
on-demand, Internet access and near video-on-demand services. Near
video-on-demand utilizes multiple channels in order to reduce the intervals
between start times for feature presentations.
The added capacity resulting from the upgrading of the Company's cable
television systems (which can be supplemented by digital compression) should
provide the technological base from which the Company can offer new services
such as telephony and interactive/transactional services. Changes in existing
law permit cable television operators to provide telephony services, and
Lenfest's cable television systems, when upgraded, are expected to have the
capacity to provide wireline telephone service in the local loop and be able
to interconnect with PCS and cellular telephone networks to deliver calls
from wireless telephone users to telephony customers.
RATES AND ANCILLARY REVENUE SOURCES
Lenfest's cable television systems typically offer five levels of
programming services: basic; CPS; expanded tier; premium services; and
pay-per-view. As of March 31, 1996, the basic service package consisted of
local off-air broadcast channels, regional superstations such as WTBS and
public service/access channels. The monthly rate charged for the basic
service package ranged from $8.03 to $10.34. The CPS package consisted of
satellite-delivered networks such as ESPN, MTV, CNN, The Discovery Channel
and USA Network in addition to the basic package channel offerings. The
average monthly rate for the CPS package (which includes the channels offered
in the basic service package) ranged from $18.99 to $26.40.
In certain areas, Lenfest offers an expanded tier of programming services
which includes channels such as The Cartoon Network, The Sci-Fi Channel, The
Travel Channel, Court TV, Encore and Turner Classic Movies. The price for the
group of expanded tier channels ranged from an additional $2.50 to $4.95 over
the price for the standard programming package, depending on the number of
channels offered.
The Company also offers premium services, which include HBO, Cinemax, The
Movie Channel, Showtime, The Disney Channel and PRISM (a sports and movie
channel for the Philadelphia metropolitan area). As of March 31, 1996, the
monthly charge for each of these services, priced individually, ranged from
$8.95 to $12.95. Rates for premium services and pay-per-view services are
currently exempt from governmental regulation. See "Legislation and
Regulation."
45
<PAGE>
Lenfest's systems typically offer four channels of pay-per-view services
which include feature movies, special events and adult programming. As of
March 31, 1996, prices for movies ranged from $2.95 to $4.95. Prices for
adult features range from $3.95 to $5.95. Special event prices vary
considerably based on market demand. Pay-per-view buy rates have increased in
the last three years as a result of expanded channel offerings and the growth
in the number of customers having addressable cable television converters.
In addition to customer fees, ancillary sources of revenue for cable
television system operators include the sale of advertising time on locally
originated and satellite-delivered programming, as well as home shopping
sales commissions. All of the Company's systems are involved in local
advertising sales. The Company's advertising income has increased from $4.3
million for the year ended December 31, 1993, to $5.8 million for the year
ended December 31, 1994 and $7.0 million for the year ended December 31,
1995.
All of Lenfest's cable television systems offer one or both of the
shop-at-home channels, QVC and Home Shopping Network ("HSN"), as part of the
basic programming package. Lenfest receives commissions from both QVC and HSN
based on orders placed by Lenfest customers. Management believes that
advertising income and home shopping commissions have substantial growth
possibilities.
Lenfest also receives revenue from the rental of converter boxes and
remote controls and from installation fees. All such revenues are regulated
by the 1992 Cable Act.
PROGRAMMING AND EQUIPMENT SUPPLY
Many cable television companies enter into contracts to obtain basic and
premium programming from program suppliers whose compensation typically is
based on a fixed fee per customer. Some program suppliers provide volume
discount pricing structures or offer marketing support to the operator.
Through an agreement with Satellite Services, Inc. (a wholly owned
subsidiary of TCI), the Company is able to purchase almost all of its
programming services at rates closely approximating those paid by TCI,
although the Company retains the option to purchase programming from other
parties. Management believes that these rates are significantly lower than
the Company could obtain independently. Programming is the Company's largest
single expense item, accounting for 23.8% of total operating expense during
1995. See "Risk Factors -- Loss of Favorable Programming Supply." The three
cable television operators in which the Company has an equity interest
(Garden State Cablevision L.P., Susquehanna Cable Co. and Raystay Co.) also
obtain their programming pursuant to this agreement.
In addition, the Company has been placed on the "approved list" of major
equipment vendors to receive the same discounts on equipment purchases as are
received by TCI. There can be no assurance that the Company will continue to
be eligible to receive these equipment discounts in the future. The upgrade
of the Company's plant is the Company's largest capital expenditure.
FRANCHISES
As of March 31, 1996, the Company held 333 cable television franchises.
These franchises provide for the payment of fees to the issuing authority,
usually local governments. The Cable Communications Policy Act of 1984 (the
"1984 Cable Act") prohibits franchising authorities from imposing annual
franchise fees in excess of 5% of the gross revenues attributable to
customers located in the franchise area and also permits the cable television
system operator to seek renegotiation and modification of franchise
requirements if warranted by changed circumstances. For the three years ended
December 31, 1995, franchise fee payments made by the Company have averaged
approximately 4.0% of gross cable television revenues.
The 1984 Cable Act provides for an orderly franchise renewal process, and
it establishes comprehensive renewal procedures which require that an
incumbent franchisee's renewal application be assessed on its own merit and
not as part of a comparative process with competing applications. A
franchising authority may not unreasonably withhold the renewal of a
franchise. If a franchise renewal is denied and the system is acquired by the
franchise authority or a third party, then the franchise authority or other
purchaser must pay the operator the "fair market value" for the system
covered by the franchise. See "Legislation and Regulation."
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<PAGE>
The Company has never had a franchise revoked and management believes that
its franchise relationships are satisfactory.
PENDING ACQUISITION
On March 28, 1996, the Company signed an agreement to acquire the
Turnersville System from Cable TV Fund 14-A, Ltd., an affiliate of Jones
Intercable, Inc. The purchase price for the Turnersville System is
approximately $84.5 million, subject to certain adjustments. At the closing,
which the parties have agreed will occur in the first quarter of 1997, the
Company expects that the Turnersville System will pass approximately 46,200
homes and serve approximately 36,300 basic customers.
The following table includes operating data for the Turnersville System
for each of the years in the three-year period ended December 31, 1995 and
for the three months ended March 31, 1996.
<TABLE>
<CAPTION>
Year Ended December 31, Three Months
---------------------------------- Ended
1993 1994 1995 March 31, 1996
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Homes passed ............................... 43,669 44,792 45,852 46,249
Basic customers ............................ 32,426 33,961 35,523 35,659
Basic penetration .......................... 74.3% 75.8% 77.5% 77.1%
Tier customers ............................. 31,681 33,195 34,636 35,006
Monthly revenue per average basic customer . $ 37.90 $ 36.73 $ 37.61 $ 39.15
Annualized EBITDA per average basic customer . $160.59 $146.51 $162.05 $181.06
</TABLE>
The Turnersville System has approximately 750 miles of 450 MHz plant. The
customers within the Turnersville System receive 62 channels of programming.
The Turnersville System offers a basic service package ($8.92 per month), a
CPS package ($13.12 additional per month), premium services ($10.95 to $12.50
per month, per service) and pay-per-view. See " -- Rates and Ancillary
Revenue Sources" for a description of the types of programming and the
services offered in these programming packages.
NON-CONSOLIDATED CABLE TELEVISION SYSTEMS
The Company holds equity investments in three cable television system
companies: Garden State Cablevision L.P., Susquehanna Cable Co. and Raystay
Co. As of March 31, 1996, these companies operated cable television systems
serving approximately 409,000 basic customers, of which approximately 335,000
are served by systems which are contiguous to the Company's cluster of cable
television systems. As a result of Lenfest's affiliation with these
companies, the companies participate in Lenfest's programming purchasing
relationship with Satellite Services, Inc. See " -- Programming and Equipment
Supply."
GARDEN STATE CABLEVISION L.P.
In 1989, the Company, along with Comcast Corporation ("Comcast") and an
investment group, acquired the former New York Times cable television system
with approximately 201,000 basic customers in the Cherry Hill, New Jersey
area. Lenfest and Comcast subsequently purchased the investment group's
interest, and each now owns 50% of Garden State Cablevision L.P. ("Garden
State").
The following table provides customer data at year end for each of the
years in the three-year period ended December 31, 1995 and for the three
months ended March 31, 1996 for Garden State's cable television systems.
Year Ended December 31, Three Months
------------------------------------ Ended
1993 1994 1995 March 31, 1996
--------- --------- --------- --------------
Homes passed ..... 284,054 288,013 292,454 293,318
Basic customers .. 192,222 195,966 200,086 201,574
Basic penetration . 67.7% 68.0% 68.4% 68.7%
Premium units .... 152,434 151,605 154,245 152,522
SUSQUEHANNA CABLE CO.
The Company, through an indirect, wholly owned subsidiary beneficially
owns a 30% equity interest in Susquehanna Cable Co.'s cable television
operating subsidiaries (the "SCC Subsidiaries"). The SCC Subsidiaries own and
operate cable television systems in York, Pennsylvania and East Providence,
Rhode Island as well as smaller systems in Mississippi, Illinois and Indiana.
47
<PAGE>
The following table provides customer data at year end for each of the
years in the three-year period ended December 31, 1995 and for the three
months ended March 31, 1996 for the SCC Subsidiaries' cable television
systems.
Year Ended December 31, Three Months
------------------------------------ Ended
1993 1994 1995 March 31, 1996
--------- --------- --------- --------------
Homes passed ..... 165,416 173,674 182,465 182,847
Basic customers .. 121,351 127,972 137,885 138,596
Basic penetration . 73.4% 73.7% 75.6% 75.8%
Premium units .... 73,361 72,740 71,135 71,675
Beginning May 28, 1998, each of Lenfest and Susquehanna Media Co. (the 70%
owner of Susquehanna) may offer to purchase all of the shares of stock of
Susquehanna Cable Co. and the SCC Subsidiaries owned by the other. If the
person to whom an offer is made rejects the offer, such person is then
obligated to purchase all of the shares of stock of the person who made the
offer on the same terms and conditions as contained in the initial offer.
Lenfest has pledged its stock in Susquehanna Cable Co. and in the SCC
Subsidiaries as collateral for obligations incurred by Susquehanna Media Co.
RAYSTAY CO.
Lenfest, through an indirect, wholly owned subsidiary, owns approximately
45% of the stock of Raystay Co. ("Raystay"). Raystay owns and operates cable
television systems in Pennsylvania and West Virginia serving approximately
69,000 basic customers.
The following table provides customer data at year end for each of the
years in the three-year period ended December 31, 1995 and for the three
months ended March 31, 1996 for Raystay's cable television systems.
Year Ended December 31, Three Months
----------------------------------- Ended
1993 1994 1995 March 31, 1996
-------- -------- -------- --------------
Homes passed ..... 56,023 56,738 63,163 92,197
Basic customers .. 40,362 42,103 46,509 68,992
Basic penetration . 72.0% 74.2% 73.6% 74.8%
Premium units .... 17,529 17,847 17,755 24,448
Pursuant to a shareholder agreement, beginning September 30, 2002 either
the Company or the Majority Shareholders of Raystay (as defined in the
agreement) may offer to purchase all of the shares of stock of the other. If
the offer to sell is rejected, the offeree is then obligated to purchase all
of the shares of stock of the offeror on the same terms and conditions. In
addition, on the earlier of May 1, 1999 or the date George G. Gardner ceases
to actively manage Raystay, Lenfest will have the right to designate the
majority of the board of directors of Raystay and to assume management
control. Lenfest has pledged its stock in Raystay as collateral for
obligations incurred by Raystay.
NON-CABLE INVESTMENTS
The Company owns various non-cable television investments described below.
STARNET, INC.
StarNet, Inc. offers program promotion for basic, pay and pay-per-view
cable television through its "NuStar," "The Promoter" and "The Barker(R)"
product lines. These services utilize proprietary cable headend equipment
that has been designed as an integrated PC-based system for local, regional
and national spot insertion.
NuStar delivers and inserts fully tagged promotional spots for programming
into 11 cable television networks. Each spot targets specific viewer groups
and includes time specific information, channel numbers and system logos. Up
to 65 different programs are promoted monthly through NuStar. The spots are
delivered by NuStar through its satellite transponder to cable headends.
NuStar launched its service in 1989, and cable television systems covering 23
million customers currently receive the service.
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The Promoter provides direct-response promotional spots to maximize a
cable television system's usage of available advertising inventory. The
Promoter allows a cable television operator to select the movies and events
to be promoted, the networks on which the advertisements will appear and the
time periods when the spots will be inserted. This allows a cable operator to
schedule each pay-per-view message based on local demographics and viewing
habits.
The Barker(R) is an enhanced pay-per-view promotional service that uses a
dedicated cable television system channel. The system is based on an
integrated PC multimedia presentation that combines graphics, full motion
video and audio to promote current and upcoming pay-per-view events. The
Barker(R) currently is received by 8 million cable television customers.
StarNet Development, a subsidiary of StarNet, manufactures and sells
advertising delivery and confirmation equipment to cable television system
operators. This equipment gives cable television system operators the ability
to insert geographically targeted advertising into cable television networks
such as ESPN and CNN and to provide advertisers with independent verification
that the advertisement has been aired.
MICRONET, INC.
Founded in 1989, MicroNet is a carrier of video, voice and data
transmission services for a mix of markets and customers. These services are
transmitted through earth station, terrestrial microwave and digital fiber
optic facilities.
MicroNet's Cedar Hill, Texas earth station serves Texas and its Glenwood,
New Jersey earth station serves the Northeast. The Cedar Hill facility is
directly interconnected to the Texas Video Network, a terrestrial system
serving seven major Texas cities and the Lower Rio Grande Valley. The
Glenwood earth station is integrated with MicroNet's Northeast terrestrial
network serving New York, Philadelphia, Baltimore and Washington, D.C.
MicroNet operates a network of fixed and temporary loops serving local
broadcasters, sports venues and other video traffic sources. These networks
are controlled by television operating centers. MicroNet's video customer
base includes all four major network broadcasters, numerous cable
programmers, news and sports program services and business video users.
MicroNet's other terrestrial systems include a cable television program
distribution network operating in New Jersey and Pennsylvania.
MicroNet operates over 120 communication tower sites in the Northeast,
Texas and California for site rental to qualified users. Customers include
wireline and non-wireline cellular carriers, government agencies and other
common carriers.
LENFEST PROGRAMMING SERVICES, INC. (NEWSCHANNEL)
NewsChannel, part of Lenfest Programming Services, Inc., is a local cable
television news channel which began operations in 1994. It is designed to
function as an electronic newspaper, providing news tailored to the
geographic area served by individual cable television systems. NewsChannel
receives news from local newspapers before the newspapers arrive at the
newsstands. NewsChannel also has access to traditional local, regional and
international broadcast news services. The news is presented with computer
generated headlines, copy, photos and video. The displayed copy is read by
announcers and is supplemented by audio soundbites and video inserts.
NewsChannel runs twenty four hours a day in ten minute cycles and is updated
continually. As of March 31, 1996, NewsChannel served approximately 603,000
customers in Pennsylvania, New Jersey and Delaware, 578,000 of whom were
customers of the Core Cable Television Systems.
LENFEST AUSTRALIA, INC.
In 1993, the government of Australia auctioned licenses for the right to
provide pay television services via DBS within Australia. The Company,
through its Lenfest Australia, Inc. subsidiary, agreed to purchase the
Australian company which successfully bid for and held the right to obtain
one of two private sector Australian pay
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television licenses, "License B." Subsequently, Lenfest Australia, Inc.
contributed its right to purchase such company (and the right to acquire
License B) to Australis Media Limited, an Australian public company which
provides programming via MMDS licenses to substantially all of Australia's
major population centers. Lenfest Australia, Inc. subsequently paid, on
behalf of Australis, A$116.8 million (approximately U.S.$78.9 million) for
License B. It also paid approximately A$13 million (approximately U.S.$8.8
million) to the shareholders of the Australian company which was the
successful bidder in the auction in accordance with the purchase agreement
for such company.
The Company currently holds securities representing a 4.1% voting interest
and a 31.4% aggregate economic interest in Australis. The Company acquired its
interest in Australis for an aggregate investment of approximately U.S.$91.0
million. As of March 22, 1996, these securities had a market value of
approximately U.S.$74.9 million. On March 29, 1996, Australis' securities were
suspended from trading on the Australian stock exchange pending an announcement
from Australis regarding its recapitalization plans. On April 22, 1996, the
securities were reinstated for trading. On July 25, 1996, Australis requested
that its securities be suspended from trading, and trading was suspended on July
29, 1996. Australis stated that it had requested the trading halt to provide it
with an opportunity to correct information concerning its recapitalization plans
and operations which Australis believed was being incorrectly reported by the
press. On July 31, 1996, Australis issued a press release, and its securities
were reinstated for trading. As of August 1, 1996, the investment had a market
value of approximately U.S.$25.6 million. For a discussion of the Company's
investment in Australis, as well as Australis' proposed recapitalization, see
"Risk Factors -- Investment in Australis Media Limited" and "Managements'
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
Australis currently provides pay television programming services to
customers via DBS and MMDS in cooperation with the other Australian
commercial satellite licensee and has entered into a 25-year programming
distribution agreement with Foxtel (a joint venture between Telestra and The
News Corporation Limited), for cable television distribution. The agreement
with Foxtel provides for minimum guaranteed annual payments (denominated in
US dollars) to Australis and, in any year in which actual Foxtel subscribers
exceed a specified number, an additional fee based on such excess. In
addition, Australis has entered into long-term programming joint ventures and
license agreements with major international film studios and cable television
programmers to obtain rights to distribute a wide variety of movie, sports,
general entertainment and other programming to the Australian market.
LENFEST INTERNATIONAL, INC. (VIDEOPOLE)
The Company and TCI each are partners in L-TCI Associates, a partnership
which owns a 29% interest in Videopole. Videopole is a French cable
television company serving rural areas of France. As of April 30, 1996,
Videopole had nearly 424,000 homes under franchise, had built television
systems passing approximately 223,000 homes, and served approximately 67,000
customers. Videopole is controlled by Synergie Developpement et Services
which is a wholly owned subsidiary of D' Electricite De France, the French
state-owned electric company.
Pursuant to the Partnership Agreement of L-TCI Associates (the "L-TCI
Partnership Agreement"), the Company made an investment of approximately $7.2
million in 1995 related to its indirect investment in Videopole. The Company
and TCI are each obligated to make capital contributions in the amounts of
FF21.83 million (approximately U.S.$4.2 million) and FF10.01 million
(approximately U.S.$1.9 million) in 1996 and 1997, respectively. In addition,
if TCI fails to make any of its required capital contributions, the L-TCI
Partnership Agreement provides that Lenfest will make TCI's, as well as its
own, capital contributions. If the Company makes payments on behalf of TCI,
the Company's partnership interest in L-TCI Associates will increase as a
result thereof. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." In
1995 and 1996, the Company made payments in the amount of approximately $3.6
million and $1.4 million, respectively, on behalf of TCI and expects to
continue to make such payments. As a result of the Company's payments in 1995
and 1996, the Company's percentage interest in L-TCI Associates increased,
thereby increasing the Company's indirect percentage interest in Videopole to
20.8%, and decreasing TCI's indirect interest to 8.2%.
PROPERTIES
The Company's principal physical assets consist of cable television
operating plant and equipment, including signal receiving, encoding and
decoding devices, headends and distribution systems and customer drop
equipment for each of its cable television systems. The Company's cable
distribution plant and related equipment generally are attached to utility
poles under pole rental agreements with local public utilities and telephone
companies, and in certain locations are buried in underground ducts or
trenches.
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The Company owns or leases real property for signal receptions sites and
business offices in many of the communities served by its systems and for its
principal operating offices. See "Certain Transactions." On March 21, 1996,
Suburban entered into a lease for office space at 200 Cresson Boulevard,
Oaks, PA. The Company has moved administrative operations to a single
location. The new offices will have approximately 57,000 square feet, which
management believes is adequate. The Company's Pottstown, PA location will
continue to be used by Suburban. Management believes that its properties are
in good operating condition and are suitable and adequate for the Company's
business operations.
COMPETITION
Multichannel Multipoint Distribution Service ("MMDS") systems, commonly
called wireless cable television systems, and Direct Broadcast Satellite
("DBS") systems, which distribute programming to home satellite dishes,
compete with traditional cable television systems. Establishing a DBS or MMDS
network is less capital intensive than building a traditional cable
television system and, therefore, gives MMDS and DBS systems an advantage in
areas of lower population density. Providers of programming via these
technologies have the potential to compete directly with cable television
systems in urban areas as well, and in some areas of the country, DBS systems
are in direct competition with cable television systems.
Currently, there are three DBS providers in the Company's service area,
Direct TV, USSB and PrimeStar. AlphaStar, EchoStar and MCI/News Corp. have
announced, and others may announce, intentions to enter into the DBS market
and may offer DBS services within the Company's service area. The packages
offered by the DBS providers generally are more expensive than the Company's
cable programming service tier, but some DBS providers currently can provide
a greater number of channels than the Company does on its cable programming
service tier, which is the comparable offering of service. The Company
believes that its services will continue to have a competitive advantage over
DBS because: (i) the up-front equipment and installation costs are
significantly higher than the installation of cable, ranging from $300 to
$900 (depending upon the provider) per installation as opposed to $33.00 for
a cable installation; (ii) within the Company's service areas, DBS providers
cannot broadcast any local off-air signals; (iii) without a significant
investment in additional equipment, only one channel can be seen on all
television sets in the same house at the same time; and (iv) with the
Company's upgraded network architecture, the Company will be able to offer
two-way interactive services and will have three to four times the bandwidth
capacity.
In MMDS, the Company faces competition from ACS Enterprises, Inc. ("ACS"),
recently acquired by CAI. ACS's maximum potential service area is a radius of
approximately 35 miles from ACS's tower in Philadelphia which covers a
significant portion of the Company's customer base. However, management
believes that a number of households in ACS's service area cannot be reached
because of terrain and elevation obstructions. In the Company's Atlantic
City/Pleasantville System, the Company faces competition from Orion Vision, a
local MMDS operator, which has a broadcast area of approximately 12 miles
from its transmitting site in Corbin City, New Jersey.
MMDS operators currently have one package of service consisting of
approximately 33 channels with no off air broadcast channels. MMDS generally
is less expensive than cable due in large part to the lower number of
channels it offers. At this time, the Company does not view MMDS as a
significant competitive service, although it expects that this could change
if advances in digital wireless technology significantly expands MMDS channel
capacity and quality of service. CAI has received investments from Bell
Atlantic and NYNEX to finance its development of digital wireless television.
Although the channel capacity of MMDS systems is limited, it is expected that
developments in compression technology will enable MMDS operators to provide
a sufficient number of channels that, while fewer than the number of channels
that are expected to be provided by cable television systems using
fiber-optic technology, may nevertheless be attractive to subscribers.
However, a digitally compressed MMDS service will require hardware similar to
that currently used by DBS providers and will have the same limitations as
compared with a cable television system currently faced by those providers
set forth above. Recent amendments to FCC regulations enable MMDS systems to
compete more effectively with cable television systems by making additional
channels available to the MMDS industry and by refining the procedures
through which MMDS licenses are granted.
To date, the Company believes that it has not lost a significant number of
customers, nor a significant amount of revenue, to DBS or MMDS operators
competing with the Company's systems. There can be no assurance, however,
that competition from these technologies will not have a negative impact on
the Company's business in the future. See "Risk Factors -- Competition."
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The 1996 Act repealed the prohibition on RBOCs and other LECs from
providing cable service directly to subscribers in their local telephone
service areas. Thus, LECs may now acquire, construct and operate cable
systems both inside and outside their service areas. The 1996 Act also
authorizes LECs to provide video programming through a variety of other
means, including the operation of "open video systems," without obtaining a
local cable franchise.
The RBOCs and other local telephone companies are in the process of
entering the cable television business. The RBOCs have significant access to
capital and several have expressed their intention to enter the video-
to-home business as an adjunct to their existing voice and data transmission
businesses. In addition, the RBOCs and local telephone companies have in
place facilities which are capable of delivering cable television service.
See "Risk Factors -- Competition."
Most of the Company's cable television assets are located in the Bell
Atlantic operating area. Bell Atlantic recently announced its intention to
merge with NYNEX. Both Bell Atlantic and NYNEX have previously made
investments in CAI in order to finance CAI's development of digital wireless
television. It is not clear at this time how the pending Bell Atlantic/NYNEX
merger will impact competition or whether Bell Atlantic (or the new Bell
Atlantic/NYNEX entity) intends to compete with the Company through its
investment in CAI directly, by constructing hardwired broadband systems
within the Company's service area or through a combination of both.
Cable television franchises are not exclusive. Under the 1992 Cable Act,
franchising authorities are prohibited from granting exclusive cable
television franchises and from unreasonably refusing to award additional
competitive franchises. Moreover, municipalities are permitted to operate
cable television systems in their communities without franchises.
Consequently, more than one cable television system may be built in the same
area (known as an "overbuild"), with potential loss of revenues to the
operator of the original cable television system. Management cannot predict
the extent to which such competition will materialize or, if such competition
materializes, the extent of its effect on Lenfest.
Constructing a cable television system is a capital intensive process for
which the Company believes there can be no assurance of realizing a return on
investment within an acceptable time period. The Company believes that, to be
successful, an overbuilder would be required to serve a distinct portion of
the cable television market on a more cost efficient basis than the existing
cable operator, have facilities capable of transmitting cable television
programming in place or have significant access to capital.
Broadcast television is another competitor to cable television. In most of
the areas served by the Company's cable systems, a variety of terrestrial
broadcast television programming can be received off-air. Typically, there
are three to ten VHF/UHF broadcast channels that provide local, network and
syndicated programming free of charge.
The Company's competitors also include master antenna television ("MATV")
and satellite master antenna television ("SMATV") systems. MATV and SMATV
systems are essentially small cable television systems that operate within
hotels, apartment complexes, condominium complexes and individual residences.
Due to the widespread availability of earth stations, such private cable
systems may offer both improved reception of local television stations and
many of the same satellite-delivered program services that are presently
offered by franchised cable systems. MATV and SMATV stations currently labor
under fewer regulatory burdens than franchised cable systems. For example,
MATV and SMATV stations need not serve low density or economically depressed
areas. By reducing cable regulation, the 1996 Act may have reduced some of
the advantages that had previously been enjoyed by MATV and SMATV providers.
However, since MATV and SMATV services are generally not "cable systems"
under the 1992 Cable Act, such services may be exempt from the remaining laws
and regulations that impact cable operators.
The 1996 Act also authorizes registered utility holding companies and
their subsidiaries to provide video programming services.
In addition, cable television operators face indirect competition from
professional sports events, the theater, moviehouses, home video
entertainment, radio and newspapers. Other new technologies may soon compete
with the non-entertainment services that cable systems offer or will soon be
able to offer, as well as with cable tele-
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vision services. Advances in communications technology as well as changes in
the marketplace and the regulatory and legislative environment are constantly
occurring. The Company cannot predict the effect that ongoing or future
developments may have on the cable television industry generally or the
Company specifically.
LEGAL PROCEEDINGS
On May 3, 1996, The News Corporation Limited ("News") filed in the Supreme
Court of New South Wales, Australia an action seeking unspecified damages as
a result of the alleged violation by the Company of an alleged oral agreement
to inform News prior to the Company taking any steps to effect a
recapitalization plan for Australis. The Company believes that the suit is
without merit. In addition, on June 6, 1996, the Company filed suit in
federal court in Philadelphia seeking a declaration that no oral agreement
was made with News to notify News prior to making a separate refinancing
proposal to Australis, and that there is no agreement whatsoever with News
that would delay or prevent the Company's participation in providing
refinancing to Australis.
On January 20, 1995, Mr. Albert Hadid filed suit in the Federal Court of
Australia, New South Wales District Registry, against Australis (a company in
which the Company holds a 31.4% aggregate economic interest, see "--
Non-Cable Investments"), the Company and several other entities and
individuals including H.F. Lenfest (the "Defendants"), involved in the
acquisition of a company of which Mr. Hadid was the controlling shareholder,
the assets of which included the right to acquire License B from the
Australian government. Mr. Hadid alleges that the Defendants defrauded him by
making certain representations to him in connection with the acquisition of
his company. Mr. Hadid also alleges the Company and Mr. Lenfest breached the
fiduciary duties that they owed to him. Mr. Hadid seeks monetary damages in
the amount of A$718 million (approximately U.S.$573 million as of May 31,
1996). The Defendants have denied all claims made against them by Mr. Hadid
and stated their belief that Mr. Hadid's allegations are without merit and
their intention to defend this action vigorously.
On December 6, 1995, the Securities and Exchange Commission (the "SEC")
sued H.F. Lenfest and Marguerite Lenfest in the United States District Court
for the Eastern District of Pennsylvania. The SEC alleges that, in October
1993, Mr. Lenfest, while in possession of non-public information, recommended
that his son purchase TCI stock and that Marguerite Lenfest traded in TCI
stock in October 1993 on the basis of information she misappropriated from
her husband. H.F. Lenfest and Marguerite Lenfest have categorically denied
that they engaged in any improper conduct and are defending this action
vigorously. The Company has agreed to pay the legal expenses of H.F. Lenfest
and Marguerite Lenfest related to this action. H.F. Lenfest and Marguerite
Lenfest have agreed to repay such expenses if it is subsequently determined
that the Company is not permitted to make such payments under Delaware
corporate law.
EMPLOYEES
As of March 31, 1996, the Company had 1,408 full-time employees, of which
172 employees were covered by collective bargaining agreements at two
locations.
As of March 31, 1996, the Company's Core Cable Television Operations had
1,029 full-time employees, of which 172 employees were covered by collective
bargaining agreements at two locations.
After the completion of the Turnersville Acquisition, the Company expects
to have approximately 1,475 full-time employees, of which 172 employees will
be covered by collective bargaining agreements at two locations.
The Company considers its relations with its current employees to be
satisfactory.
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LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies may in the future materially affect
the cable television industry. The following is a summary of significant
federal laws and regulations affecting the growth and operation of the cable
television industry and a description of certain state and local laws.
FEDERAL STATUTORY LAW
EXISTING LAWS
The Cable Communications Policy Act of 1984 ("1984 Cable Act") became
effective on December 29, 1984. This federal statute, which amended the
Communications Act of 1934 (the "Communications Act"), creates uniform
national standards and guidelines for the regulation of cable television
systems. On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 ("1992 Cable Act"). This legislation
amended the 1984 Cable Act in many respects and has significantly changed the
regulatory environment in which the cable industry operates. The 1992 Cable
Act allows for a greater degree of regulation of the cable television
industry with respect to, among other things: (i) cable television system
rates for both basic and certain nonbasic services; (ii) programming access
and exclusivity arrangements; (iii) access to cable channels by unaffiliated
programming services; (iv) leased access terms and conditions; (v) horizontal
and vertical ownership of cable television systems; (vi) customer service
requirements; (vii) franchise renewals; (viii) television broadcast signal
carriage and retransmission consent; (ix) technical standards; (x) customer
privacy; (xi) consumer protection issues; (xii) cable equipment
compatibility; (xiii) obscene or indecent programming; and (xiv) requiring
subscribers to subscribe to tiers of service other than basic service as a
condition of purchasing premium services. Additionally, the 1992 Cable Act
encourages competition with existing cable television systems by: allowing
municipalities to own and operate their own cable television systems without
having to obtain a franchise; preventing franchising authorities from
granting exclusive franchises or unreasonably refusing to award additional
franchises covering an existing cable television system's service area; and
prohibiting, with certain exceptions, the common ownership of cable
television systems and co-located MMDS or SMATV (satellite master antenna
television) systems. The 1992 Cable Act also precludes cable operators
affiliated with video programmers from favoring such programmers in
determining carriage on their cable systems or unreasonably restricting the
sale of their programming to other multichannel video distributors.
The 1996 Act, which became law on February 8, 1996, significantly alters
the federal, state and local regulatory structure. As it pertains to cable
television, the 1996 Act, among other things, (i) deregulates rates for
nonbasic cable service in 1999; (ii) deregulates basic and nonbasic rates
with respect to cable operators that face video competition from LECs by
expanding the definition of "effective competition," the existence of which
displaces rate regulation; (iii) eliminates the restriction against the
ownership and operation of cable systems by telephone companies within their
local exchange service areas; and (iv) liberalizes certain of the FCC's
cross-ownership restrictions. The FCC will have to conduct a number of
rulemaking proceedings in order to implement many of the provisions of the
1996 Act.
FEDERAL REGULATION
The FCC, the principal federal regulatory agency with jurisdiction over
the cable television industry, has promulgated regulations covering a number
of subject matter areas. The FCC has the authority to enforce these
regulations through the imposition of substantial fines, the issuance of
cease and desist orders and/or the imposition of other administrative
sanctions, such as the revocation of FCC licenses needed to operate certain
transmission facilities often used in connection with cable operations. A
brief summary of the most significant of these federal regulations as adopted
to date follows.
RATE REGULATION
The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional nonbasic program tiers. The 1984 Cable Act also
deregulated basic cable rates for cable television systems determined by the
FCC to be subject to "effective competition." The 1992 Cable Act replaced the
FCC's old
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standard for determining "effective competition," under which most cable
television systems were exempt from local rate regulation, with a statutory
provision that subjected nearly all cable television systems to local rate
regulation of basic service. The 1996 Act expands the definition of
"effective competition" to cover situations where a local telephone company
or its affiliate, or any multichannel video provider using telephone company
facilities, offers comparable video service by any means except DBS.
Regulation of both basic and nonbasic tier cable rates ceases for any cable
system subject to "effective competition."
Additionally, the 1992 Cable Act authorized the FCC to adopt a formula,
for franchising authorities to enforce, to ensure that basic cable rates are
reasonable; allowed the FCC to review rates for nonbasic service tiers (other
than per-channel or per-program services) in response to complaints filed by
franchising authorities and/or cable customers; prohibited cable television
systems from requiring subscribers to purchase service tiers above basic
service in order to purchase premium services if the system is technically
capable of doing so; required the FCC to adopt regulations to establish, on
the basis of actual costs, the price for installation of cable service,
remote controls, converter boxes and additional outlets; and allows the FCC
to impose restrictions on the retiering and rearrangement of cable services
under certain limited circumstances.
The FCC adopted rules designed to implement these rate regulation
provisions on April 1, 1993, and then significantly amended them on
reconsideration on February 22 and November 10, 1994. The FCC's regulations
contain standards for the regulation of basic and nonbasic cable service
rates (other than per-channel or per-program services). The rate regulations
adopt a benchmark price cap system for measuring the reasonableness of
existing basic and nonbasic service rates, and a formula for evaluating
future rate increases. Alternatively, cable operators have the opportunity to
make cost-of-service showings which, in some cases, may justify rates above
the applicable benchmarks. The rules also require that charges for
cable-related equipment (e.g., converter boxes and remote control devices)
and installation services be unbundled from the provision of cable service
and based upon actual costs plus a reasonable profit. The charges for
equipment and installation services must be recalculated annually and
adjusted accordingly.
The 1996 Act eliminates regulation of rates for CPS packages for all cable
operators as of March 31, 1999. In the interim, regulation of rates for CPS
packages can only be triggered if a franchising authority complaint based on
more than one subscriber complaint is made with the FCC within 90 days after
a rate increase. These 1996 Act provisions should materially alter the
applicability of FCC rate regulations adopted under the 1992 Cable Act.
In addition, the 1996 Act relaxes the uniform rate requirements of the
1992 Cable Act, which required an operator of cable television systems to
have a uniform rate structure for the provision of cable services throughout
the geographic area in which the operator provides cable service.
Specifically, the new legislation clarifies that the uniform rate provision
does not apply where an operator of a cable television system faces
"effective competition." In addition, bulk discounts to multiple dwelling
units are exempted from the uniform rate requirements. However, complaints
may be made to the FCC against operators of cable television systems not
subject to effective competition for "predatory" pricing (including with
respect to bulk discounts to multiple dwelling units). The 1996 Act also
permits operators of cable television systems to aggregate, on a franchise,
system, regional or company level, its equipment costs in broad categories.
The 1996 Act is expected to facilitate the rationalization of equipment rates
across jurisdictional boundaries. However, these cost-aggregation rules do
not apply to the limited equipment used by subscribers who only receive basic
service.
Local franchising authorities and/or the FCC are empowered to order a
reduction of existing rates which exceed the maximum permitted level for
either basic and/or nonbasic cable services and associated equipment, and
refunds could be required. In general, the reduction for existing basic and
nonbasic cable service rates under the original rate regulations would be to
the greater of (i) the applicable benchmark level or (ii) the rates in force
as of September 30, 1992, minus 10 percent; in both cases adjusted forward
for inflation. The current regulations require an aggregate reduction of as
much as 17 percent, adjusted forward for inflation, from the rates in force
as of September 30, 1992. The regulations also provide that future rate
increases may not exceed an inflation-indexed amount, plus increases in
certain costs beyond the cable operator's control, such as taxes, franchise
fees and increased programming costs. Cost-based adjustments to these capped
rates can also be made in the event a cable operator adds or deletes
channels. The November 10, 1994 amendments incorporated an alter
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native method for adjusting the rates charged for a regulated nonbasic
service tier when new services are added. This method will allow cable
operators to increase the monthly rate to each customer by as much as $1.50
over a two year period to reflect the addition of up to six new channels of
service on regulated nonbasic service tiers (an additional increase of $0.20
is permitted in the third year if a seventh channel is added). In addition,
new product tiers consisting of services new to the cable television system
can be created free of rate regulation as long as certain conditions are met
such as not moving services from existing tiers to the new tier.
Recently, the FCC has taken two actions, initiated prior to the 1996 Act,
that may have a beneficial effect on revenue and cash flow. First, the FCC
has adopted a procedure under which cable operators can file abbreviated cost
of service showings for system rebuilds and upgrades, the result of which
would be a permitted increase in regulated rates to allow recovery of those
costs. Second, the FCC has adopted a new procedure for the annual
pass-through of increases in certain external costs, such as programming
costs, under which cable operators could increase rates based on actual and
anticipated cost increases for the coming year. This would be an alternative
to the methodology described in the previous paragraph whereby such costs can
be passed through on a quarterly basis, but only for cost increases already
incurred.
In November 1995, the FCC proposed to provide operators of cable
television systems with the option of establishing uniform rates for similar
service packages offered in multiple franchise areas located in the same
region. Under the FCC's current rules, operators of cable television systems
subject to rate regulation are required to establish rates on a
franchise-specific basis. The proposed rules could lower such operators'
marketing costs and also allow operators to respond better to competition
from alternative providers. The Company is unable to predict if these
proposed rules will ultimately be promulgated by the FCC and, if they are
promulgated, their effect on the Company.
CARRIAGE OF BROADCAST TELEVISION SIGNALS
The 1992 Cable Act allows commercial television broadcast stations which
are "local" to a cable television system to elect every three years either
(i) to require the cable television system to carry the station, subject to
certain exceptions (known as the "must carry" requirement), or (ii) to deny
the cable television system the right to carry the station without the
station's express consent (known as "re-transmission consent"). The next
election between must-carry and retransmission consent will be October 1,
1996. Local non-commercial television stations are also given mandatory
carriage rights, subject to certain exceptions, but are not given the option
to negotiate retransmission consent for the carriage of their signal. In
addition, cable television systems must obtain retransmission consent for the
carriage of all "distant" commercial broadcast stations, except for certain
"superstations," i.e., commercial satellite-delivered independent stations
such as WTBS, WGN, and WWOR-TV. The legality of these "must-carry" provisions
is currently under judicial review. Invalidation of the "must-carry"
provisions would free cable operators (except for any contractual
commitments) to replace the carriage of any or all local broadcast stations
with other programming. However, the outcome of the pending judicial review
cannot be predicted.
DELETION OF CERTAIN PROGRAMMING
Cable television systems that have 1,000 or more customers must, upon the
appropriate request of a local television station, delete the simultaneous or
nonsimultaneous network programming of a distant station when such
programming has also been contracted for by the local station on an exclusive
basis. FCC regulations also enable television stations that have obtained
exclusive distribution rights for syndicated programming in their market to
require a cable television system to delete or "black out" such programming
from other television stations which are carried by the cable television
system.
RENEWAL OF FRANCHISES
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While
these formal procedures are not mandatory unless timely invoked by either the
cable operator or the franchising authority, they can provide substantial
protection to incumbent franchisees. Notwithstanding the renewal process,
franchising authorities and cable operators remain free to negotiate a
renewal outside the formal process. Nevertheless, renewal is by no means
assured, as the franchisee must
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meet certain statutory standards if the formal renewal procedures are
invoked. Even if a franchise is renewed, a franchising authority may impose
new and more onerous requirements such as upgrading facilities and equipment,
although the municipality must take into account the cost of meeting such
requirements.
The 1992 Cable Act makes several changes to the process under which a
cable operator seeks to enforce his renewal rights which could make it easier
in some cases for a franchising authority to deny renewal. Franchising
authorities may consider the "level" of programming service provided by a
cable operator in deciding whether to renew. For alleged franchise violations
occurring after December 29, 1984, franchising authorities are no longer
precluded from denying renewal based on failure to substantially comply with
the material terms of the franchise where the franchising authority has
"effectively acquiesced" to such past violations. Rather, the franchising
authority is estopped if, after giving the cable operator notice and
opportunity to cure, it fails to respond to a written notice from the cable
television operator of its failure or inability to cure. Courts may not
reverse a denial of renewal based on procedural violations found to be
"harmless error."
CHANNEL SET-ASIDES
The 1984 Cable Act permits local franchising authorities to require cable
operators to set aside certain channels for public, educational and
governmental access programming. The 1984 Cable Act further requires cable
television systems with thirty-six or more activated channels to designate a
portion of their channel capacity for commercial leased access by
unaffiliated third parties. The 1992 Cable Act requires the FCC to establish
a formula for determining maximum reasonable rates. The FCC is presently
engaged in a proceeding in which it may alter the leased access rate formula.
The FCC has tentatively concluded that the current formula overcompensates
operators of cable television systems. Therefore, the FCC is considering
changes in its leased access rate rules that may result in operators of cable
television systems being compensated less for leased access. In this
proceeding, the FCC is also considering requiring operators of cable
television systems to reserve a portion of their leased access capacity for
not-for-profit programmers and/or establishing special preferential rates for
such programmers. The Company cannot predict the outcome of this proceeding
or its effect on the Company.
OWNERSHIP
The 1996 Act repealed the statutory ban against local exchange telephone
companies ("LECs") from providing video programming directly to customers
within their local exchange telephone service areas, except in rural areas or
by specific waiver of FCC rules. Consequently, the 1996 Act permits telephone
companies to compete directly with operators of cable television systems.
Under the 1996 Act and FCC rules recently adopted to implement the 1996 Act,
LECs may provide video service as broadcasters, common carriers, or cable
operators or LECs and others may also provide video service through "open
video systems" ("OVS"), a regulatory regime that may give them more
flexibility than traditional cable systems. OVS operators (including LECs)
may operate "open video systems" without obtaining a local cable franchise,
although they can be required to make payments to local governmental bodies
in lieu of cable franchise fees. In general, OVS operators must make their
systems available to programming providers on rates, terms and conditions
that are reasonable and nondiscriminatory. Where carriage demand by
programming providers exceeds the channel capacity of an open video system,
two-thirds of the channels must be made available to programmers unaffiliated
with the OVS operator.
The 1996 Act generally prohibits buyouts of cable television systems
(including any ownership interest of such systems exceeding 10%) by LECs
within an LEC's telephone service area, buyouts by operators of cable
television systems of LEC systems within a cable operator's franchise area,
and joint ventures between operators of cable television systems and LECs in
the same markets. There are some statutory exceptions, including a rural
exemption that permits buyouts in which the purchased system serves a
non-urban area with fewer than 35,000 inhabitants. Also, the FCC may grant
waivers of the buyout provisions in cases where (i) the operator of a cable
television system or the LEC would be subject to undue economic distress if
such provisions were enforced, (ii) the system or facilities would not be
economically viable in the absence of a buyout or a joint venture or (iii)
the anticompetitive effects of the proposed transaction are clearly
outweighed by the transaction's effect in light of community needs. The
respective local franchising authority must approve any such waiver.
The 1996 Act also authorizes registered utility holding companies and
their subsidiaries to provide video programming services, notwithstanding the
Public Utility Holding Company Act. In order to take advantage of the new
legislation, public utilities must establish separate subsidiaries through
which to operate any cable operations. Such utility companies must also apply
to the FCC for operating authority.
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The 1996 Act eliminated the FCC rule prohibiting common ownership between
a cable system and a national broadcast television network. The 1996 Act also
eliminated the statutory ban covering certain common ownership interests,
operation or control between a television station and cable system within the
station's Grade B signal coverage area. However, the parallel FCC rule
against cable/television station cross-ownership remains in place, subject to
review by the FCC within two years. Finally, the 1992 Cable Act prohibits
common ownership, control or interest in cable television systems and MMDS
facilities or satellite master antenna television ("SMATV") systems having
overlapping service areas, except in limited circumstances. The 1996 Act
exempts cable systems facing "effective competition" from the MMDS and SMATV
cross-ownership restrictions.
Pursuant to the 1992 Cable Act, the FCC has adopted rules which, with
certain exceptions, preclude a cable television system from devoting more
than 40% of its first 75 activated channels to national video programming
services in which the cable system owner has an attributable interest. The
FCC also has set a limit of 30% of total nationwide cable homes that can be
served by any multiple cable system operator. The FCC has stayed the
effectiveness of this ruling pending the outcome of its appeal from the U.S.
District Court decision holding the multiple ownership limit provision of the
1992 Cable Act unconstitutional.
EQUAL EMPLOYMENT OPPORTUNITY
The 1984 Cable Act includes provisions to ensure that minorities and women
are provided equal employment opportunities within the cable television
industry. The statute requires the FCC to adopt reporting and certification
rules that apply to all cable television system operators with more than five
full-time employees. Pursuant to the requirements of the 1992 Cable Act, the
FCC has imposed more detailed annual Equal Employment Opportunity ("EEO")
reporting requirements on cable operators and has expanded those requirements
to all multichannel video service distributors. Failure to comply with the
EEO requirements can result in the imposition of fines and/or other
administrative sanctions, or may, in certain circumstances, be cited by a
franchising authority as a reason for denying a franchisee's renewal request.
FRANCHISE TRANSFERS
The 1992 Cable Act requires franchising authorities to act on any
franchise transfer request within 120 days after receipt of all information
required by FCC regulations and by the franchising authority. Approval is
deemed to be granted if the franchising authority fails to act within such
period unless an extension of time has been agreed to.
TECHNICAL REQUIREMENTS
The FCC has imposed technical standards applicable to all channels on
which downstream video programming is carried, and has prohibited franchising
authorities from adopting standards which are in conflict with or more
restrictive than those established by the FCC. Local franchising authorities
are permitted to enforce the FCC's new technical standards. In order to
prevent harmful interference with aeronautical navigation and safety radio
services, the FCC also has adopted additional standards applicable to cable
television systems using frequencies in the 108-137 MHz and 225-400 MHz bands
and established limits on cable television system signal leakage. Periodic
testing by cable operators for compliance with these technical standards and
signal leakage limits is required.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable television systems
and consumer electronics equipment. These regulations, inter alia, generally
prohibit cable operators from scrambling their basic service tier and from
changing the infrared codes used in their existing customer premises
equipment. Under the 1996 Act, local franchising authorities may not
prohibit, condition or restrict a cable system's use of any type of
subscriber equipment or transmission technology.
FCC IMPLEMENTATION OF THE 1996 ACT
The FCC has recently initiated a proceeding to implement most of the
cable-related reform provisions of the 1996 Act. In this proceeding, the FCC
has adopted certain interim rules to govern cable operators while the agency
completes its implementation of the cable-related reform provisions of the
1996 Act. Among other things,
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the FCC is requiring on an interim basis that for an LEC to constitute
"effective competition" to cable operators, the LEC's programming must
include the signals of local broadcasters. Cable television systems may file
a petition with the FCC at any time for a determination as to whether they
are subject to "effective competition" and thus exempt from rate regulation.
Depending on the outcome of the FCC proceeding, several of the Company's
systems in the Philadelphia area may become deregulated.
The FCC has also adopted interim rules governing the filing of rate
complaints regarding nonbasic cable service by local franchising authorities.
Local franchising authorities may file rate complaints with the FCC when the
local franchising authorities receive more than one customer complaint
concerning a cable operator's rate increase within 90 days of the date such
increase becomes effective. If the local franchising authority receives more
than one such customer complaint and decides to file its own complaint with
the FCC, it must do so within 180 days of the date the rate increase becomes
effective. Before filing a complaint with the FCC, the local franchising
authority must first provide the operator of the cable system written notice
of its intent to do so and must give the operator a minimum of 30 days to
file the relevant FCC forms used to justify a rate increase with the local
franchising authority. The local franchising authority must then forward its
complaint and the operator's response to the FCC within the 180 day deadline.
The FCC must issue a final order within 90 days of the date it receives a
local franchising authority complaint.
Among the principal issues still under consideration by the FCC is the
question of when a LEC's provision of video programming services constitutes
"effective competition" to an incumbent cable operator. The Company cannot
predict the outcome of this FCC proceeding or its ultimate effect on the
Company.
OTHER MATTERS
FCC regulation also includes matters regarding a cable television system's
carriage of local sports programming; franchise fees; pole attachments; home
wiring; customer service; rules applicable to origination cablecasts; rules
governing political programming; sponsorship identification; lottery
information; and limitations on advertising contained in children's
programming.
The 1996 Act imposes new requirements on operators of cable television
systems, including an obligation, upon request, to fully scramble or block at
no charge the audio and video portion of any channel not specifically
subscribed to by a household. The 1996 Act also directs the FCC to adopt
regulations that ensure, with certain exceptions, that video programming is
fully accessible through closed captioning. The FCC is presently engaged in a
proceeding to establish regulations to implement such closed captioning
requirements.
COPYRIGHT
Cable television systems are subject to federal copyright licensing
covering carriage of broadcast signals. In exchange for making semi-annual
payments to a federal copyright royalty pool and meeting certain other
obligations, cable operators obtain a statutory license to retransmit
broadcast signals. The amount of this royalty payment varies, depending on
the amount of system revenues from certain sources, the number of distant
signals carried, and the location of the cable television system with respect
to over-the-air television stations. Cable operators are liable for interest
on underpaid and unpaid royalty fees, but are not entitled to collect
interest on refunds received for overpayment of copyright fees.
The Copyright Office has commenced a proceeding aimed at examining its
policies governing the consolidated reporting of commonly owned and
contiguous cable television systems. The present policies governing the
consolidated reporting of certain cable television systems have often led to
substantial increases in the amount of copyright fees owed by the systems
affected. These situations have most frequently arisen in the context of
cable television system mergers and acquisitions. While it is not possible to
predict the outcome of this proceeding, any changes adopted by the Copyright
Office in its current policies may have the effect of reducing the copyright
impact of certain transactions involving cable company mergers and cable
television system acquisitions.
STATE AND LOCAL REGULATION
Because a cable television system uses local streets and rights-of-way,
cable television systems are subject to state and local regulation, typically
imposed through the franchising process. State and/or local officials are
usually involved in franchise selection, system design and construction,
safety, service rates, consumer relations, billing practices and community
related programming and services.
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Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. Franchises generally are granted for fixed terms and
in many cases are terminable if the franchise operator fails to comply with
material provisions. Although the 1984 Cable Act provides for certain
procedural protections, there can be no assurance that renewals will be
granted or that renewals will be made on similar terms and conditions.
Franchises usually call for the payment of fees (which are limited to 5% of
the system's gross subscriber revenues under the 1992 Cable Act) to the
granting authority. Upon receipt of a franchise, the cable television system
owner usually is subject to a broad range of obligations to the issuing
authority directly affecting the business of the system. Franchises generally
contain provisions governing charges for basic cable television services,
fees to be paid to the franchising authority, length of the franchise term,
renewal, sale or transfer of the franchise, territory of the franchise,
design and technical performance of the system, use and occupancy of public
streets and number and types of cable services provided. The terms and
conditions of franchises vary materially from jurisdiction to jurisdiction,
and even from city to city within the same state, historically ranging from
reasonable to highly restrictive or burdensome.
The 1992 Cable Act prohibits exclusive franchises, and allows franchising
authorities to exercise greater control over the operation of franchised
cable television systems than the 1984 Cable Act did, especially in the area
of customer service and rate regulation. The 1992 Cable Act also allows
franchising authorities to operate their own multichannel video distribution
system without having to obtain a franchise and permits states or local
franchising authorities to adopt certain restrictions on the ownership of
cable television systems. Moreover, franchising authorities are immunized
from monetary damage awards arising from regulation of cable television
systems or decisions made on franchise grants, renewals, transfers and
amendments.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility.
The foregoing does not purport to describe all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry. Other existing federal regulations, copyright licensing
and, in many jurisdictions, state and local franchise requirements, currently
are the subject of a variety of judicial proceedings, legislative hearings
and administrative and legislative proposals which could change, in varying
degrees, the manner in which cable television systems operate. Neither the
outcome of these proceedings nor their impact upon the cable television
industry can be predicted at this time.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as set forth
below:
<TABLE>
<CAPTION>
Name Age Position
---------------------- ----- ---------------------------------------------------
<S> <C> <C>
H.F. Lenfest ......... 66 President, CEO and Director
Marguerite B. Lenfest . 63 Secretary/Treasurer and Director
Samuel W. Morris, Jr. . 53 Vice President-General Counsel, Assistant Secretary and
Director
John C. Malone ....... 55 Director
Brendan R. Clouston .. 43 Director
Harry F. Brooks ...... 59 Executive Vice President, Assistant Secretary
Donald L. Heller ..... 50 Vice President
Stephen N. Plant ..... 55 Vice President
Jeffrey DiFrancesco .. 32 Vice President
Robert W. Mohollen ... 34 Assistant Treasurer, Assistant Secretary
</TABLE>
H.F. Lenfest is the founder, a director and President and Chief Executive
Officer of the Company, the sole director of each of the Company's
subsidiaries and the President of each of the subsidiaries other than Lenfest
Programming, TeleSTAR Marketing, Inc. ("TeleSTAR"), and MicroNet and its
subsidiaries. Mr. Lenfest's principal occupation since 1974 has been serving
as the President and CEO of the Company and its subsidiaries. He is married
to Marguerite B. Lenfest. Mr. Lenfest is currently a director of TelVue
Corporation and a director of Video Jukebox Network, Inc.
Marguerite B. Lenfest has served as a director and the Secretary/Treasurer
of the Company since 1974. She is the wife of H.F. Lenfest and the sister of
Harry F. Brooks.
Samuel W. Morris, Jr. has been Vice President-General Counsel and
Assistant Secretary of the Company since November 1993. Mr. Morris became a
director of the Company on April 4, 1996. Prior to assuming his current
position, he was a founding partner in the law firm of Hoyle, Morris & Kerr,
where he remains Of Counsel. Mr. Morris is also Vice President-General
Counsel and Secretary of each of the Company's subsidiaries.
John C. Malone has served as a director of the Company since January 1982.
Dr. Malone has served as Chief Executive Officer and President of TCI since
January 1994, Chief Executive Officer of TCI Communications, Inc. from March
1992 to October 1994 and President of TCI Communications, Inc. from 1973 to
October 1994. He currently is a director of TCI, Tele-Communications
International, Inc., Turner Broadcasting System, Inc., Discovery
Communications, Inc., Home Shopping Network and The Bank of New York.
Brendan R. Clouston became a director of the Company on April 4, 1996. Mr.
Clouston serves as Executive Vice President and Chief Operating Officer of
TCI and as President and CEO of TCI Communications, Inc.
Harry F. Brooks is Executive Vice President/Assistant Secretary of the
Company. He has been Executive Vice President since 1991 and a Vice President
since 1983. Mr. Brooks is also Vice President/Assistant Treasurer/Assistant
Secretary of each of the Company's subsidiaries other than TeleSTAR (where he
is Treasurer and Assistant Secretary), Lenfest Raystay Holdings, Inc. (where
he is Vice President and Assistant Secretary) and Lenfest Atlantic, Inc. He
is the brother of Marguerite B. Lenfest.
Donald L. Heller has been a Vice President of the Company since March
1993. Prior to assuming his current position, Mr. Heller was, from June 1984
to January 1993, the Vice President and General Manager of Sportschannel
Prism Associates, a regional cable television service which provides movies
and professional sports. Mr. Heller is also Vice President of Lenfest
International, Inc., Lenfest Australia, Inc. and Lenfest Programming. He is
currently a director of TelVue Corporation.
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Stephen N. Plant has been a Vice President of the Company since September,
1993. Prior to assuming his current position, he was Senior Vice President
and Manager - Telecommunication and Media Lending of PNC Bank, National
Association, one of the Company's current group of lending banks. He is also
a Vice President of Lenfest Australia, Inc.
Jeffrey J. DiFrancesco has been Vice President of Strategic Planning and
Business Development of the Company since January 1, 1996. Prior to assuming
his current position, he was Principal Consultant with Price Waterhouse's
Entertainment, Media and Communications Group. Prior to that he was a
Managing Director at Bell Atlantic Video Services Company and Tele-TV.
Robert W. Mohollen has been Assistant Treasurer and Assistant Secretary of
the Company since August 1992. Prior to assuming his current position, he was
Controller since June 1989. Prior to that he was an accountant and auditor
with Pressman Ciocca & Smith, Certified Public Accountants, the Company's
accountants. Mr. Mohollen is also Treasurer and Assistant Secretary of each
of the Company's subsidiaries except TeleSTAR.
All directors serve until the next annual meeting of stockholders and
until their successors have been elected and have qualified. All executive
officers serve at the discretion of the Board of Directors. The directors of
the Company receive no compensation in their capacity as directors.
OTHER PRINCIPAL EMPLOYEES
Debra Krzywicki has been an Executive Vice President of Suburban Cable
since January 1, 1996, and a Vice President of Suburban Cable from 1989 to
December 31, 1995. She is primarily responsible for marketing, programming,
customer service, training and public relations.
Robert Lawrence has been an Executive Vice President of Suburban Cable
since January 1996, and a Regional Vice President and General Manager of
Suburban Cable from March 1982 to December 31, 1995. He is responsible for
technical operations, engineering, franchise relations, information systems
and purchasing. He is also currently a director of TelVue Corporation.
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EXECUTIVE COMPENSATION
The Company has no long-term compensation plans. The following table sets
forth certain information for the years ended December 31, 1993, 1994 and
1995 concerning cash and non-cash compensation earned by the CEO and the four
other most highly compensated executive officers of the Company whose
combined salary and bonus exceeded $100,000 during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and All Other
Principal Position Year Salary Bonus Compensation
------------------------ ------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
H.F. Lenfest ........... 1995 $500,000 $ 750,000 $294,958(a)(b)
President and CEO 1994 500,000 -- 283,931(a)(b)
1993 175,000 2,500,000 312,621(a)(b)
Harry F. Brooks ........ 1995 $135,000 -- $ 6,750(a)
Executive Vice President 1994 130,000 -- 6,500(a)
1993 120,000 -- 6,000(a)
Samuel W. Morris, Jr. .. 1995 $200,000 $ 100,000 $ 9,240(a)
Vice President and 1994 200,000 50,000 10,000(c)
General Counsel 1993 23,846 -- --
Stephen N. Plant ....... 1995 $125,000 -- $ 6,250
Vice President 1994 120,000 -- --
1993 38,308 -- --
Donald L. Heller ....... 1995 $115,000 -- $ 5,750(a)
Vice President 1994 110,000 -- 4,231(a)
1993 78,846 -- --
</TABLE>
- ------
(a) Matching contributions under the Company's 401(k) Plan for H.F. Lenfest
amounted to $9,240, $5,830 and $8,750 and for Harry F. Brooks, $6,750,
$6,500, and $6,000 for the years ended December 31, 1995, 1994, and 1993,
respectively, and for Donald L. Heller, $5,750 and $4,231 for the years
ended December 31, 1995 and 1994, respectively; for Samuel W. Morris,
Jr., $9,240 for the year ended December 31, 1995; and for Stephen N.
Plant, $6,250 for the year ended December 31, 1995.
(b) Pursuant to agreements between the Company and a foundation and trusts
created by H.F. Lenfest, the foundation and the trusts have purchased
split-dollar life insurance policies on H.F. Lenfest's life and on the
joint lives of Mr. Lenfest and his wife, Marguerite Lenfest, an officer
and director of the Company. Under these agreements, the Company pays (i)
the premium on each policy, minus a sum equal to the lesser of the
applicable one-year term premium cost computed under the Internal Revenue
Service Ruling 55-747 or the cost of comparable one-year term life
insurance in the amount of each policy or (ii) the entire premium. The
trusts and foundation are the beneficiaries of the insurance policies.
However, the Company has been granted a security interest in the death
benefits of each policy equal to the sum of all premium payments made by
the Company. These arrangements are designed so that if the assumptions
made as to mortality experience, policy dividends and expenses are
realized, the Company, upon the deaths of Mr. and Mrs. Lenfest or the
surrender of the policies, will recover all of its insurance premium
payments. The premiums paid by the Company in 1995, 1994 and 1993
pursuant to these arrangements were $325,471, $328,449 and $362,517,
respectively. The amounts in this column include the present value of
such premium payments using an imputed interest rate, such present value
calculated based upon Mr. and Mrs. Lenfest's remaining life expectancy,
which totaled $232,985 $278,101 and $303,871 in 1995, 1994 and 1993,
respectively. In addition, in 1995, Mr. Lenfest received $52,733 of
additional compensation, of which $50,213 consisted of the payment by the
Company of expenses incurred by Mr. Lenfest in connection with personal
investments.
(c) The $10,000 additional compensation was to reimburse Mr. Morris for
medical insurance premiums.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no compensation committee. H.F. Lenfest has participated
in the past, and is expected to continue to participate, in the deliberations
of the Board of Directors concerning executive compensation. See "Risk
Factors -- Concentration of Control in Single Stockholder."
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CERTAIN TRANSACTIONS
The Company is a party to an agreement with Satellite Services, Inc.
("SSI"), an affiliate of TCI, the indirect parent of LMC Lenfest, Inc., a 50%
stockholder of the Company, pursuant to which SSI provides certain cable
programming to the Company at a rate fixed as a percentage in excess of the
rate available to TCI. Management believes that these rates are significantly
less than the rates that the Company could obtain independently. For the year
ended December 31, 1995, the Company paid SSI approximately $37.7 million.
The Company, through its StarNet, Inc. and StarNet Development, Inc.
subsidiary, sells cross channel tune-in promotional services for cable
television to affiliates of TCI. For the year ended December 31, 1995, the
Company received $3.9 million for such services.
In 1994, the Company sold the assets of Stockdale Productions, Inc., a
subsidiary that has been merged out of existence as of December 31, 1994, to
TCI for $225,000. The assets were sold on a liquidation basis at a price
negotiated by Harry F. Brooks.
The Company rents four office and warehouse spaces from H.F. Lenfest and
Marguerite Lenfest. For the year ended December 31, 1995, the Company paid
the Lenfests an aggregate of $801,000 under such leases. Rental payments made
to stockholders are on terms that are no less favorable than those the
Company could obtain from independent parties.
The Company reimbursed Mr. Lenfest approximately $8.8 million in June
1994, representing funds advanced by him on behalf of the Company for the
deposits for Australian pay television licenses. The Company also paid all
interest and other costs incurred by Mr. Lenfest in connection with such
advances. See "Business -- Non-Cable Investments -- Lenfest Australia, Inc."
The Company reimbursed Mr. Lenfest approximately $10.2 million in 1995,
representing his costs incurred on behalf of the Company for the buyout of
the investment partnership of Garden State Cablevision L.P.
For the year ended December 31, 1995, the Company paid TelVue Corporation,
an affiliate of the Company, $190,000 for pay-per-view order placement
services.
In November 1994, Mr. Lenfest and TCI International, Inc. jointly and
severally guaranteed up to $67 million in program license payment obligations
of the distributor of Australis' movie programming. The Company has agreed to
indemnify Mr. Lenfest against loss from such guaranty to the fullest extent
permitted under the Company's debt obligations. The Company has neither
sought nor obtained any consents which may be required. The terms of the
guarantees provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with the provision of one or more letters of credit,
which may not exceed $33.5 million. The Company is currently in discussions
with Australis and a bank with regard to obtaining a letter of credit
in the amount of $33.5 million for the benefit of the beneficiaries under the
guarantees. If the Company obtains such a letter of credit facility, the
Company would be directly obligated for $33.5 million and may remain
indirectly obligated for the balance of the program license payment
obligations. Under the terms of the New Bank Credit Facility, however, Mr.
Lenfest's claims for indemnification are limited to $33.5 million, which amount
will be further reduced by the aggregate face amount of any letters of credit
issued under the New Bank Credit Facility with respect to the program license
payment obligations guarantees. See "Risk Factors -- Investment in Australis
Media Limited."
On February 29, 1996, Mr. Lenfest guaranteed the full payment and
performance of the Lenfest Australia Credit Facility.
The Company has agreed to pay the legal expenses of H.F. Lenfest and
Marguerite Lenfest related to a pending SEC action against them. See
"Business -- Legal Proceedings." H.F. Lenfest and Marguerite Lenfest have
agreed to repay such expenses if it is subsequently determined that the
Company is not permitted to make such payments under Delaware corporate law.
On February 12, 1996, the Company completed the exchange of its cable
television systems in the East San Francisco Bay Area, a 41.67% partnership
interest in Bay Cable Advertising, and the right to acquire certain other
cable television systems for TCI's Wilmington, Delaware area cable television
systems. In connection with that transaction, the Company also purchased the
Philadelphia area assets of Cable AdNet Inc., a subsidiary of TCI, for
approximately $1.1 million.
John C. Malone, a director of the Company, is also a director of The Bank
of New York, which is the Trustee under the Indenture for the Company's 8 3/8
% Senior Notes, a lender under the New Bank Credit Facility, the Trustee
under the Indenture and the Exchange Agent under the Exchange Offer.
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For the year ended December 31, 1995, Cable AdNet Partners, an affiliate
of TCI and John C. Malone, paid Suburban Cable TV Co. Inc., a subsidiary of
the Company, approximately $2.6 million for Suburban Cable TV Co. Inc.'s
share of advertising revenue under a certain advertising agreement.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 31, 1995, certain
information with respect to the Common Stock beneficially owned by each
director, all officers and directors of the Company as a group, and each
person known to the Company to own beneficially more than 5% of such Common
Stock. Unless otherwise noted, the individuals have sole voting and
investment power.
<TABLE>
<CAPTION>
Shares of Percent of
Name and Address Common Stock Common Stock
---------------- -------------- --------------
<S> <C> <C>
H.F. Lenfest, Director (a)(b)(c)(d) .............. 79,448(c) 50.0%
Marguerite B. Lenfest, Director (a) .............. -- --
John C. Malone, Director (e) ..................... 79,448(f) 50.0%
Brook J. Lenfest (a)(c)(d) ....................... 14,862(g) 9.4%
H. Chase Lenfest (a)(c)(d) ....................... 14,862(g) 9.4%
Diane A. Lenfest (a)(c)(d) ....................... 14,862(g) 9.4%
LMC Lenfest, Inc. (c)(h) ......................... 79,448(c) 50.0%
(an indirect wholly owned subsidiary of TCI)
All officers and directors as a group (9 persons) . 158,896 100.0%
</TABLE>
- ------
(a) Such person's address is c/o The Lenfest Group, 200 Cresson Boulevard,
Oaks, PA 19456.
(b) Includes 14,862 and 14,862 shares owned by Brook J. Lenfest, H. Chase
Lenfest which are held in trusts established by each of them, and 14,862
shares owned by Diane A. Lenfest, respectively, all of whom are children
of Mr. Lenfest. See Note (d) below.
(c) H.F. Lenfest and LMC Lenfest, Inc., as successor in interest to Liberty
Media Corporation, have an agreement that provides, together with the
amended and restated Articles of Incorporation of the Company, that Mr.
Lenfest has the right to designate a majority of the Board of Directors
until January 1, 2002. During such period, vacancies in respect of the
directors designated by Mr. Lenfest shall be filled by designees of Mr.
Lenfest or, in the event of Mr. Lenfest's death, of The Lenfest
Foundation. Thereafter, the Lenfest Family and LMC Lenfest, Inc. will
have the right to appoint an equal number of members of the Company's
Board of Directors. This right will continue for so long as any member of
the Lenfest Family owns any stock in the Company. Pursuant to a separate
agreement, each of H.F. Lenfest, Brook J. Lenfest, H. Chase Lenfest and
Diane A. Lenfest (the "Lenfest Shareholders") have granted to LMC
Lenfest, Inc. a right of first refusal with respect to their shares of
stock in the Company and LMC Lenfest, Inc. has granted a right of first
refusal to the Lenfest Shareholders with respect to its shares of stock
in the Company.
(d) Each of Mr. Lenfest, Brook J. Lenfest and H. Chase Lenfest hold their
34,862 shares, 14,862 shares and 14,862 shares, respectively, in trusts
established by each of them, each of which trusts is terminable at will.
(e) Dr. Malone's address is c/o Terrace Tower II, 5619 DTC Parkway,
Englewood, CO 80111.
(f) Includes 79,448 shares owned by LMC Lenfest, Inc., of which Dr. Malone is
an affiliate. Dr. Malone disclaims beneficial ownership of these shares.
(g) Each of Brook J. Lenfest, H. Chase Lenfest and Diane A. Lenfest has given
to H.F. Lenfest an irrevocable proxy granting him the power (until March
30, 2000) to vote their shares for the election of directors. H.F.
Lenfest disclaims beneficial ownership of these shares.
(h) LMC Lenfest, Inc.'s address is 8101 East Pacific Avenue, Suite 500,
Englewood, CO 80111.
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DESCRIPTION OF OTHER DEBT OBLIGATIONS
11.84% SENIOR NOTES DUE 1998
In May 1989, the Company sold to an institutional investor $50 million of
10.69% Senior Notes due 1998, which interest rate was increased to 11.84% in
November 1995 (the "11.84% Senior Notes"). The 11.84% Senior Notes mature on
May 15, 1998. As of March 31, 1996, as a result of mandatory prepayments
required by the note purchase agreement pursuant to which the 11.84% Senior
Notes were issued (the "11.84% Senior Note Purchase Agreement"), there was
$31.5 million principal amount of the 11.84% Senior Notes outstanding, which
has been reduced to $21.0 million pursuant to a mandatory prepayment made on
May 15, 1996. In connection with the offering and sale of the 8 3/8 % Senior
Notes, the Company and the holders of the 11.84% Senior Notes agreed to amend
the terms thereof by permitting the TCI Exchange, by increasing the interest
rate thereon to 11.84% per annum, by changing the debt incurrence covenant
such that the Company may not incur debt if the Company's Senior Debt
Leverage Ratio and Total Debt Leverage Ratio would exceed 700% and 750%,
respectively, through September 30, 1996, and 650% and 700%, respectively,
thereafter and by specifying that the prepayment premium specified in such
agreement will remain at its current level through the termination of such
agreement. A mandatory prepayment in the amount of $10.5 million is due on
May 15, 1997.
11.30% SENIOR NOTES DUE 2000
In September 1988, the Company sold to certain institutional investors
$125 million of 10.15% Senior Notes due 2000, which interest rate was
increased to 11.30% in November 1995 (the "11.30% Senior Notes"). The 11.30%
Senior Notes mature on September 1, 2000. As of March 31, 1996, as a result
of mandatory prepayments required by the note purchase agreement pursuant to
which the 11.30% Senior Notes were issued (the "11.30% Senior Note Purchase
Agreement"), there was $75.0 million principal amount of the 11.30% Senior
Notes outstanding. In connection with the offering and sale of the 8 3/8 %
Senior Notes, the Company and the holders of the 11.30% Senior Notes agreed
to amend the terms thereof by permitting the TCI Exchange, by increasing the
interest rate thereon to 11.30% per annum, by changing the debt incurrence
covenant such that the Company may not incur debt if the Company's Senior
Debt Leverage Ratio and Total Debt Leverage Ratio would exceed 700% and 750%,
respectively, through September 30, 1996, and 650% and 700%, respectively,
thereafter and by specifying that the prepayment premium specified in such
agreement will remain at its current level through the termination of such
agreement. Mandatory prepayments of $15 million will be due on each September
1, commencing on September 1, 1996, until maturity.
9.93% SENIOR NOTES DUE 2001
In September 1991, the Company sold to certain institutional investors
$100 million of 9.93% Senior Notes due 2001 (the "9.93% Senior Notes"). The
9.93% Senior Notes mature on September 30, 2001. As of June 30, 1995, there
was $100 million principal amount of the 9.93% Senior Notes outstanding,
which has been subsequently reduced to $14.25 million due to additional
mandatory prepayments and optional prepayments made with the net proceeds of
the offering of the 8 3/8 % Senior Notes.
8 3/8 % SENIOR NOTES DUE 2005
In November 1995, the Company publicly issued $700 million of 8 3/8 %
Senior Notes due 2005 (the "8 3/8 % Senior Notes"). The 8 3/8 % Senior Notes
mature on November 1, 2005. As of March 31, 1996, there was $700 million
principal amount of the 8 3/8 % Senior Notes outstanding. The 8 3/8 % Senior
Notes were issued pursuant to an indenture containing covenants substantially
similar to the Indenture governing the Notes.
NEW BANK CREDIT FACILITY
On June 27, 1996, The Toronto-Dominion Bank, PNC Bank, N.A. and
NationsBank of Texas, N.A. and certain other lenders party thereto
(collectively, the "Lenders") entered into a credit agreement with the
Company pursuant to which the Lenders provided the Company with the $450
million New Bank Credit Facility ($150 million term and $300 million
revolving).
Principal payments under the term loan facility and commitment reductions
under the revolving loan facility will commence on March 31, 1999, with
quarterly reductions thereafter until the termination of the New
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Bank Credit Facility on September 30, 2003. Loans outstanding under the New
Bank Credit Facility will bear interest, at the Company's option, at either
(i) the Base Rate plus an applicable margin ranging from 0% to 1 3/8 % or
(ii) LIBOR plus an applicable margin ranging from 3/4 % to 2 3/8 %, in each
case based upon certain levels of leverage ratios.
The terms of the New Bank Credit Facility prohibit the Company from (i)
incurring certain additional Indebtedness in excess of $10 million until the
ratio of Total Debt to Annualized Operating Cash Flow is less than 6.00:1,
(ii) having a Senior Debt Leverage Ratio for the most recent quarter end in
excess of 5.75:1 through December 30, 1996, and declining thereafter to
4.50:1 beginning December 31, 1999, (iii) having a ratio of Operating Cash
Flow to Total Interest Expense of less than 1.50:1 through December 31, 1997,
and less than 1.75:1 thereafter and (iv) having a Total Debt Leverage Ratio
in excess of 7.50:1 through December 30, 1996, and declining thereafter to
6.00:1 beginning on December 31, 1998. In addition, the New Bank Credit
Facility contains certain restrictions on the Company and its Restricted
Subsidiaries with respect to, among other things, the payment of dividends,
the repurchase of stock, the making of Restricted Payments and Restricted
Purchases, the making of investments, the creation of Liens, certain asset
sales, sale-leaseback transactions, transactions with Affiliates, the
disposition of certain securities of its Restricted Subsidiaries, the
designation of subsidiaries as Restricted Subsidiaries and Unrestricted
Subsidiaries and mergers and consolidations; provided, however, that the
Company will be permitted under the terms of the New Bank Credit Facility (a)
to make investments in related businesses not to exceed $70 million so long
as the Lenfest Australia Credit Facility or any payment obligation of Lenfest
Australia, Inc. thereunder remains outstanding, and $90 million in the
aggregate, until the ratio of Total Debt to Annualized Operating Cash Flow is
less than 6.00:1 for two consecutive fiscal quarters, and (b) to make
acquisitions in an aggregate amount of $100 million, including the
Turnersville Acquisition. In addition, the Company will be permitted to make
distributions equal to 50% of Excess Cash Flow once the ratio of Total Debt
to Annualized Operating Cash Flow is less than 6.00:1 for two consecutive
fiscal quarters. In addition, it is an event of default if neither H.F.
Lenfest (individually or by written proxy of the voting rights of the members
of his immediate family with respect to the capital stock of the Company) nor
TCI own beneficially 50% or more of the voting shares of the Company's
capital stock and have the right to elect at least 50% of the members of the
board of directors of the Company. Terms capitalized but not defined above
have the meanings assigned to them in the New Bank Credit Facility.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Exchange Notes will be issued under an indenture dated as of June 15,
1996 (the "Indenture") between the Company and The Bank of New York, as
trustee (the "Trustee"). The Indenture authorizes the issuance of $300
million in aggregate principal amount of the Exchange Notes. The form and
terms of the Exchange Notes are identical in all material respects to the
form and terms of the Old Notes, except that the Exchange Notes will be
registered under the Securities Act and, therefore, will be treated as a
single class under the Indenture with any Old Notes that remain outstanding.
The Exchange Notes and the Old Notes are herein collectively referred to as
the "Notes".
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), as in effect on the date of the
Indenture. The Notes are subject to all such terms, and holders of the Notes
are referred to the Indenture and the Trust Indenture Act for a statement of
those terms. The statements under this caption relating to the Notes and the
Indenture are summaries and do not purport to be complete. Such summaries may
make use of certain terms defined in the Indenture and are qualified in their
entirety by express reference to the Indenture. A copy of the proposed form
of Indenture is available upon request to the Company at the address set
forth under "Available Information."
The principal of and interest on the Notes will be payable at the office
or agency to be maintained by the Company, which, unless otherwise provided
by the Company, will be the offices of the Trustee. The principal of and
interest payments on the Notes may be paid by check. The Notes may be
presented for registration of transfer and exchange at such offices.
The Notes will be issued in fully registered form only and will be issued
in denominations of $1,000 and integral multiples thereof.
TERMS OF THE NOTES
Maturity. The Notes will mature on June 15, 2006.
Interest. The Company will pay interest on the Notes on June 15 and
December 15 of each year, commencing December 15, 1996, to the persons who
are registered holders at the close of business on June 1 and December 1
immediately preceding the interest payment date.
RANKING
The indebtedness evidenced by the Notes will be senior subordinated,
unsecured obligations of the Company. The payment of the principal of,
premium (if any) and interest on the Notes is subordinate in right of
payment, as set forth in the Indenture, to the prior payment in full of all
Senior Indebtedness, whether outstanding on the Issue Date or thereafter
incurred, including the Company's obligations under the New Bank Credit
Facility, the 8 3/8 % Senior Notes and the Private Placement Notes.
As of March 31, 1996, after giving pro forma effect to the Transactions,
the Company's Senior Indebtedness would have been approximately $1,074
million. Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in
any case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Limitation an Indebtedness."
All the operations of the Company are conducted through its subsidiaries.
Claims of creditors of such subsidiaries, including trade creditors, secured
creditors and creditors holding indebtedness and guarantees issued by such
subsidiaries, and claims of preferred stockholders (if any) of such
subsidiaries generally will have pri-
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<PAGE>
ority with respect to the assets and earnings of such subsidiaries over the
claims of creditors of the Company, including holders of the Notes, even
though such obligations will not constitute Senior Indebtedness. The Notes,
therefore, will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders (if any) of subsidiaries of the
Company. At March 31, 1996, the total liabilities of the Company's
subsidiaries (including trade payables and accrued liabilities) were
approximately $96.5 million, of which approximately $31 million was
indebtedness. Although the Indenture limits the incurrence of Indebtedness
and preferred stock of certain of the Company's subsidiaries, such limitation
is subject to a number of significant qualifications. Moreover, the Indenture
does not impose any limitation on the incurrence by such subsidiaries of
liabilities that are not considered Indebtedness under the Indenture. See "--
Certain Covenants -- Limitation on Indebtedness."
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate
or junior in ranking in right of payment to its Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinated or junior to secured
Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any
Notes (collectively, "pay the Notes") if (i) any Designated Senior
Indebtedness is not paid when due or (ii) any other default on Designated
Senior Indebtedness occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either
case, the default has been cured or waived and any such acceleration has been
rescinded or such Designated Senior Indebtedness has been paid in full.
However, the Company may pay the Notes without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of
any default (other than a default described in clause (i) or (ii) of the
first sentence of this paragraph) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative
of the holders of such Designated Senior Indebtedness specifying an election
to effect a Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice
is no longer continuing or (iii) because such Designated Senior Indebtedness
has been repaid in full). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Notes after the end of such Payment Blockage Period. The
Notes shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company or its property, the holders of Senior
Indebtedness will be entitled to receive payment in full of such Senior
Indebtedness before the Noteholders are entitled to receive any payment, and
until the Senior Indebtedness is paid in full, any payment or distribution to
which Noteholders would be entitled but for the subordination provisions of
the Indenture will be made to holders of such Senior Indebtedness as their
interests may appear. If a distribution is made to Noteholders that, due to
the subordination provisions, should not have been made to them, such
Noteholders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
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By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors
of the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably,
than the Noteholders.
The terms of the subordination provisions described above will not apply
to payments from money or the proceeds of U.S. Government Obligations held in
trust by the Trustee for the payment of principal of and interest on the
Notes pursuant to the provisions described under "-- Defeasance."
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes sold will be issued in the
form of a Global Note. The Global Note will be deposited with, or on behalf
of, the Depository and registered in the name of the Depository or its
nominee. Except as set forth below, the Global Note may be transferred, in
whole and not in part, only to the Depository or another nominee of the
Depository. Investors may hold their beneficial interests in the Global Note
directly through the Depository if they have an account with the Depository
or indirectly through organizations which have accounts with the Depository.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and "a clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depository was created to hold securities of institutions that have
accounts with the Depository ("participants") and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depository's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and
certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the
Exchange Notes represented by such Global Note to the accounts of
participants. Ownership of beneficial interests in the Global Note will be
limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Note will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'
interest) and such participants (with respect to the owners of beneficial
interests in the Global Note other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may
impair the ability to transfer or pledge beneficial interests in the Global
Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Exchange
Notes for all purposes of such Exchange Notes and the Indenture. Except as
set forth below, owners of beneficial interests in the Global Note will not
be entitled to have the Exchange Notes represented by the Global Note
registered in their names, will not receive or be entitled to receive
physical delivery of certificated Exchange Notes in definitive form and will
not be considered to be the owners or holders of any Exchange Notes under the
Global Note. The Company understands that under existing industry practice,
in the event an owner of a beneficial interest in the Global Note desires to
take any action that the Depository, as the holder of the Global Note, is
entitled to take, the Depository would authorize the participants to take
such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Note registered in the name of and held by the Depository or its
nominee will be made to the Depository or its nominee, as the case may be, as
the registered owner and holder of the Global Note.
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The Company expects that the Depository or its nominee, upon receipt of
any payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in
the Global Note held through such participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants. The Company will not have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Note for any Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depository and its participants or the relationship between such participants
and the owners of beneficial interests in the Global Note owning through such
participants.
Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, the Global Note may not be transferred
except as a whole by the Depository to a nominee of such Depository or by a
nominee of such Depository to such Depository or another nominee of such
Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of
the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance
by the Depository or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
The Exchange Notes represented by the Global Note are exchangeable for
certificated Exchange Notes in definitive form of like tenor as such Notes in
denominations of U.S. $1,000 and integral multiples thereof if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Note or if at any time the Depository ceases to be
a clearing agency registered under the Exchange Act, (ii) the Company in its
discretion at any time determines not to have all of the Notes represented by
the Global Note or (iii) a default entitling the holders of the Notes to
accelerate the maturity thereof has occurred and is continuing. Any Exchange
Note that is exchangeable pursuant to the preceding sentence is exchangeable
for certificated Exchange Notes issuable in authorized denominations and
registered in such names as the Depository shall direct. Subject to the
foregoing, the Global Note is not exchangeable, except for a Global Note of
the same aggregate denomination to be registered in the name of the
Depository or its nominee.
OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to
maturity.
MANDATORY SINKING FUND
There are no mandatory sinking fund payments for the Notes.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control Triggering Event
with respect to the Notes, the Company shall notify the Trustee in writing of
such proposed occurrence and shall make an offer to purchase (the "Change of
Control Offer") the Notes at a purchase price equal to 101% of the principal
amount thereof plus any accrued and unpaid interest thereon to the Change of
Control Payment Date (as defined) (the "Change of Control Purchase Price") in
accordance with the procedures set forth in this covenant.
Within 50 days of the occurrence of a Change of Control Triggering Event
with respect to the Notes, the Company also shall (i) cause a notice of the
Change of Control Offer to be sent at least once to the Dow Jones News
Service or similar business news service in the United States and (ii) send
by first-class mail, postage prepaid, to the Trustee and to each registered
holder of the Notes, at his address appearing in the register of the Notes
maintained by the Registrar, a notice stating:
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(1) that the Change of Control Offer is being made pursuant to this
covenant and that all such Notes tendered will be accepted for payment,
provided that a Change of Control Triggering Event has occurred and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days and no later than 60 days
after the date on which such notice is mailed) (the "Change of Control
Payment Date");
(3) that any such Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any such Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender such
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a facsimile
transmission or letter setting forth the name of the holder, the principal
amount of such Notes delivered for purchase, and a statement that such
holder is withdrawing his election to have such Notes purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof; and
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, the Company shall (i) accept for
payment the Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so tendered and (iii) deliver
or cause to be delivered to the Trustee the Notes so accepted together with
an Officers' Certificate indicating the Notes or portions thereof tendered to
the Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Trustee shall promptly authenticate and mail to such holder a new Note
equal in principal amount to any unpurchased portion of the Notes
surrendered; provided that each such new Note shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
covenant described hereunder. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
Management has no present intention to engage in a transaction involving a
Change of Control, although it is possible that the Company would decide to
do so in the future. Subject to the limitations discussed below, the Company
could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase
the amount of indebtedness outstanding at such time or otherwise affect the
Company's capital structure or credit ratings. Restrictions on the ability of
the Company to incur additional Indebtedness are contained in the covenant
described under " -- Limitation on Indebtedness." Such restrictions can only
be waived with the consent of the registered holders of a majority in
principal amount of the Notes then outstanding. Except for the limitations
contained in such covenants, however, the Indenture will not contain any
covenants or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
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The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the New Bank Credit Facility and the
Private Placement Note Agreements, and may require the Company to offer to
repurchase the 8 3/8 % Senior Notes. In addition, future senior indebtedness
of the Company may contain prohibitions on the occurrence of certain events
that would constitute a Change of Control or require such senior indebtedness
to be repurchased upon a Change of Control. In the event a Change of Control
occurs at a time when such prohibitions are in effect, the Company could seek
the consent of its lenders or other holders of senior indebtedness to the
purchase of Notes or could attempt to refinance borrowings containing such
prohibitions. If the Company does not obtain such consents or repay such
borrowings, the Company will be effectively prohibited from purchasing Notes.
Moreover, the exercise by the holders of the Notes of their right to require
the Company to repurchase the Notes could cause a default under such senior
indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the holders of Notes following the occurrence of a
Change of Control Triggering Event may be limited by the Company's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture. During
any period of time that (i) the ratings assigned to the Notes by both of the
Rating Agencies are Investment Grade Ratings and (ii) no Default has occurred
and is continuing under the Indenture, the Company and its Restricted
Subsidiaries will not be subject to the provisions of the Indenture described
below under "Limitation on Indebtedness," "Limitation on Restricted
Payments," "Limitation on Transactions with Affiliates" and clause (iv) of
"Merger, Consolidation and Sale of Assets" (collectively, the "Suspended
Covenants"). In the event that the Company and its Restricted Subsidiaries
are not subject to the Suspended Covenants with respect to the Notes for any
period of time as a result of the preceding sentence and, subsequently, one
or both Rating Agencies withdraws its ratings or downgrades the ratings
assigned to such Notes below the required Investment Grade Ratings, then the
Company and its Restricted Subsidiaries will thereafter again be subject to
the Suspended Covenants for the benefit of such Notes and compliance with the
Suspended Covenants with respect to Restricted Payments made after the time
of such withdrawal or downgrade will be calculated in accordance with the
terms of the covenant described below under "Limitation on Restricted
Payments" as if such covenant had been in effect during the entire period of
time from the date of the Indenture.
Limitation on Indebtedness. The Company shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, create, incur, issue,
assume or become liable for, contingently or otherwise (collectively
"incur"), any Indebtedness unless, after giving effect to such incurrence on
a pro forma basis, the Company's Leverage Ratio would not exceed 8.00.
Notwithstanding the foregoing limitation, the Company and its Restricted
Subsidiaries may incur the following Indebtedness: (i) the Notes; (ii)
Indebtedness outstanding on the Issue Date; (iii) Permitted Refinancing
Indebtedness incurred in respect of Indebtedness incurred pursuant to the
provisions of the immediately preceding paragraph or clauses (i) and (ii) of
this paragraph; (iv) Indebtedness of the Company owing to and held by a
Restricted Subsidiary and Indebtedness of a Restricted Subsidiary owing to
and held by the Company or any other Restricted Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock or
other event that results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Restricted Subsidiary) shall be deemed, in each
case, to constitute the incurrence of such Indebtedness by the issuer
thereof; (v) Indebtedness under Interest Rate Agreements; provided, however,
such Interest Rate Agreements do not increase the Indebtedness of the Company
outstanding at any time other than as a result of fluctuations in interest
rates or by reason of customary fees, indemnities and compensation payable
thereunder and (vi) Indebtedness in connection with one or more standby
letters of credit or performance bonds issued in the ordinary course of
business or pursuant to self- insurance obligations.
Limitation on Restricted Payments. The Company shall not make, and shall
not permit any Restricted Subsidiary to make, any Restricted Payment if at
the time of, and after giving effect to, such proposed Restricted Payment,
(i) a Default shall have occurred and be continuing, (ii) the aggregate
amount of such Restricted Pay-
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ment and all other Restricted Payments made since November 14, 1995 (the
amount of any Restricted Payment, if other than cash, to be based upon Fair
Market Value), would exceed an amount equal to the sum of (a) the excess of
(1) Cumulative EBITDA over (2) the product of 1.2 and Cumulative Interest
Expense, (b) Capital Stock Sale Proceeds, (c) the amount by which
Indebtedness of the Company or any Restricted Subsidiary is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to November 14, 1995 of any Indebtedness of the
Company or any Restricted Subsidiary convertible or exchangeable for Capital
Stock (other than Redeemable Stock) of the Company (less the amount of any
cash or other Property distributed by the Company or any Restricted
Subsidiary upon conversion or exchange) and (d) $100,000,000, or (iii) the
Company could not incur at least $1.00 of additional Indebtedness pursuant to
the first paragraph of " -- Limitation on Indebtedness."
Notwithstanding the foregoing limitation, the Company may (i) pay
dividends on its Capital Stock within 60 days of the declaration thereof if,
on the declaration date, such dividends could have been paid in compliance
with the foregoing limitation, (ii) redeem, repurchase, defease, acquire or
retire for value, any Indebtedness subordinate (whether pursuant to its terms
or by operation of law) in right of payment to the Notes with the proceeds of
any Permitted Refinancing Indebtedness or (iii) acquire, redeem or retire
Capital Stock or Indebtedness subordinate (whether pursuant to its terms or
by operation of law) in right of payment to the Notes in exchange for, or in
connection with a substantially concurrent issuance of, Capital Stock of the
Company (other than Redeemable Stock).
Any payments made pursuant to clauses (ii) and (iii) of the immediately
preceding paragraph shall be excluded from the calculation of the aggregate
amount of Restricted Payments made after November 14, 1995; provided,
however, that the proceeds from the issuance of Capital Stock pursuant to
clause (iii) of the immediately preceding paragraph shall not constitute
Capital Stock Sale Proceeds for purposes of clause (ii)(b) of the first
paragraph of this covenant.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
conduct any business or enter into or suffer to exist any transaction or
series of transactions (including the purchase, sale, transfer, lease or
exchange of any Property or the rendering of any service) with, or for the
benefit of, any Affiliate (an "Affiliate Transaction") unless (i) the terms
of such Affiliate Transaction are in writing, (ii) such Affiliate Transaction
is in the best interest of the Company or such Restricted Subsidiary, as the
case may be, (iii) such Affiliate Transaction is on terms as favorable to the
Company or such Restricted Subsidiary, as the case may be, as those that
could be obtained at the time of such Affiliate Transaction for a similar
transaction in arms-length dealings with a Person who is not such an
Affiliate and (iv) with respect to each Affiliate Transaction involving
aggregate payments in excess of $50 million, the Company delivers to the
Trustee an opinion letter from an Independent Appraiser to the effect that
such Affiliate Transaction is fair, from a financial point of view and an
Officers' Certificate certifying that such Affiliate Transaction was approved
by a majority of the Board of Directors of the Company and that such
Affiliate Transaction complies with clauses (ii) and (iii).
Notwithstanding the foregoing limitation, the Company may enter into or
suffer to exist the following: (i) any transaction pursuant to any contract
in existence on the Issue Date, including contracts for the acquisition of
cable television programming and renewals, extensions and replacements
thereof on terms no less favorable to the Company and its Restricted
Subsidiaries; (ii) any Restricted Payment permitted to be made pursuant to
the covenant described under "Limitation on Restricted Payments;" (iii) any
transaction or series of transactions between the Company and one or more of
its Restricted Subsidiaries or between two or more of its Restricted
Subsidiaries (provided that no more than 5% of the equity interest in any of
its Restricted Subsidiaries is owned by an Affiliate); and (iv) the payment
of compensation (including, amounts paid pursuant to employee benefit plans)
for the personal services of officers, directors and employees of the Company
or any of its Restricted Subsidiaries, so long as the Board of Directors of
the Company in good faith shall have approved the terms thereof and deemed
the services theretofore or thereafter to be performed for such compensation
or fees to be fair consideration therefor.
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors of the Company may designate an Unrestricted Subsidiary as a
Restricted Subsidiary or designate a Restricted Subsidiary as an Unrestricted
Subsidiary at any time; provided, however, that immediately after giving
effect to such designation on a
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pro forma basis, (i) the Company's Leverage Ratio would not exceed 8.00, (ii)
the Company and its Restricted Subsidiaries are in compliance with the
provisions of the Indenture described under "Limitation on Layered
Indebtedness" and "Limitation on Subordinated Liens" and (iii) an Officers'
Certificate with respect to such designation is delivered to the Trustee
within 75 days after the end of the fiscal quarter of the Company in which
such designation is made (or, in the case of a designation made during the
last fiscal quarter of the Company's fiscal year, within 120 days after the
end of such fiscal year), which Officers' Certificate shall state the
effective date of such designation.
Limitation on Layered Indebtedness. The Company shall not, directly or
indirectly, incur any Indebtedness that is subordinate or junior in ranking
in right of payment to any other Indebtedness of the Company unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated
in right of payment to Senior Subordinated Indebtedness.
Limitation on Subordinated Liens. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, incur or suffer
to exist any Lien (other than Permitted Liens) on or with respect to any of
its property or assets (including Capital Stock), whether owned on the Issue
Date or thereafter acquired, or any interest therein or any income or profits
therefrom securing any obligation or Indebtedness that is subordinate or
junior in ranking in right of payment to, or ranks pari passu with, the
Notes, unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or prior to) such obligation or
Indebtedness for so long as such obligation or Indebtedness is so secured.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company may not consolidate with or merge with or into, or convey,
sell, transfer, lease or otherwise dispose of all or substantially all of its
assets (as an entirety or substantially as an entirety in one transaction or
a series of related transactions), to any Person unless: (i) the Company
shall be the surviving Person (the "Surviving Person"), or the Surviving
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or to which the assets of the Company are transferred
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia; (ii) the Surviving
Person (if other than the Company) shall expressly assume, by supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company under the Notes and the
Indenture, and the obligations under the Indenture shall remain in full force
and effect; (iii) immediately before and immediately after giving effect to
such transaction, no Default shall have occurred and be continuing; and (iv)
immediately after giving effect to such transaction on a pro forma basis
(including, any Indebtedness incurred or anticipated to be incurred in
connection with such transaction or series of transactions), the Surviving
Person would be able to incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of " -- Limitation on Indebtedness."
In connection with any consolidation, merger or transfer contemplated by
this provision, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
SEC REPORTS
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and provide the Trustee and holders of
the Notes with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times
specified for the filing of such information, documents and reports under
such Sections.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the Company fails to make the payment of any principal of, or premium, if
any, on the Notes when the same becomes due and payable at matu-
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rity, upon acceleration, redemption or declaration, or otherwise; (ii) the
Company fails to make the payment of any interest on the Notes when the same
becomes due and payable, and such failure continues for a period of 30 days;
(iii) the Company fails to comply with any other covenant in the Notes or
Indenture and such failure continues for 30 days after written notice from
the Trustee or the registered holders of not less than 25% in aggregate
principal amount of the Notes then outstanding; (iv) the Company or any
Restricted Subsidiary fails to pay when due principal, interest or premium
aggregating $10,000,000 or more with respect to any Indebtedness of the
Company or any Restricted Subsidiary or the acceleration of any such
Indebtedness, which default shall not be cured or waived or which
acceleration shall not be rescinded or annulled, within 10 days after written
notice (the "cross default provisions"); (v) any final judgment or judgments
for the payment of money in excess of $10,000,000 shall be rendered against
the Company or any Restricted Subsidiary and shall not be discharged for any
period of 30 consecutive days during which a stay of enforcement shall not be
in effect (the "judgment default provisions"); or (vi) certain events
involving bankruptcy, insolvency or reorganization of the Company or any
Restricted Subsidiary (the "bankruptcy provisions"). The Indenture provides
that the Trustee may withhold notice to the holders of the Notes of any
default (except in payment of principal or premium, if any, or interest on
such Notes) if the Trustee considers it to be in the best interest of the
holders of the Notes to do so.
The Indenture provides that if an Event of Default with respect to the
Notes (other than an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to the Company) shall
have occurred and be continuing, the Trustee or the registered holders of not
less than 25% in aggregate principal amount of the Notes then outstanding may
declare to be immediately due and payable the principal amount of all the
Notes then outstanding, plus accrued but unpaid interest to the date of
acceleration; provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the
registered holders of a majority in aggregate principal amount of the Notes
then outstanding may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of
accelerated principal, premium or interest, have been cured or waived as
provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization with respect to the
Company shall occur, such amount with respect to all of the Notes shall be
due and payable immediately without any declaration or other act on the part
of the Trustee or the holders of the Notes.
The registered holders of a majority in principal amount of the Notes then
outstanding shall have the right to waive any existing Default with respect
to the Notes or compliance with any provision of the Indenture or the Notes
and to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, subject to certain limitations specified in
the Indenture.
No holder of the Notes will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such
holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless also the registered holders of at
least 25% in aggregate principal amount of the Notes then outstanding shall
have made written request and offered reasonable indemnity to the Trustee to
institute such proceeding as a trustee, and unless the Trustee shall not have
received from the registered holders of a majority in aggregate principal
amount of the Notes then outstanding a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
AMENDMENTS AND WAIVERS
The Indenture may be amended with the consent of the registered holders of
a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Notes) and any past default or compliance with any provisions may also be
waived with the consent of the registered holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
holder of an outstanding Note, no amendment may, among other things, (i)
reduce the amount of Notes whose holders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest on any Note,
(iii) reduce the principal of or extend the stated maturity of any Note, (iv)
make any Note payable in money other than that stated in the Note, (v) impair
the right of any holder of the Notes to
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receive payment of principal of and interest on such holder's Notes on or
after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such holder's Notes, (vi) make any change in
the amendment provisions which require each holder's consent or in the waiver
provisions or (vii) make any change to the subordination provisions of the
Indenture that would adversely affect the Noteholders.
Without the consent of any holder of the Notes, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of
the obligations of the Company under the Indenture, to provide for
uncertificated Notes in addition to or in place of certificated Notes
(provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Internal Revenue Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Internal Revenue Code), to add Guarantees with respect to the Notes, to
secure the Notes, to add to the covenants of the Company for the benefit of
the holders of the Notes or to surrender any right or power conferred upon
the Company, to make any change that does not adversely affect the rights of
any holder of the Notes or to comply with any requirement of the Commission
in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment made to the subordination provisions of
the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding shall be effective as to such holder of Senior
Indebtedness unless such holder (or its Representative) consents to such
change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to registered holders of the Notes a notice briefly
describing such amendment. However, the failure to give such notice to all
holders of the Notes, or any defect therein, will not impair or affect the
validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register
the transfer or exchange of the Notes, to replace mutilated, destroyed, lost
or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. The Company at any time may terminate its obligations under the
covenants described under " -- Certain Covenants" (other than the covenant
described under " -- Merger, Consolidation and Sale of Assets"), the
operation of the cross default provisions, the bankruptcy provisions with
respect to Restricted Subsidiaries, the judgment default provisions described
under " -- Events of Default" above and the limitations contained in clause
(iv) under " -- Certain Covenants -- Merger, Consolidation and Sale of
Assets" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in clause (iii) (with respect to the
covenants described under "Certain Covenants," other than the covenant
described under " -- Certain Covenants -- Merger, Consolidation and Sale of
Assets" above), (iv), (v) or (vi) (with respect only to Restricted
Subsidiaries) under " -- Events of Default" above or because of the failure
of the Company to comply with clause (iv) under " -- Certain Covenants --
Merger, Consolidation and Sale of Assets" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money
or U.S. Government Obligations for the payment of principal and interest on
the Notes to maturity and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance
had not occurred (and, in the case of legal defeasance only, such Opinion of
Counsel must be based on a ruling of the Internal Revenue Service or other
change in applicable Federal income tax law).
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THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the
Notes. The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. John C. Malone, a director of the Company, is a director of The Bank
of New York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Affiliate" of any specified Person means (i) any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or officer (a) of such specified Person, (b) of any Subsidiary of
such specified Person or (c) of any Person described in clause (i) above. For
the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants
described under "Limitation on Transactions with Affiliates" only,
"Affiliate" shall also mean any beneficial owner of shares representing 10%
or more of the total voting power of the Capital Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an
Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Annualized Pro Forma EBITDA" means, with respect to any Person, the
product of such Person's Pro Forma EBITDA for the latest fiscal quarter for
which financial statements are available multiplied by four.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction
or series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary, (b) all or substantially all of the
assets of the Company or of any Restricted Subsidiary or (c) all or
substantially all of the assets of (1) a Company System or part thereof
serving at least 50,000 basic customers, (2) a division, (3) a line of
business or (4) a comparable business segment of the Company or any
Restricted Subsidiary.
"Attributable Indebtedness" means Indebtedness deemed to be incurred in
respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).
"Bank Indebtedness" means the Indebtedness and all other monetary
obligations of the Company incurred under the New Bank Credit Facility.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right, warrant, option or other
interest in the nature of an equity interest in such Person, but excluding
any debt security convertible or exchangeable into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds
received by the Company from the issue or sale (other than to a Subsidiary or
an employee stock ownership plan or trust established by the Company or any
Subsidiary) by the Company of any class of its Capital Stock (other than
Redeemable Stock) after November 14, 1995.
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"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting
principles and the amount of such Indebtedness shall be the capitalized
amount of such obligations determined in accordance with generally accepted
accounting principles.
"Change of Control" means such time as a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than one
or more of the Permitted Holders and their Affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power required to elect or designate for
election a majority of the Company's Board of Directors and attaching to the
then outstanding voting Capital Stock of the Company.
"Change of Control Triggering Event" means, with respect to the Notes, the
occurrence of both a Change of Control and a Rating Decline with respect to
the Notes.
"Company System" means any cable television system owned by the Company or
any Restricted Subsidiary.
"Consolidated Interest Expense" means, for any Person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, fees payable in connection with financings,
including commitment, availability and similar fees, and amortization of debt
issuance costs, non-cash interest payments on any Indebtedness and the
interest portion of any deferred payment obligation and after taking into
account the effect of elections made under, and the net costs associated
with, any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends, the amount of Preferred
Stock dividends in respect of all Preferred Stock of Restricted Subsidiaries
held by Persons other than the Company or a Restricted Subsidiary,
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, and the interest
component of rentals in respect of any Capitalized Lease Obligation or Sale
and Leaseback Transaction paid, accrued or scheduled to be paid or accrued by
such Person during such period, determined on a consolidated basis in
accordance with generally accepted accounting principles. For purposes of
this definition, interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined by such Person to be the
rate of interest implicit in such Capitalized Lease Obligation in accordance
with generally accepted accounting principles consistently applied.
"Consolidated Net Income" means for any period, the net income (loss) of
the Company and its Subsidiaries; provided, however, that there shall not be
included in such Consolidated Net Income (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject
to the limitations contained in (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (b) the Company's equity in a net loss
of any such Person (other than an Unrestricted Subsidiary) for such period
shall be included in determining such Consolidated Net Income, (ii) any net
income (loss) of any Person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, except that (a) subject to the
limitations contained in (iv) below, the Company's equity in the net income
of any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case
of a dividend to another Restricted Subsidiary, to the limitation contained
in this clause) and (b) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income, (iv) any gain (but not loss) realized upon the sale
or other disposition of any property, plant or equipment of the Company or
its consolidated Subsidiaries (including pursuant to any Sale and Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person, (v) any extraordinary
gain or loss and (vi) the cumulative effect of a change in accounting
principles.
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"Cumulative EBITDA" means at any date of determination the cumulative
EBITDA of the Company from and after September 30, 1995 to the end of the
fiscal quarter immediately preceding the date of determination or, if such
cumulative EBITDA for such period is negative, minus the amount by which such
cumulative EBITDA is less than zero.
"Cumulative Interest Expense" means at any date of determination the
aggregate amount of Consolidated Interest Expense paid, accrued or scheduled
to be paid or accrued by the Company from September 30, 1995 to the end of
the fiscal quarter immediately preceding the date of determination determined
on a consolidated basis in accordance with generally accepted accounting
principles.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness, (ii) the
8 3/8% Senior Notes and (iii) any other Senior Indebtedness of the Company
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $100 million and is
specifically designated by the Company in the instrument evidencing or
governing such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of the Indenture.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes for such period based on income or profits to the extent such
income or profits were included in computing consolidated net income and any
provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period, plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization
of intangibles for such period on a consolidated basis, plus (vi) any other
non-cash items reducing consolidated net income for such period, minus (B)
all non-cash items increasing consolidated net income for such period, all
for such Person and its Subsidiaries determined in accordance with generally
accepted accounting principles consistently applied, except that with respect
to the Company each of the foregoing items shall be determined on a
consolidated basis with respect to the Company and its Restricted
Subsidiaries only.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means with respect to any Property, the price which
could be negotiated in an arm's- length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (i) if such property or asset has a
Fair Market Value of less than $5 million, by any Officer of the Company or
(ii) if such property or asset has a Fair Market Value in excess of $5
million, by a majority of the Board of Directors of the Company and evidenced
by a resolution, dated within 30 days of the relevant transaction, of such
Board delivered to the Trustee.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), or evidenced by
bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding any
balances that constitute customer advance payments and deposits, accounts
payable or trade payables, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with
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generally accepted accounting principles, and shall also include, to the
extent not otherwise included (i) any Capitalized Lease Obligations, (ii)
Indebtedness of other Persons secured by a Lien to which the property or
assets owned or held by such Person is subject, whether or not the obligation
or obligations secured thereby shall have been assumed (the amount of such
Indebtedness being deemed to be the lesser of the value of such property or
assets or the amount of the Indebtedness so secured), (iii) Guarantees of
Indebtedness of other Persons, (iv) any Redeemable Stock, (v) any
Attributable Indebtedness, (vi) all obligations of such Person in respect of
letters of credit, bankers' acceptances or other similar instruments or
credit transactions (including reimbursement obligations with respect
thereto), other than obligations with respect to letters of credit securing
obligations (other than obligations described in this definition) entered
into in the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit, (vii) in the case of the Company, Preferred Stock of its
Restricted Subsidiaries and (viii) obligations of any such Person under any
Interest Rate Agreement applicable to any of the foregoing. Notwithstanding
the foregoing, Indebtedness shall not include any interest or accrued
interest until due and payable.
"Independent Appraiser" means, an investment banking firm of national
standing with non-investment grade debt underwriting experience or any third
party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) and BBB- (or the equivalent) by Moody's Investors Service,
Inc. (or any successor to the rating agency business thereof) and Standard &
Poor's Rating Group (or any successor to the rating agency business thereof),
respectively.
"Issue Date" means the date on which the Notes are initially issued.
"Lenfest Family" means collectively H. F. Lenfest and members of his
immediate family, any of their respective spouses, estates, lineal
descendants, heirs, executors, personal representatives, administrators,
trusts for any of their benefit and charitable foundations to which shares of
the Company's Capital Stock beneficially owned by any of the foregoing have
been transferred.
"Leverage Ratio" is defined as the ratio of (i) the outstanding
Indebtedness of a Person and its Subsidiaries (or in the case of the Company,
its Restricted Subsidiaries) divided by (ii) the Annualized Pro Forma EBITDA
of such Person.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement (other than any easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind
or nature whatsoever on or with respect to such Property (including any
Capitalized Lease Obligation, conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing or any Sale and Leaseback Transaction).
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the President, the Treasurer, or any Executive Vice
President or Vice President of the Company.
"Officers' Certificate" means a certificate signed by two Officers at
least one of whom shall be the principal executive officer, principal
accounting officer or principal financial officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
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"Permitted Holders" means the Lenfest Family and Tele-Communications, Inc.
"Permitted Liens" means (i) Liens on the Property of the Company or any
Restricted Subsidiary existing on the Issue Date; (ii) Liens on the Property
of the Company or any Restricted Subsidiary to secure any extension, renewal,
refinancing, replacement or refunding (or successive extensions, renewals,
refinancings, replacements or refundings), in whole or in part, of any
Indebtedness secured by Liens referred to in any of clauses (i), (vi) or
(ix); provided, however, that any such Lien will be limited to all or part of
the same Property that secured the original Lien (plus improvements on such
Property) and the aggregate principal amount of Indebtedness that is secured
by such Lien will not be increased to an amount greater than the sum of (A)
the outstanding principal amount, or, if greater, the committed amount, of
the Indebtedness described under clauses (i), (vi) and (ix) at the time the
original Lien became a Permitted Lien under the Indenture and (B) an amount
necessary to pay any premiums, fees and other expenses incurred by the
Company in connection with such refinancing, refunding, extension, renewal or
replacement; (iii) Liens for taxes, assessments or governmental charges or
levies on the Property of the Company or any Restricted Subsidiary if the
same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings;
(iv) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens on the Property of the Company or any
Restricted Subsidiary arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or are being contested
in good faith and by appropriate proceedings; (v) Liens on the Property of
the Company or any Restricted Subsidiary in favor of issuers of performance
bonds and surety or appeal bonds; (vi) Liens on Property at the time the
Company or any Restricted Subsidiary acquired such Property, including any
acquisition by means of a merger or consolidation with or into the Company or
such Restricted Subsidiary; provided, however, that such Lien shall not have
been incurred in anticipation or in connection with such transaction or
series of related transactions pursuant to which such Property was acquired
by the Company or such Restricted Subsidiary; (vii) other Liens on the
Property of the Company or any Restricted Subsidiary incidental to the
conduct of their respective businesses or the ownership of their respective
Properties which were not created in connection with the incurrence of
Indebtedness or the obtaining of advances or credit and which do not in the
aggregate materially detract from the value of their respective Properties or
materially impair the use thereof in the operation of their respective
businesses; (viii) pledges or deposits by the Company or any Restricted
Subsidiary under workmen's compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which the
Company or any Restricted Subsidiary is a party, or deposits to secure public
or statutory obligations of the Company or any Restricted Subsidiary, or
deposits for the payment of rent, in each case incurred in the ordinary
course of business, (ix) Liens on the Property of a Person at the time such
Person becomes a Restricted Subsidiary; provided, however, that any such Lien
may not extend to any other Property of the Company or any Restricted
Subsidiary; provided further, however, that any such Lien was not incurred in
anticipation of or in connection with the transaction or series of related
transactions pursuant to which such Person became a Restricted Subsidiary or
(x) utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with
respect to properties of a similar character.
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including
any successive extensions, renewals, substitutions, refinancings or
replacements so long as (i) the aggregate amount of Indebtedness represented
thereby is not increased by such renewal, extension, substitution,
refinancing or replacement, (ii) the average life and the date such
Indebtedness is scheduled to mature is not shortened and (iii) the new
Indebtedness shall not be senior in right of payment to the Indebtedness that
is being extended, renewed, substituted, refinanced or replaced.
"Person" means any individual, corporation, company (including limited
liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of
other Capital Stock issued by such Person.
"Private Placement Note Agreements" means (i) the Note Agreement dated as
of September 14, 1988, as amended, among the Company, The Equitable Life
Assurance Society of the United States, The Mutual Life
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Insurance Company of New York, The Mutual Benefit Life Insurance Company and
The Prudential Insurance Company of America; (ii) the Note Agreement dated as
of May 22, 1989, as amended, between the Company and The Prudential Insurance
Company of America; and (iii) the Note Agreement dated as of September 27,
1991, as amended, among the Company and Teachers Insurance and Annuity
Association of America, Jackson National Life Insurance Company, UNUM Life
Insurance Company, First UNUM Life Insurance Company, IDS Life Insurance
Company of New York, American Enterprise Life Insurance Company, New York
Life Insurance Company and SAFECO Life Insurance Company.
"Private Placement Notes" means (i) the 11.84% Senior Notes due 2000; (ii)
the 11.30% Senior Notes due 1998; and (iii) the 9.93% Senior Notes due 2001,
all as issued pursuant to the Private Placement Note Agreements.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of
such Person as determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied after giving
effect to the following: (i) if, during or after such period, such Person or
any of its Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of
such Person and its Subsidiaries for such period shall be reduced by an
amount equal to the Pro Forma EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Sale for the period or
increased by an amount equal to the Pro Forma EBITDA (if negative) directly
attributable thereto for such period and (ii) if, during or after such
period, such Person or any of its Subsidiaries completes an acquisition of
any Person or business which immediately after such acquisition is a
Subsidiary of such Person or whose assets are held directly by such Person or
a Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give
pro forma effect to the acquisition of such Person or business; provided,
however, that, with respect to the Company, all of the foregoing references
to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to the
"Restricted Subsidiaries" of the Company.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock in any
other Person (but excluding Capital Stock or other securities issued by such
Person).
"Rating Agencies" mean Standard and Poor's Rating Group, a division of
McGraw Hill, Inc., and Moody's Investors Service, Inc. or any successor to
the respective rating agency businesses thereof.
"Rating Date" means the date which is 90 days prior to the earlier of (i)
a Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of the Company to effect a Change of Control.
"Rating Decline" means, with respect to the Notes, the occurrence of the
following on, or within 90 days after, the date of public notice of the
occurrence of a Change of Control or of the intention by the Company to
effect a Change of Control (which period shall be extended so long as the
rating of such Notes is under publicly announced consideration for possible
downgrade by either of the Rating Agencies): (a) in the event the Notes are
assigned an Investment Grade Rating by either of the Rating Agencies on the
Rating Date, the rating of the Notes by both of the Rating Agencies shall be
below an Investment Grade Rating; or (b) in the event the Notes are rated
below an Investment Grade Rating by both of the Rating Agencies on the Rating
Date, the rating of the Notes by either of the Rating Agencies shall be
decreased by one or more gradations (including gradations within rating
categories as well as between rating categories).
"Redeemable Dividend" means, for any dividend with regard to Redeemable
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is redeemable at the option of the holder thereof, in whole or in part,
or (iii) is convertible or exchangeable for Indebtedness.
"Representative" means any trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Company.
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"Restricted Payment" means (i) any dividend or distribution (whether made
in cash, property or securities) declared or paid on or with respect to any
shares of Capital Stock of the Company or Capital Stock of any Restricted
Subsidiary except for any dividend or distribution which is made solely to
the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is
not wholly owned, to the other shareholders of such Restricted Subsidiary on
a pro rata basis) or dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) of the Company; (ii) a payment
made by the Company or any Restricted Subsidiary to purchase, redeem, acquire
or retire any Capital Stock of the Company or Capital Stock of any Affiliate
of the Company (other than a Restricted Subsidiary) or any warrants, rights
or options to directly or indirectly purchase or acquire any such Capital
Stock or any securities exchangeable for or convertible into any such Capital
Stock; or (iii) a payment made by the Company or any Restricted Subsidiary to
redeem, repurchase, defease or otherwise acquire or retire for value, prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment (other than the purchase, repurchase, or other acquisition of any
Indebtedness subordinate in right of payment to the Notes purchased in
anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of
acquisition), Indebtedness of the Company which is subordinate (whether
pursuant to its terms or by operation of law) in right of payment to the
Notes.
"Restricted Subsidiary" means (a) Suburban Cable TV Co. Inc., LenComm,
Inc., Lenfest West, Inc., Lenfest Atlantic, Inc., Lenfest South Jersey
Investments, Inc., South Jersey Cablevision Associates, Lenfest Newcastle
County, Lenfest Newcastle County, Inc. and CAH, Inc.; (b) any Subsidiary of
the Company after the Issue Date unless such Subsidiary shall have been
designated an Unrestricted Subsidiary as permitted pursuant to " -- Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries": and
(c) an Unrestricted Subsidiary which is redesignated as a Restricted
Subsidiary as permitted pursuant to " -- Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such
Person or one of its Restricted Subsidiaries.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter Incurred and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which the Company is responsible or liable unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are subordinate in right of payment to the
Notes; provided, however, that Senior Indebtedness shall not include (1) any
obligation of the Company to any Subsidiary, (2) any liability for Federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course
of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of the Company or (5) that portion
of any Indebtedness which at the time of incurrence is incurred in violation
of the Indenture.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness
is to rank pari passu with the Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, officers or trustees thereof is held by such first-named Person
or any of its Subsidiaries; or (ii) in the case of a partnership, joint
venture, association or other business
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entity, with respect to which such first-named Person or any of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise if in accordance with
generally accepted accounting principles such entity is consolidated with the
first-named Person for financial statement purposes.
"Unrestricted Subsidiary" means (a) any Subsidiary in existence on the
Issue Date that is not a Restricted Subsidiary; (b) any Subsidiary of an
Unrestricted Subsidiary and (c) any Subsidiary of the Company which is
designated after the Issue Date as an Unrestricted Subsidiary as permitted
pursuant to " -- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries" and not thereafter redesignated as a Restricted
Subsidiary as permitted pursuant thereto.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on June 27, 1996 to the Initial
Purchasers in reliance on Section 4(2) of the Securities Act. The Initial
Purchasers offered and sold the Old Notes only to "qualified institutional
buyers" (as defined in Rule 144A) in compliance with Rule 144A and to a
limited number of other institutional "accredited investors" (as defined in
Rule 501 (a) (1), (2), (3) or (7) under the Securities Act) that, prior to
their purchase of Old Notes, delivered to the Initial Purchasers a letter
containing certain representations and agreements.
In connection with the sale of the Old Notes, the Company and the Initial
Purchasers entered into a Registration Agreement dated June 20, 1996 (the
"Registration Agreement"), which generally requires the Company (i) to cause
the Old Notes to be registered under the Securities Act pursuant to a Shelf
Registration Statement (as defined) or (ii) to file with the Commission the
Exchange Offer Registration Statement with respect to the Exchange Offer. The
Exchange Offer is being made pursuant to the Registration Agreement to
satisfy the Company's obligations thereunder with regard to the Exchange
Notes. The term "holder" with respect to the Exchange Offer means any person
in whose name Notes are registered on the registrar's books or any other
person who has obtained a properly completed bond power from the registered
holder, or any person whose Notes are held of record by The Depository Trust
Company ("DTC") who desires to deliver such Old Notes, by book- entry
transfer at DTC.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than broker-dealers, as set forth below, and any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such holder's business and that
such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes or who is
an affiliate of the Company may not rely upon such interpretations by the
staff of the Commission and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Failure
to comply with such requirements in such instance may result in such holder
incurring liabilities under the Securities Act for which the holder is not
indemnified by the Company. Each broker-dealer (other than an affiliate of
the Company) that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market- making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. See "Plan of Distribution." The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. The Company has agreed that, for a period
of 180 days after the Expiration Date, it will make the Prospectus available
to any broker-dealer for use in connection with any such sale. See "Plan of
Distribution." Any broker-dealer who is an affiliate of the Company may not
rely on such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
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The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in
which this Exchange Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will
represent to the Company that, among other things, (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or
not such person is the holder, (ii) neither the holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes, (iii) neither the
holder nor any such other person is an "affiliate" of the Company as defined
in Rule 405 under the Securities Act or, if such holder is an "affiliate,"
that such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if the
holder is not a broker-dealer, that neither the holder nor any such other
person is engaged in or intends to engage in the distribution of such
Exchange Notes, and (v) if such holder is a broker-dealer, that it will
receive Exchange Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to participate. Holders of the Old Notes are urged
to consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
Pursuant to the terms of the Registration Agreement, if, under certain
circumstances, the Exchange Offer is not permitted, the Company shall, as
promptly as practicable (but in no event more than 30 days after so required
or requested pursuant to Registration Agreement), file with the Commission
and thereafter shall cause to be declared effective under the Securities Act
by the 150th day after the Closing Date (as defined in the Registration
Agreement) a Shelf Registration Statement relating to the offer and sale of
the Old Notes or the Exchange Notes, as applicable, by the Holders from time
to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Agreement. The Company will
be required to keep the Shelf Registration Statement continuously effective
in order to permit the prospectus forming part thereof to be usable by the
Holders for a period of three years from the date of the Shelf Registration
Statement is declared effective by the Commission or such shorter period that
will terminate when all the Old Notes or Exchange Notes, as applicable,
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Regisstration Statement.
TERMS OF THE EXCHANGE OFFER
General Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company hereby offers to
exchange any and all Old Notes validly tendered and not withdrawn prior to
5:00 p.m., New York City time, on the Expiration Date. Subject to the minimum
denomination requirements of the Exchange Notes, the Company will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange
Offer. However, Old Notes may be tendered only in amounts that are integral
multiples of $1,000 principal amount.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the Exchange
Notes will be registered under the Securities Act and, therefore, will not
bear legends restricting the transfer and (ii) holders of the Exchange Notes
will not be entitled to certain rights of holders of Old Notes under the
Registration Agreement, which will terminate upon consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the Old
Notes, will be entitled to the benefits of the Indenture and will be treated
as a single class thereunder with any Old Notes that remain outstanding. The
Exchange Offer is not conditioned upon any minimum aggregate principal amount
of Old Notes being tendered for exchange.
As of the date of this Prospectus, $300,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996 to all holders known
to the Company.
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Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Agreement and the
applicable requirements of the Exchange Act, and the rules and regulations of
the Commission thereunder. Old Notes which are not tendered for exchange in
the Exchange Offer will remain outstanding and interest thereon will continue
to accrue.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purposes of receiving the Exchange Notes from the Company. If
any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses".
Expiration Date; Extensions; Amendments. The term "Expiration Date" shall
mean 5:00 p.m., New, York City time, on , 1996, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend
the Exchange Offer, the Company reserves the right to extend the Exchange
Offer at any time and from time to time by giving oral or written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to
the Dow Jones News Service. During any extension of the Exchange Offer, all
Notes previously tendered pursuant to the Exchange Offer and not withdrawn
will remain subject to the Exchange Offer. The date of the exchange of the
Exchange Notes for Old Notes will be the first New York Stock Exchange
trading day following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth under "-- Conditions of the
Exchange Offer" below shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent
or (ii) to amend the terms of the Exchange Offer in any manner. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice thereof to the holders of
Old Notes. If the Exchange Offer is amended in any manner determined by the
Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed
to the holders of Old Notes, and the Company will extend the Exchange Offer
for a period of time, depending upon the significance of the amendment and
the manner of disclosure to such holders, if the Exchange Offer otherwise
would expire during such period.
In all cases, issuance of the Exchange Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of a properly completed and duly
executed Letter of Transmittal and all other required documents; provided,
however, that the Company reserves the absolute right to waive any conditions
of the Exchange Offer or defects or irregularities in the tender of Old
Notes. If any tendered Old Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes or substitute Old Notes evidencing the
unaccepted portion, as appropriate, will be returned without expense to the
tendering holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at DTC pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to
an account maintained with DTC), unless otherwise provided in the Letter of
Transmittal, as promptly as practicable after the expiration or termination
of the Exchange Offer.
Interest on the Exchange Notes. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each Exchange Note will bear interest from the most recent date to
which interest has been paid on the Old Notes or Exchange Notes, or if no
interest has been paid on the Old Notes or Exchange Notes, from June 27,
1996.
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Procedures for Tendering Old Notes. The tender to the Company of Old Notes
by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal. A holder of the Old Notes may tender such Old Notes by
(i) properly completing and signing a Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to a Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with any corresponding certificate or certificates representing Old Notes
being tendered (or confirmation of a book-entry-transfer of such Old Notes
into the Exchange Agent's account at DTC pursuant to the book-entry
procedures described below) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or
prior to the Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Old Notes are to be reissued)
in the name of the registered holder (which term, for the purposes described
herein, shall include any participant in DTC (also referred to as a
book-entry facility) whose name appears on a security listing as the owner of
Old Notes, the signature of such signer need not be guaranteed. In any other
case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered holder and the signature on the endorsement or instrument
of transfer must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" as defined by rule
17Ad-15 under the Exchange Act (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the Exchange Notes or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC) is received by the
Exchange Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided below) from an Eligible
Institution is received by the Exchange Agent. Issuances of Exchange Notes in
exchange for Old Notes tendered pursuant to a Notice of Guaranteed Delivery
or letter, telegram or facsimile transmission to similar effect (as provided
below) by an Eligible Institution will be made only against submission of a
duly signed Letter of Transmittal (and any other required documents) and
deposit of the tendered Old Notes (or confirmation of a book-entry transfer
of such Old Notes into the Exchange Agent's account at DTC pursuant to the
book-entry procedures described below).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company, which determination will be final and binding. The Company
reserves the absolute right to reject any and all tenders not in proper form
or the acceptance for exchange of which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularity in
the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Any Old Notes received by the Exchange Agent that are not
validly tendered and as to which the defects
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or irregularities have not been cured or waived, or if Old Notes are
submitted in principal amount greater than the principal amount of Old Notes
being tendered by such tendering holder, such unaccepted or non-exchanged Old
Notes will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date and (ii) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers will differ from the
terms of the Exchange Offer.
Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish an
account with respect to the Old Notes at DTC for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in DTC's system may make book-entry
delivery of Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account with respect to the Old Notes in accordance with DTC
procedure for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at
DTC, an appropriate Letter of Transmittal with any required signature
guarantee and all other required documents must in each case be transmitted
to and received or confirmed by the Exchange Agent at the address set forth
in the Letter of Transmittal on or prior to the Expiration Date, or if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
Guaranteed Delivery Procedures. If a holder desires to participate in the
Exchange Offer and such holder's Old Notes are not immediately available, or
time will not permit such holder's Old Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) on
or prior to the Expiration Date, the Exchange Agent has received from an
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the tendering holder, the name(s) in which the Old Notes are
registered, the certificate number(s) of the Old Notes to be tendered and the
amount tendered, and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of the Notice of Guaranteed Delivery, such Old Notes,
in proper form for transfer (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), will be delivered by
such Eligible Institution together with any other documents required by the
Letter of Transmittal and (iii) the certificates for all physically tendered
Old Notes, in proper form for transfer, or a confirmation of book-entry
transfer such Old Notes into the Exchange Agent's account at DTC, as the case
may be, and all other documents required by the Letter of Transmittal are
received by the Exchange Agent within three New Stock Exchange Trading Days
after the date of execution of the Notice of Guaranteed Delivery. Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange
Agent.
Terms and Conditions of the Letter of Transmittal. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's true and
lawful agent and attorney-in-fact with respect to such tendered Old Notes,
with full power of substitution, among other things, to cause the Old Notes
to be assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the Old Notes and to acquire Exchange Notes issuable upon the
exchange of such tendered Old Notes, and that, when the same are accepted for
exchange, the Company will acquire good and unencumbered title to the
tendered Old Notes, free and clear of all liens, restrictions, charges,
encumbrances and adverse claims. The Transferor also warrants that it will,
upon request, execute and deliver any additional documents reasonably
requested by the Company or the
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Exchange Agent as necessary or desirable to complete and give effect to the
transactions contemplated by the Letter of Transmittal. All authority
conferred by the Transferor will survive the death, bankruptcy or incapacity
of the Transferor and every obligation of the Transferor shall be binding
upon the heirs, personal representatives, executors, administrators,
successors, assigns, trustees in bankruptcy and other legal representatives
of such Transferor.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above under the heading "-- Purpose and Effect
of the Exchange Offer".
Withdrawal of Tenders of Notes. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having tendered the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
contain a statement that such holder is withdrawing his election to have such
Old Notes exchanged, (iv) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at DTC.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, which
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Old Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old
Notes which have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with DTC for
the Old Notes) as soon as practicable after withdrawal, rejection of tender
or termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Old Notes" at any time on or prior to the Expiration
Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Company shall not be required to accept for exchange,
or exchange Exchange Notes for, any Old Notes, and may terminate the Exchange
Offer as provided herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Company, seeks to or would prohibit,
restrict, materially delay or otherwise render illegal consummation of the
Exchange Offer, or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its
subsidiaries has occurred which, in the sole judgment of the Company,
might materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company, or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Company's reasonable judgment, might
materially impair the Company's ability to proceed with the Exchange
Offer.
If the Company determines in its sole discretion that any of the above
conditions is not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the Expiration
Date, subject, however, to the right
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of holders to withdraw such Old Notes (see "-- Terms of the Exchange Offer --
Withdrawal of Tenders of Old Notes") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all validly tendered
Old Notes which have not been withdrawn. If such waiver constitutes a
material change to the Exchange Offer, the Company will promptly disclose
such waiver by means of a prospectus supplement that will be distributed to
the holders of Old Notes, and the Company will extend the Exchange Offer for
a period of time, depending upon the significance of the waiver and the
manner of disclosure to the such holders, if the Exchange Offer otherwise
would expire during such period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. All executed Letters of Transmittal should be directed to the Exchange
Agent at one of the addresses set forth below. Requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notices
of Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
The Bank of New York
Reorganization Section
101 Barclay Street-7E
New York, New York 10286
Attn: Ms. Jodi Smith
By Facsimile Transmission (for Eligible Institutions only):
(212) 571-3080
Attn: Ms. Jodi Smith
Confirm by Telephone:
(212) 815-2791
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional
solicitation may be made by telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent
in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptance of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company also may pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus, the Letter
of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include, among others, fees and expenses
of the Exchange Agent, accounting and legal fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Notes pursuant to the Exchange Offer. If, however,
Exchange Notes, or Old Notes for principal amounts not tendered or accepted
for exchange, are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Old Notes tendered or if a
transfer tax is imposed for any reason other than the exchange of the Old
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the holder or any other persons) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
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CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule
144 of the Securities Act. Accordingly, such Old Notes may be resold only (i)
to the Company or any subsidiary thereof, (ii) inside the United States to a
qualified institutional buyer in compliance with Rule 144A, (iii) inside the
United States to an institutional accredited investor that, prior to such
transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Old Notes (the form of which letter can be obtained from the Trustee)
and, if such transfer is in respect of an aggregate principal amount of Old
Notes at the time of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (iv) outside the United States in compliance with Rule 904
under the Securities Act, (v) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available) or (vi) pursuant
to an effective registration statement under the Securities Act. The
liquidity of the Old Notes could be adversely affected by the Exchange Offer.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The costs of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the Exchange Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
exchanging Old Notes for Exchange Notes pursuant to the Exchange Offer is
based upon current provisions of the Internal Revenue Code of 1986, as
amended, existing and proposed regulations thereunder, and current
administrative rulings and court decisions. All of the foregoing are subject
to change, possibly on a retroactive basis, and no ruling has been or will be
sought from the Internal Revenue Service. This discussion does not address
any of the federal income tax consequences of owning or disposing of Exchange
Notes, nor does it address the applicability or effect of any state, local or
foreign tax laws. Each holder should consult such holder's own tax advisor
concerning the application of federal income tax laws, as well as the laws of
any state, local or foreign taxing jurisdiction, to their particular
situations.
The exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer should not be treated as a taxable "exchange" for federal income tax
purposes. As a result, there should be no federal income tax consequences to
holders exchanging Old Notes for Exchange Notes pursuant to the Exchange
Offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business on the 180th day following the Expiration
Date, it will make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition,
until , 199 , all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such Exchange Notes.
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Any broker-dealer that resells Exchange Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one
counsel for the holders of the Notes) other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act,
LEGAL MATTERS
The legality of the Exchange Notes offered hereby will be passed upon for
the Company by Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania and
Samuel W. Morris, Jr., Esquire, Vice President and General Counsel of the
Company. Certain legal matters with respect to regulation and legislation
concerning the cable television industry will be passed upon for the Company
by Fleischman and Walsh, L.L.P., Washington, D.C.
EXPERTS
The consolidated financial statements and financial statement schedule of
the Company and its subsidiaries as of December 31, 1994 and 1995, and for
each of the three years in the period ended December 31, 1995, included in
this Prospectus and in the Registration Statement have been audited by
Pressman Ciocca & Smith, independent certified public accountants, as stated
in their report appearing herein and elsewhere in the Registration Statement.
Such financial statements and financial statement schedule have been included
herein in reliance upon such reports of such firm given upon their authority
as experts in auditing and accounting. The pro forma statement of operations
for the year ended December 31, 1995, included under "Pro Forma Financial
Information" has been examined by Pressman Ciocca & Smith and is included
herein in reliance upon the report of such firm given upon their authority on
reporting on examinations of pro forma financial statements. With respect to
the unaudited financial statements as of March 31, 1996, and for the three
month periods ended March 31, 1995 and 1996, and the pro forma balance sheet
as of March 31, 1996, and the pro forma statement of operations for the three
months ended March 31, 1996, included herein, the independent certified
public accountants have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated
in their separate reports appearing herein they did not audit and they do not
express an opinion on that interim and pro forma financial information.
Because of the limited nature of the review procedures applied, the degree of
reliance on their report on such information should be restricted. In
addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
interim and pro forma financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities Act
of 1933.
The combined financial statements and financial statement schedule
relating to Sammons Cable as of December 31, 1994 and 1995, and for each of
the three years in the period ended December 31, 1995, included in this
Prospectus and in the Registration Statement have been audited by Coopers &
Lybrand L.L.P., independent accountants, as stated in their report appearing
herein and elsewhere in the Registration Statement. Such financial statements
and financial statement schedule have been included herein in reliance upon
such reports of such firm given upon their authority as experts in auditing
and accounting. With respect to the unaudited financial information for the
three and two month periods ended March 31, 1995 and February 29, 1996,
respectively, included herein, the independent accountants have applied
limited procedures in accordance with professional standards for a review of
such information. However, as stated in their separate report included
herein, they did not audit and they do not express an opinion on that interim
financial information. Because of the limited nature of the review procedures
applied, the degree of reliance on their report on such information should be
restricted.
93
<PAGE>
The accountants are not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of
the Registration Statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of the Securities Act of 1933.
The financial statements and financial statement schedule relating to the
Wilmington System as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, included in this Prospectus and
in the Registration Statement have been audited by Pressman Ciocca & Smith,
independent certified public accountants, as stated in their report appearing
herein and elsewhere in the Registration Statement. Such financial statements
and financial statement schedule have been included herein in reliance upon
such reports of such firm given upon their authority as experts in auditing
and accounting. With respect to the unaudited financial information for the
periods ended March 31, 1995 and February 12, 1996, respectively, included
herein, the independent certified public accountants have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their separate report included herein,
they did not audit and they do not express an opinion on that interim
financial information. Because of the limited nature of the review procedures
applied, the degree of reliance on their report on such information should be
restricted. In addition, the accountants are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities Act
of 1933.
The financial statements and financial statement schedule relating to
Garden State Cablevision L.P. as of December 31, 1994 and 1995, and for each
of the three years in the period ended December 31, 1995, included in this
Prospectus and in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
With respect to the unaudited financial information as of March 31, 1996, and
the three month periods ended March 31, 1995 and 1996, included herein, the
independent public accountants have applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate report thereon states that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on that information should be restricted
in light of the limited nature of the review procedures applied. In addition,
the accountants are not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of
the Registration Statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of the Securities Act of 1933.
94
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants ....................................................... F-2
Report of Independent Certified Public Accountants ....................................................... F-3
Report of Independent Certified Public Accountants on Pro Forma Financial Information .................... F-4
Consolidated Balance Sheets, December 31, 1994 and 1995, and March 31, 1996 .............................. F-5
Consolidated Statements of Operations, Years Ended December 31, 1993, 1994 and 1995, and Three Months
Ended March 31, 1995 and 1996 .......................................................................... F-7
Consolidated Statements of Changes in Stockholder's Equity (Deficit), Years Ended December 31, 1993, 1994
and 1995, and Three Months Ended March 31, 1995 and 1996 ................................................. F-8
Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995, and Three Months Ended
March 31, 1995 and 1996 .................................................................................. F-9
Notes to Consolidated Financial Statements. ............................................................... F-11
THE WILMINGTON, DELAWARE SYSTEM
Report of Independent Certified Public Accountants ........................................................ F-37
Report of Independent Certified Public Accountants ........................................................ F-38
Balance Sheets, December 31, 1994 and 1995 ................................................................ F-39
Statements of Operations, Years Ended December 31, 1993, 1994 and 1995, and Three Months Ended March 31,
1995 and period ended February 12, 1996 .................................................................. F-40
Statements of Changes in Equity Investment, Years Ended December 31, 1993, 1994 and 1995 .................. F-41
Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995 .................................... F-42
Notes to Financial Statements ............................................................................. F-43
SAMMONS CABLE
Report of Independent Accountants ......................................................................... F-50
Report of Independent Accountants ......................................................................... F-51
Combined Balance Sheets, December 31, 1994 and 1995 ....................................................... F-52
Combined Statements of Income, Years Ended December 31, 1993, 1994 and 1995, and Three Months Ended March
31, 1995 and Two Months Ended February 29, 1996 .......................................................... F-54
Combined Statements of Changes in Equity Investment, Years Ended December 31, 1993, 1994 and 1995 ......... F-55
Combined Statements of Cash Flows, Years Ended December 31, 1993, 1994, and 1995 .......................... F-56
Notes to Combined Financial Statements .................................................................... F-57
GARDEN STATE CABLEVISION L.P.
Report of Independent Public Accountants .................................................................. F-62
Report of Independent Public Accountants .................................................................. F-63
Balance Sheets, December 31, 1994 and 1995, and March 31, 1996 ............................................ F-64
Statements of Operations, Years Ended December 31, 1993, 1994 and 1995, and Three Months Ended March 31,
1995 and 1996 ............................................................................................ F-65
Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995, and Three Months Ended March 31,
1995 and 1996 ............................................................................................ F-66
Statements of Partners' (Deficit) Capital, Years Ended December 31, 1993, 1994 and 1995, and Three Months
Ended March 31, 1996 ..................................................................................... F-67
Notes to Financial Statements ............................................................................. F-68
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Lenfest Communications, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Lenfest
Communications, Inc. and subsidiaries as of December 31, 1994 and 1995, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We did not audit the financial statements of Garden State
Cablevision, L.P., the investment in which, as discussed in Note 7 to the
financial statements, is accounted for by the equity method of accounting.
The financial statements reflect equity in accumulated losses, net of related
receivable, in excess of the investments in Garden State in the amounts of
$34,078,000 and $15,451,000 at December 31, 1994 and 1995, respectively, and
equity in its net losses of $8,570,000, $7,476,000 and $8,527,000 for each of
the years in the three-year period ended December 31, 1995. The financial
statements of Garden State were audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to the amounts
included for Garden State, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lenfest Communications, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 11 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" in 1994. Also as discussed in Note
18 to the consolidated financial statements, the Company changed its method
of accounting for income taxes in 1993.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
July 18, 1996
(except for Note 26,
as to which the
date is August 1, 1996)
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Lenfest Communications, Inc. and Subsidiaries:
We have reviewed the accompanying consolidated balance sheet of Lenfest
Communications, Inc. and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the three month periods ended March 31, 1996
and 1995. These consolidated financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the consolidated
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
July 18, 1996
F-3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Lenfest Communications, Inc. and Subsidiaries:
We have examined the pro forma adjustments reflecting the Transactions and
the Offering (both as defined herein) and the application of those
adjustments to the historical amounts in the pro forma condensed statement of
operations of Lenfest Communications, Inc. for the year ended December 31,
1995 (appearing under "Pro Forma Financial Information" in the Offering
Memorandum of which this report forms a part). The historical condensed
financial statement is derived from the historical financial statements of
Lenfest Communications, Inc., which were audited by us, the historical
financial statement of the Wilmington System, which were audited by us, and
the historical financial statement of the Sammons Systems, which were audited
by other accountants, appearing elsewhere herein. Such pro forma adjustments
are based upon management's assumptions described in the notes. Our
examination was made in accordance with standards established by the American
Institute of Certified Public Accountants and, accordingly, included such
procedures as we considered necessary in the circumstances.
The objective of this pro forma financial information is to show what the
significant effects on the historical information might have been had the
Transactions and the Offering occurred at an earlier date. However, the pro
forma condensed financial statements are not necessarily indicative of the
results of operations or related effects on financial position that would
have been attained had the above-mentioned transactions actually occurred
earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the
above-mentioned transactions, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma column reflects
the proper application of those adjustments to the historical financial
statement amounts in the pro forma condensed statement of operations for the
year ended December 31, 1995.
In addition, we have reviewed the related pro forma adjustments reflecting
the Transactions and the Offering and the application of those adjustments to
the historical amounts in the accompanying pro forma condensed balance sheet
of Lenfest Communications, Inc. as of March 31, 1996, and the pro forma
statement of operations for the three months then ended (appearing under "Pro
Forma Financial Information" in the Offering Memorandum of which this report
forms a part). These historical condensed financial statements are derived
from the historical financial statements of Lenfest Communication, Inc. which
were reviewed by us, the historical financial statement of the Wilmington
System, which were reviewed by us, and the historical financial statement of
the Sammons Systems, which were reviewed by other accountants, appearing
elsewhere herein. Such pro forma adjustments are based upon management's
assumptions described in the notes. Our review was made in accordance with
standards established by the American Institute of Certified Public
Accountants.
A review is substantially less in scope than an examination, the objective of
which is the expression of an opinion on management's assumptions, the pro
forma adjustments and the application of those adjustments to historical
financial information. Accordingly, we do not express such an opinion on the
pro forma adjustments or the application of such adjustments to the pro forma
condensed balance sheet as of March 31, 1996, and the pro forma condensed
statement of operation for the three months then ended.
Based on our review, however, nothing came to our attention that caused us to
believe that management's assumptions do not provide a reasonable basis for
presenting the significant effects directly attributable to the
above-mentioned transactions, that the related pro forma adjustments do not
give appropriate effect to those assumptions, or that the pro forma column
does not reflect the proper application of those adjustments to the
historical financial statement amounts in the pro forma condensed balance
sheet as of March 31, 1996, and the pro forma condensed statement of
operations for the three months then ended.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
July 18, 1996
F-4
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, (Unaudited)
-------------------------- March 31,
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents .............................. $ 4,302 $164,943 $ 19,469
Cash - restricted escrow ............................... 3,273 -- --
Marketable securities .................................. 135,113 169,581 83,342
Accounts receivable - trade and other, less allowance for
doubtful accounts of $828 in 1994, $1,104 in 1995 and
$1,014 in 1996 ........................................ 14,629 12,701 16,994
Accounts receivable - affiliate ........................ 466 103 2,280
Notes receivable ....................................... -- 86 26,585
Inventories ............................................ 7,192 4,932 4,023
Prepaid expenses ....................................... 4,486 3,946 3,532
Property and equipment, net of accumulated depreciation . 211,127 211,780 381,217
Investments in affiliates, accounted for under the equity
method, and related receivables ....................... 36,529 49,072 40,947
Other investments, at cost, and related receivables .... 10,414 10,410 10,410
Goodwill, net of amortization .......................... 50,989 52,874 75,910
Deferred franchise costs, net of amortization .......... 146,476 133,525 509,645
Other intangible assets, net of amortization ........... 22,598 20,519 22,314
Deferred Federal tax asset (net) ....................... 15,268 14,707 45,234
Other assets ........................................... 2,484 2,569 7,098
----------- ----------- ------------
$665,346 $ 851,748 $1,249,000
=========== =========== ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, (Unaudited)
-------------------------- March 31,
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Notes payable ........................................... $ 620,788 $ 812,441 $1,251,553
Obligations under capital leases - related party ........ 5,333 5,284 5,271
Accounts payable and accrued expenses - unrelated parties . 21,725 33,926 46,688
Accounts payable - affiliate ............................ 7,638 7,205 10,257
Unearned revenues and customer prepayments .............. 3,232 3,402 3,903
Deposits on converters .................................. 5,791 5,853 4,682
Deferred state tax liability (net) ...................... 13,029 9,940 9,141
Investment in Garden State Cablevision L.P. ............. 34,078 15,451 17,598
----------- ----------- ------------
TOTAL LIABILITIES ..................................... 711,614 893,502 1,349,093
MINORITY INTERESTS in equity of consolidated subsidiaries . 3,341 3,438 3,565
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 158,896 shares authorized,
issued and outstanding.................................. 2 2 2
Additional paid-in capital .............................. 50,747 50,747 50,747
Unrealized gain (loss) on marketable securities, net of
deferred taxes of $8,172 in 1994, $21,759 in 1995 and
($9,892) in 1996 ....................................... 14,719 40,410 (18,371)
Cumulative foreign currency translation adjustment, net of
deferred taxes of $5,461 in 1994, $4,071 in 1995 and
$5,946 in 1996.......................................... 10,600 7,560 11,042
Accumulated deficit ..................................... (125,677) (143,911) (147,078)
----------- ----------- ------------
(49,609) (45,192) (103,658)
----------- ----------- ------------
$ 665,346 $ 851,748 $1,249,000
=========== =========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------- ------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES ...................... $213,240 $236,195 $266,249 $ 64,106 $ 80,367
OPERATING EXPENSES
Service ..................... 16,254 18,344 20,659 4,794 6,492
Programming - from affiliate . 29,851 33,782 37,685 9,396 11,256
Programming - other cable ... 14,182 15,485 17,637 4,024 4,881
Programming - non-cable ..... 7,750 10,085 10,101 2,720 3,094
Cost of sales - equipment ... 279 3,076 8,515 2,072 1,775
Selling and marketing ....... 6,411 8,263 9,328 1,895 3,273
General and administrative .. 43,332 45,504 49,982 11,786 14,878
Depreciation ................ 45,348 50,001 51,624 12,372 14,066
Amortization ................ 19,847 25,517 26,076 5,686 7,709
------------ ------------ ------------ ---------- ----------
183,254 210,057 231,607 54,745 67,424
------------ ------------ ------------ ---------- ----------
OPERATING INCOME ......... 29,986 26,138 34,642 9,361 12,943
OTHER INCOME (EXPENSE)
Interest expense ............ (35,090) (47,749) (61,538) (14,279) (20,221)
Equity in net (losses) of
unconsolidated affiliates . (8,450) (7,940) (10,682) (3,092) (7,185)
Other income (expense) ...... (1,347) 923 14,988 14,300 10,946
------------ ------------ ------------ ---------- ----------
(44,887) (54,766) (57,232) (3,071) (16,460)
------------ ------------ ------------ ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY LOSS ...... (14,901) (28,628) (22,590) 6,290 (3,517)
INCOME TAX BENEFIT (EXPENSE)
Current ..................... (400) (40) -- (400) (1,200)
Deferred .................... 3,434 9,769 11,095 (1,883) 1,550
------------ ------------ ------------ ---------- ----------
3,034 9,729 11,095 (2,283) 350
------------ ------------ ------------ ---------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS ..... (11,867) (18,899) (11,495) 4,007 (3,167)
EXTRAORDINARY (LOSS)
Early extinguishment of debt, net
of deferred taxes of $3,629 -- -- (6,739) -- --
------------ ------------ ------------ ---------- ----------
NET INCOME (LOSS) ........ $ (11,867) $ (18,899) $ (18,234) $ 4,007 $ (3,167)
============ ============ ============ ========== ==========
</TABLE>
See accompanying notes.
F-7
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
BALANCE AT BEGINNING AND END OF PERIOD . $ 2 $ 2 $ 2 $ 2 $ 2
============= ============= ============= ============= =============
ADDITIONAL PAID-IN CAPITAL
BALANCE AT BEGINNING AND END OF PERIOD . $ 50,747 $ 50,747 $ 50,747 $ 50,747 $ 50,747
============= ============= ============= ============= =============
UNREALIZED GAIN (LOSS) ON MARKETABLE
SECURITIES
Balance at beginning of period ......... $ -- $ -- $ 14,719 $ 14,719 $ 40,410
Adjustment for the cumulative effect of
applying the new method of accounting
for certain investments in debt and
equity securities, net of deferred
taxes of $4,300 in 1994 .............. -- 8,440 -- -- --
Net unrealized gain (loss) on marketable
securities, net of deferred taxes .... -- 6,279 25,691 (12,891) (58,781)
------------- ------------- ------------- ------------- -------------
BALANCE AT END OF PERIOD .......... $ -- $ 14,719 $ 40,410 $ 1,828 $ (18,371)
============= ============= ============= ============= =============
CUMULATIVE FOREIGN CURRENCY TRANSLATION
ADJUSTMENT
Balance at beginning of period ......... $ -- $ -- $ 10,600 $ 10,600 $ 7,560
Net change in cumulative foreign currency
translation net of deferred taxes .... -- 10,600 (3,040) (3,742) 3,482
------------- ------------- ------------- ------------- -------------
BALANCE AT END OF PERIOD .......... $ -- $ 10,600 $ 7,560 $ 6,858 $ 11,042
============= ============= ============= ============= =============
ACCUMULATED DEFICIT
Balance at beginning of period, as previously
reported ............................. $ (127,446) $ (106,778) $ (125,677) $ (125,677) $ (143,911)
Adjustment for the cumulative effect on prior
years of applying retroactively the new
method of accounting for income taxes . 32,535 -- -- -- --
------------- ------------- ------------- ------------- -------------
Balance at beginning of period, as adjusted (94,911) (106,778) (125,677) (125,677) (143,911)
Net income (loss) ...................... (11,867) (18,899) (18,234) 4,007 (3,167)
------------- ------------- ------------- ------------- -------------
BALANCE AT END OF PERIOD .......... $ (106,778) $ (125,677) $ (143,911) $ (121,670) $ (147,078)
============= ============= ============= ============= =============
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
$ (56,029) $ (49,609) $ (45,192) $ (62,235) $ (103,658)
============= ============= ============= ============= =============
</TABLE>
See accompanying notes.
F-8
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
---------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) ................ $ (11,867) $ (18,899) $ (18,234) $ 4,007 $ (3,167)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization . 65,195 75,518 77,700 18,058 21,775
Extraordinary loss ............ -- -- 10,368 -- --
Accretion of debt discount .... -- -- 328 -- 391
Net (gains) losses on sales of
marketable securities ....... (3,292) 209 (13,517) (13,115) (27)
Deferred income tax (benefit) . (3,434) (9,769) (14,724) 1,883 (1,550)
Write off of assets upon rebuild
of cable systems ............ 1,445 2,245 282 -- --
(Gain) on sale of property and
equipment ................... (1,150) (371) (143) (75) (20)
Equity in net losses of
unconsolidated affiliates ... 8,450 7,940 10,682 3,092 7,185
(Gain) on disposal of partnership
interest .................... -- -- -- -- (6,974)
Loss on other investments ..... -- -- 75 -- --
Interest paid from loan proceeds -- 1,792 -- -- --
Deferred interest on capital leases 49 19 -- 2 --
Minority interest ............. (78) (581) (1,347) (108) (1,225)
Changes in operating assets and
liabilities, net of effects from
acquisitions
Cash -- restricted escrow ..... -- (3,273) 3,273 (60) --
Accounts receivable ........... (1,704) (3,595) 2,205 755 (1,042)
Inventories ................... (3,502) (2,657) 2,260 (768) 909
Prepaid expenses .............. 204 478 540 62 178
Other assets .................. (278) (564) (85) 25 (106)
Accounts payable and accrued
expenses:
Affiliate ................... (2,091) 4,176 (433) (382) 596
Unrelated parties ........... 4,607 (773) 12,201 (5,442) 12,334
Unearned revenues and customer
prepayments ................. 155 1,930 (137) 561 721
Deposits on converters ........ 166 294 62 23 (10)
------------ ------------ ------------ ---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ............... 52,875 54,119 71,356 8,518 29,968
------------ ------------ ------------ ---------- -----------
</TABLE>
See accompanying notes.
F-9
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
-------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
------------- ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems ..... $ (80,557) -- -- $ -- $ (576,132)
Acquisition of the minority interest
of South Jersey Cablevision
Associates ..................... -- -- (8,838) -- --
Non cable acquisitions ............ -- -- (198) (198) (1,100)
Purchases of property and equipment . (45,584) (48,525) (47,735) (11,320) (8,479)
Purchases of marketable securities . (30,981) (9,023) (2,678) (846) (185)
Purchases of other investments .... (10,359) (55) (71) (873) --
Proceeds from sales of property and
equipment ...................... 1,860 607 253 79 20
Proceeds from sales of marketable
securities ..................... 37,744 6,974 16,575 14,344 1,374
Loan to Australis Media ........... -- -- -- -- (26,530)
Proceeds from note receivable ..... -- -- 19,240 -- --
Investments in unconsolidated
affiliates ..................... (18,625) (5,071) (19,492) (7,500) (2,761)
Distributions from unconsolidated
affiliates ..................... 1,450 2,825 1,826 -- --
(Increase) in other intangible assets
-- investing ................... (170) (490) (539) (19) (784)
Loans and advances to unconsolidated
affiliates ..................... (6,610) (1,979) (726) (976) (103)
Loans and advances from unconsolidated
affiliates ..................... 333 837 1,110 72 729
------------ ----------- ----------- ---------- -------------
NET CASH (USED BY) INVESTING
ACTIVITIES ................ (151,499) (53,900) (41,273) (7,237) (613,951)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increases in debt ................. 187,590 275,950 741,363 5,000 438,720
Early extinguishment of debt ...... -- -- (91,118) -- --
Other debt reduction:
Notes .......................... (91,932) (274,350) (515,528) (10,000) --
Bonds .......................... (367) (67) -- -- --
Obligations under capital leases . (72) (90) (49) (7) (13)
(Increase) in other intangible assets
-- financing ................... (3,319) (76) (4,110) (154) (198)
------------ ----------- ----------- ---------- -------------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES ...... 91,900 1,367 130,558 (5,161) 438,509
------------ ----------- ----------- ---------- -------------
NET INCREASE
(DECREASE) IN CASH ........ (6,724) 1,586 160,641 (3,880) (145,474)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ......................... 9,440 2,716 4,302 4,302 164,943
------------ ----------- ----------- ---------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,716 $ 4,302 $ 164,943 $ 422 $ 19,469
============ =========== =========== ========== =============
</TABLE>
See accompanying notes.
F-10
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
(Information as of March 31, 1996, and for the three months ended March 31,
1995 and 1996, is unaudited)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Lenfest Communications,
Inc. and subsidiaries ("the Company") is presented to assist in understanding
its financial statements. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the consolidated financial statements.
BUSINESS ACTIVITIES AND CONCENTRATIONS OF CREDIT RISK
The Company, through its cable subsidiaries, owns and operates clusters of
cable television systems located in the New Jersey and Pennsylvania suburbs
of Philadelphia, Pennsylvania, westward through Lancaster County,
Pennsylvania, and (until February 12, 1996) in Oakland, California and
Berkeley, California and other nearby municipalities in the East San
Francisco Bay Area. After February 12, 1996, the Company, through its
subsidiaries, acquired a cable system serving northern Delaware in exchange
for the cable systems located in California (See Note 26). In addition, the
Company, through its non-cable subsidiaries, provides satellite delivered
cross channel tune-in promotional services for cable television, microwave
transmission of video, voice and data and is developing cable advertising and
billing software and commercial insertion equipment which it markets. The
Company's ability to collect the amounts due from customers is affected by
economic fluctuations in these geographic areas and in the cable television
industry generally.
The Company maintains cash balances at several financial institutions
located primarily in the Philadelphia and East San Francisco Bay Areas.
Accounts at each institution are insured by either the Bank Insurance Fund or
another institutional insurance fund up to $100,000 and $500,000,
respectively. The Company maintains cash balances in excess of the insured
amounts.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Lenfest
Communications, Inc. and those of all wholly owned subsidiaries. In addition,
effective 1995, the accounts of L-TCI Associates, a partnership that is owned
approximately sixty-eight percent (68%) by the Company, are also included.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
UNAUDITED INTERIM STATEMENTS
The financial statements as of March 31, 1996, and for the three months
ended March 31, 1995 and 1996 are unaudited; however, in the opinion of the
management of the Company, all adjustments (consisting solely of normal
recurring adjustments) necessary to a fair presentation of the financial
statements for these interim periods have been made. The results for the
interim periods ended March 31, 1995 and 1996 are not necessarily indicative
of the results to be obtained for a full fiscal year.
USE OF ESTIMATES
The preparation of the consolidated 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 consolidated financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and marketable debt
securities with original maturities of three months or less.
In connection with the upgrading of certain cable systems by South Jersey
Cablevision Associates, the State of New Jersey required the Company to
establish a restricted escrow until the State approved the upgrades. The
escrow was released in April 1995.
F-11
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out basis. Inventories consist of equipment assembled and sold by the
Company's wholly owned subsidiaries, StarNet, Inc. and StarNet Development,
Inc.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. For the newly acquired systems
or companies, the purchase price has been allocated to net assets on the
basis of fair market values as determined by an independent appraiser.
Depreciation is provided using the accelerated and straight-line methods of
depreciation for financial reporting purposes at rates based on estimated
useful lives. For income tax purposes, recovery of capital costs for property
and equipment is made using accelerated methods over statutory recovery
periods.
Expenditures for renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
PROPERTY AND EQUIPMENT UNDER CAPITAL LEASES
Property and equipment capitalized under capital leases are amortized on
the straight-line method over the term of the leases or the estimated useful
lives of the assets. Amortization of leased assets is included in
depreciation expense in the statements of operations.
CAPITALIZATION OF COSTS
All costs properly attributable to capital items, including that portion
of employees' compensation allocable to installation, engineering, design,
construction and various other capital projects are capitalized. Installation
income has been fully recognized.
INVESTMENTS
Investments in which the ownership interest is less than 20% are generally
carried at cost. Investments in marketable equity securities are carried at
fair market value and any unrealized appreciation is presented as a separate
component of stockholders' equity (deficit), net of deferred taxes. For those
investments in affiliates in which the Company's voting interest is 20% to
50%, the equity method of accounting is used. Under this method, the original
investment, recorded at cost, is adjusted to recognize the Company's share of
the net earnings or losses of the affiliates as they occur rather than as
dividends or other distributions are received, limited to the extent of the
Company's investment in, advances to and guarantees for the investee. The
Company's share of net earnings or losses of affiliates includes the
amortization of purchase adjustments.
DEFERRED FRANCHISE COSTS, GOODWILL AND OTHER INTANGIBLE ASSETS
Deferred franchise costs, goodwill and other intangible assets acquired in
connection with the purchases of cable systems and other companies have been
valued at acquisition cost on the basis of the allocation of the purchase
price on a fair market value basis to net assets as determined by an
independent appraiser. Additions to these assets are stated at cost. Other
intangible assets consist of debt acquisition costs, organization costs,
covenants not to compete and software development costs. Goodwill represents
the cost of acquired cable systems and companies in excess of amounts
allocated to specific assets based on their fair market values. Deferred
franchise costs are amortized on the straight-line method over the legal
franchise lives, generally 10 to 20 years. Other intangible assets are being
amortized on the straight-line method over their legal or estimated useful
lives, generally ranging from 5 to 10 years. Goodwill is amortized on the
straight-line method over 20 to 40 years. In accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", the Company
assesses on an on-going basis the recoverability of intangible assets based
on estimates of future undiscounted cash flows for the applicable business
acquired compared to net book value. If the future undiscounted cash flow
estimate is less than net book
F-12
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
value, net book value is then reduced to the undiscounted cash flow estimate.
The Company also evaluates the amortization periods of intangible assets to
determine whether events or circumstances warrant revised estimates of useful
lives. As of December 31, 1995, management believes that no revisions to the
remaining useful lives or writedowns of deferred charges are required.
FOREIGN CURRENCY TRANSLATION
All balance sheet accounts of foreign investments are translated at the
current exchange rate as of the end of the year. Statement of operations
items are translated at average currency exchange rates. The resulting
translation adjustment is presented as a separate component of stockholders'
equity (deficit), net of deferred taxes.
INCOME TAXES
The Company files a consolidated Federal tax return. Investment and other
tax credits are recognized under the flow-through method of accounting.
INTEREST RATE PROTECTION AGREEMENTS
The amount to be paid or received is accrued as interest rates change and
is recognized over the life of the agreements as an adjustment to interest
expense.
COMPENSATED ABSENCES
Employees of the Company are entitled to carry over up to five days of
earned, unused vacation to the following year. The Company also pays
employees for earned, unused vacation upon termination of employment. The
Company does not accrue this liability because it does not believe this
liability to be material.
REVENUE RECOGNITION
The Company bills its customers in advance; however, revenue is recognized
as cable television services are provided. Receivables are generally
collected within 30 days. Credit risk is managed by disconnecting services to
customers who are delinquent. Other revenues are recognized as services are
provided or equipment is delivered. Revenues obtained from the connection of
customers of the cable television system are less than related direct selling
costs; therefore, such revenues are recognized as received.
RESTATEMENT AND RECLASSIFICATIONS
Certain amounts have been reclassified for comparability with the 1995
presentation. In addition, certain 1995 amounts have been reclassified to
present underwriters' commissions and other debt issuance costs as debt
discount and related accretion of discount as interest expense.
NOTE 2 -- COMMON STOCK OWNERSHIP AND CONTROL
The 158,896 shares of common stock outstanding at December 31, 1994 and
1995, are 50% owned by members of the Lenfest Family and affiliated entities
and 50% by LMC Lenfest, Inc., an indirect wholly owned subsidiary of
Tele-Communications, Inc. ("TCI"). Pursuant to an agreement between H.F.
Lenfest and LMC Lenfest, Inc. and the amended and restated Articles of
Incorporation of the Company, Mr. Lenfest has the right to continue as chief
executive officer of the Company for ten years, and has the right to
designate a majority of the Board of Directors of the Company until January
1, 2002. During such period, vacancies in respect of the directors designated
by Mr. Lenfest shall be filled by designees of Mr. Lenfest or, in the event
of Mr. Lenfest's death, of The Lenfest Foundation. Thereafter, the Lenfest
family and LMC Lenfest, Inc. will have the right to appoint an equal number
of members of the Company's Board of Directors. This right will continue for
so long as any member of the Lenfest Family owns any stock in the Company.
F-13
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 3 -- SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest ....................... $36,908 $44,613 $55,845 $16,707 $3,932
========= ========== ========== ========== =========
Income taxes ................... $ 400 $ 121 $ 160 $ -- $ --
========= ========== ========== ========== =========
</TABLE>
SUPPLEMENTAL SCHEDULES RELATING TO ACQUISITIONS
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
-------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ---------- ---------- ---------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Property and equipment ......... $ 24,839 $ -- $ 4,932 $ 1,347 $161,896
Deferred franchise costs ....... 69,988 -- 2,124 -- 388,761
Intangible and other assets .... 10,518 -- 6,158 6,158 26,575
Debt assumed ................... (19,160) -- -- -- --
Liability assumed .............. (1,628) -- -- -- --
Minority interest in partnership
equity ........................ (4,000) -- 3,129 -- --
Customer prepayments and
deposits ...................... -- -- (307) (307) --
---------- ---------- --------- --------- ------------
-- -- 16,036 7,198 577,232
Amount financed ................ -- -- 7,000 7,000 --
---------- ---------- --------- --------- ------------
NET CASH PAID ................ $ 80,557 $ -- $ 9,036 $ 198 $577,232
========== ========== ========= ========= ============
Unrealized gains (losses) on
marketable securities ......... $ 12,739 $38,952 $73,800 $13,176 $(11,276)
========== ========== ========= ========= ============
</TABLE>
NONCASH INVESTING AND FINANCING TRANSACTIONS
In 1995, the Company financed a $19,240,000 loan to Australis Media Limited
and $20,000,000 of its additional investment in Garden State Cablevision, L.P.
The Company's 1994 investment in Raystay Co. was financed by a promissory
note to Raystay Co. in the amount of $3,000,000 and promissory notes to
several selling shareholders totaling $3,238,000.
In 1994, the Company financed the payment of $90,972,000 of maturing debt,
$1,792,000 of interest and $4,236,000 of loan costs.
In 1994, the Company converted $2,200,000 of convertible promissory notes
and $154,000 of accrued interest into 1,833,555 shares of Video Jukebox
Network, Inc.
The Company's 1993 investment in Australis Media Limited was financed by
notes payable to a group of banks in the amount of $85,000,000 and by a
promissory note to a principal stockholder of the Company in the amount of
$5,972,000.
In 1993, the Company refinanced $19,160,000 of debt assumed by South
Jersey Cablevision Associates.
During 1993, 1994 and 1995, the Company disposed of $307,000, $2,037,000
and $4,231,000, respectively, of fully depreciated plant in connection with
the rebuild of certain of its systems. The Company retired $250,000 of fully
depreciated equipment in 1994.
F-14
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 3 -- SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS - (Continued)
The Company incurred additional capital lease obligations in the amount of
$954,000 in 1993. Additionally, the Company reclassified $777,000 and $10,000
of equipment under capital lease as property and equipment in 1994 and 1995,
respectively, at the conclusion of the lease obligations.
NOTE 4 -- NEW BUSINESS AND ACQUISITIONS
CABLE SYSTEMS
On June 29, 1995, the Company, through its subsidiary, Lenfest Raystay
Holdings, Inc., exercised an option to acquire an additional 5,275 shares of
Class B common stock of Raystay Co. for $3,073,000 increasing the Company's
ownership to 45%. The Company initially acquired 31.99% of the outstanding
stock of Raystay Co. for $6,238,000 on July 29, 1994. The Company uses the
equity method to account for this investment.
On June 23, 1995, the Company, through its newly formed subsidiary,
Lenfest South Jersey Investments, Inc. purchased the remaining 40% minority
general partnership interest in South Jersey Cablevision Associates ("South
Jersey") for $8,838,000. The Company, through its subsidiary, Lenfest
Atlantic, Inc., owned a sixty percent (60%) general partnership interest in
South Jersey, and has managed the South Jersey's operations since its
inception on April 2, 1993. Lenfest Atlantic's original investment was
$6,000,000. South Jersey owns and operates contiguous cable systems serving
approximately 20,000 subscribers in southern New Jersey.
On January 10, 1995, the Company, through its subsidiary, Lenfest Jersey,
Inc., acquired a 10.005% general partnership interest in Garden State
Cablevision, L.P. for $29,250,000, increasing its ownership to a total of 50%
of the partnership.
On August 20, 1993, the Company, through its subsidiary, Suburban Cable TV
Co. Inc., acquired the assets of a cable television system serving a total of
approximately 25,000 subscribers located in Norristown, Pennsylvania and
surrounding areas. The acquisition was accounted for under the purchase
method. The purchase price was $75,500,000.
On May 28, 1993, the Company, through its newly formed subsidiary, Lenfest
York, Inc., acquired 14.9% of the voting stock of Susquehanna Cable Co.
("Susquehanna"), a majority-owned subsidiary of Susquehanna Pfaltzgraff Co.,
and 17.75% of the voting stock of four of Susquehanna's subsidiaries for
$11,000,000. On November 30, 1993, Lenfest York, Inc. acquired 17.75% of the
voting stock of a fifth subsidiary of Susquehanna for $14,000,000. The
Company's direct and indirect investment in each of the five subsidiaries
("Subsidiaries") aggregates 30%. The Company utilizes the equity method to
account for its investment in the Subsidiaries and the cost method to account
for its investment in Susquehanna. Susquehanna and Subsidiaries own and
operate several cable systems serving a total of over 120,000 subscribers,
the largest of which is located in York County, Pennsylvania and is
contiguous to the Company's cable systems located in Lancaster County,
Pennsylvania. The Company has the right of first refusal on any sale of stock
of the Subsidiaries owned by Susquehanna and on any sale of cable television
system assets owned by Susquehanna or Subsidiaries. In addition, after May
28, 1998, the agreement provides that either the Company or Susquehanna can
initiate a buy-sell transaction for all of the outstanding ownership
interests in Susquehanna and Subsidiaries.
The accompanying consolidated financial statements include the results of
operations for these acquisitions since the date of acquisition.
The following summarized pro forma (unaudited) information assumes the
acquisitions had occurred on January 1, 1993:
<TABLE>
<CAPTION>
(Dollars in thousands)
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues ...................... $ 223,046 $ 237,195 266,249
------------ ------------ ------------
Loss before extraordinary loss . $ (11,200) $ (20,056) $ (11,707)
------------ ------------ ------------
Net loss ...................... $ (11,200) $ (20,056) $ (18,446)
========= ========= =========
</TABLE>
F-15
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 4 -- NEW BUSINESS AND ACQUISITIONS - (Continued)
INTERNATIONAL
In December 1993, the Company, through its newly formed subsidiary, Lenfest
Australia, Inc., formed an Australian subsidiary, Lenfest Australia Group Pty
Limited. Lenfest Australia Group Pty Limited was formed to acquire 11,000,000
shares of the voting stock (approximately 8.2%, at that time) and 173,000,000
non-voting debentures for a total equity interest of approximately 50.5% (at
that time), (49.1% on a fully-diluted basis) of Australis Media Limited
("Australis"), a publicly traded Australian company for $90,972,000, which
includes a reimbursement of $7,500,000 to H.F. Lenfest for his payment of
deposits for a Pay TV license. Australis holds one of two Australian commercial
Pay TV Direct Broadcast Satellite licenses as well as a number of MDS licenses
serving several major metropolitan areas of Australia. The Company classifies
this investment as marketable securities. Although the Company's total equity
interest in Australis exceeds 20%, the Company does not utilize the equity
method to account for this investment because it presently owns less than 5% of
the voting stock of Australis and the Company does not have the ability to exert
significant influence over Australis' operational and financial policies. (See
Note 11).
In April 1993, the Company, through its newly formed subsidiary, Lenfest
International, Inc., formed L-TCI Associates ("L-TCI"), a general partnership
with UA-France, Inc. ("UAF"), an indirect, wholly owned subsidiary of
Tele-Communications, Inc. L-TCI was formed to subscribe to and acquire shares
of stock in Videopole, a French cable television holding and management
company that franchises, builds and operates cable television systems in
medium to smaller communities in France. In May 1993, L-TCI acquired 29% of
the issued and outstanding stock of Videopole. The Company invested
$4,860,000 to fund its pro-rata share of the L-TCI acquisition in 1993 and
made an additional investment of $1,627,000 in 1994. The Company used the
equity method to account for its investment in L-TCI in 1993 and 1994. L-TCI
is obligated to make additional capital contributions pursuant to its stock
subscription agreement. In 1995, UAF did not fund its pro-rata share of the
capital contributions. Pursuant to the L-TCI partnership agreement, the
Company is contingently liable for the UAF share of the L-TCI's commitment
and invested $7,168,000 to fund the contribution. The 1995 investment
increased the Company's ownership percentage of L-TCI to approximately 68%.
L-TCI's commitment amounts to 43,660,000 and 20,010,000 French francs in 1996
and 1997, respectively, which as of the date of these statements, amounted to
$8,902,000 and $4,080,000, respectively.
OTHER
On January 4, 1995, the Company acquired all of the general and limited
partnership interests of OPM Real Estate, L.P., a company that provided
microwave transmission services throughout Delaware, Maryland and Virginia,
for a price of $7,500,000 before deductions for customer prepayments and
deposits. The Company acquired these interests through MicroNet Diversified
Investments, Inc. and MicroNet Delmarva, Inc., newly formed, wholly owned
subsidiaries of MicroNet, Inc., a wholly owned subsidiary of the Company.
Immediately upon acquisition, the name of the limited partnership was changed
to MicroNet Delmarva Associates, L.P. ("Associates"). As an indirect, wholly
owned subsidiary of the Company, Associates is included in the consolidated
financial statements of the Company. This acquisition was financed in part by
a new $7,000,000 credit facility issued by PNC Bank to MicroNet, Inc.
On August 24, 1993, the Company, through its newly formed subsidiary,
StarNet Interactive Entertainment, Inc., formed a partnership with CEA
Investors Partnership II, Ltd. ("Investors") for the sole purpose of jointly
holding a substantial equity interest in Video JukeBox Network, Inc. ("VJN"),
a publicly traded Florida corporation. The name of the partnership is
StarNet/CEA II Partners ("Partners"). The Company contributed $3,305,808 for
a fifty percent (50%) partnership interest and Investors contributed cash of
$105,808 and 2,834,908 shares of VJN common stock valued at $3,200,000. On
August 30, 1993, Partners acquired 2,014,520 shares of VJN common stock from
New Vision Music for $1,611,616, 687,500 shares of newly issued VJN common
stock for $550,000 and a convertible promissory note issued by VJN for
$1,200,000, with interest accruing at the rate of prime plus 1%, with the
note convertible at the rate of $.80 per share and accrued interest on the
note at the rate of $1.25 per share. As of December 16, 1993, the $1,200,000
convertible promissory note was converted into 1,500,000 shares of VJN common
stock and the related accrued interest of $24,855 was converted into 19,884
shares of VJN common stock. In 1994, the Partners acquired an additional
1,957,033
F-16
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 4 -- NEW BUSINESS AND ACQUISITIONS - (Continued)
shares of VJN stock for $1,949,000. At December 31, 1995, Partners owned a
total of 9,013,845 shares of VJN common stock, which represents direct
ownership by Partners of approximately 37.6% of VJN's outstanding shares of
common stock. In addition, Investors also controls irrevocable proxies in its
favor on an additional 3,308,810 shares. Investors has agreed that it will
vote the proxy shares in the same manner as Partners, thereby giving Partners
and Investors voting control over approximately 51.5% of VJN voting stock.
In connection with the above stock acquisitions, StarNet, Inc.
("StarNet"), a subsidiary of the Company, entered into consulting, management
and service agreements with VJN, whereby StarNet is responsible for the
day-to-day management and supervision of VJN and whereby StarNet will provide
technology relating to a system for digital satellite distribution, headend
storage and playback of discrete video segments. StarNet was compensated at
the rate of $25,000 per month during the consulting period (August 24, 1993
to December 16, 1993). Under the management agreement, which expired December
31, 1994, StarNet was compensated in the amount of $250,000 plus costs
incurred by StarNet in developing the above technology. Under the service
agreement, StarNet was providing analog uplink service and satellite capacity
to VJN on Satcom C-4 for the delivery of VJN's programming service known as
"The Box" for a fee of $200,000 per month. Upon conversion of The Box from
analog to digital transmission, which occurred in February 1995, the monthly
charge was reduced to $110,000 per month, and further reduced to $73,500 in
April 1995. As permitted by the service agreement, VJN elected to defer the
first eleven months of payments by the issuance of convertible promissory
notes totaling $2,200,000, such notes bearing interest at prime plus one
percent (1%). On December 12, 1994, StarNet converted the convertible
promissory notes and $154,000 of accrued interest into 1,833,555 shares of
VJN. By mutual agreement, the service agreement will terminate in April 1996.
The Company's direct and indirect investment in VJN via Investors and
StarNet amount to approximately 45.3% of the outstanding stock of VJN. The
Company utilizes the equity method to account for its investment in VJN.
NOTE 5 -- INVENTORIES
The schedule of inventories at December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Raw materials ..................... $5,429 $3,428
Finished goods and work-in-process . 1,763 1,504
--------- ---------
$7,192 $4,932
========= =========
</TABLE>
At December 31, 1995, inventories have been written down to estimated net
realizable value and the accompanying consolidated statement of operations
for 1995 includes a corresponding charge of $1,346,000, which has been
included with cost of sales-equipment.
F-17
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 6 -- PROPERTY AND EQUIPMENT
The schedule of property and equipment at December 31, 1994 and 1995 is as
follows:
<TABLE>
<CAPTION>
Estimated
Useful Lives
1994 1995 in Years
----------- ----------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Land .................................... $ 4,456 $ 4,660 --
Building and improvements ............... 12,918 13,574 10-39
Cable distribution systems .............. 420,144 458,520 5-12
Microwave equipment ..................... 28,609 30,717 7
Satellite communications equipment ...... 6,380 9,806 7
Office equipment, furniture and fixtures . 14,301 16,457 4-15
Assets under capital leases ............. 5,142 5,132 4-15
----------- -----------
491,950 538,866
Accumulated depreciation ................ 280,823 327,086
----------- -----------
$211,127 $211,780
=========== ===========
</TABLE>
NOTE 7 -- INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P.
The Company, through several subsidiaries, owns non-controlling equity
interests in several general partnerships and corporations. Any subsidiary of
the Company that is a general partner is, as such, liable, as a matter of
partnership law, for all debts of such partnership in the event liabilities
of that partnership were to exceed its assets. Investments and advances in
affiliates accounted for under the equity method amounted to $36,529,000 and
$49,072,000 at December 31, 1994 and 1995, respectively. Net losses
recognized under the equity method for the years ended December 31, 1993,
1994 and 1995 were $8,450,000, $7,940,000 and $10,682,000, respectively.
Under the equity method, the initial investments are recorded at cost.
Subsequently, the carrying amount of the investments are adjusted to reflect
the Company's share of net income or loss of the affiliates as they occur.
Losses in excess of amounts recorded as investments on the Company's books
have been offset against loans and advances to these unconsolidated
affiliates to the extent they exist.
The Company, through its subsidiary, Lenfest Jersey, Inc., owns a 10.005%
general partnership interest and a 39.995% limited partnership interest in
Garden State Cablevision L.P. ("Garden State"), a cable company now serving
approximately 198,000 subscribers in southern New Jersey. Under a consulting
agreement, the Company advises Garden State on various operational and
financial matters for a consulting fee equal to 1.5% of Garden State's gross
revenue. On January 10, 1995, in connection with the increase in ownership
described in Note 4, the consulting fee was changed to 3% of gross revenue.
However, due to restrictions contained in Garden State's debt agreements, the
payment of a portion of these fees has been deferred. Garden State also
obtains its cable television programming from Satellite Services, Inc.
through the Company. The programming services are at a rate which is not more
than Garden State could obtain independently. For the years ended December
31, 1993, 1994 and 1995, the total programming obtained through the Company
was approximately $10,226,000, $11,150,000 and $11,985,000, respectively. The
Company accounts for its investment in Garden State under the equity method.
Effective January 10, 1995, the Company is allocated a total of 50% of Garden
State's losses. Previously, the Company was allocated 49.5% of losses. In
addition, the Company is required to make up its partner capital deficits
upon the termination or liquidation of the Garden State partnership. Because
of the requirement to make up capital deficits, the accompanying financial
statements reflect equity in accumulated losses, net of related receivable,
in excess of the investments in Garden State in the amount of $34,078,000 and
$15,451,000 at December 31, 1994 and 1995, respectively.
F-18
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 7 -- INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (Continued)
Summarized audited financial information of Garden State, accounted for
under the equity method, at December 31, 1994 and 1995, is as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Financial Position
Cash and cash equivalents ............ $ 4,610 $ 3,259
Accounts receivable, net ............. 2,227 2,640
Prepaid expenses ..................... 1,105 1,104
Property and equipment, net .......... 75,695 72,485
Other deferred assets, net ........... 142,997 113,711
---------- ----------
TOTAL ASSETS ....................... $226,634 $193,199
========== ==========
Debt ................................. $262,000 $245,000
Liabilities to the Company ........... 7,087 7,801
Accounts payable and accrued expenses . 14,792 18,188
Customer prepayments and deposits .... 1,022 971
Other liabilities .................... 902 964
Partners' deficit .................... (59,169) (79,725)
---------- ----------
TOTAL LIABILITIES AND DEFICIT ...... $226,634 $193,199
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Results of Operations
Revenues ............................. $ 90,824 $ 92,514 $ 92,815
Operating expenses ................... (38,014) (40,294) (41,639)
Depreciation and amortization ........ (47,682) (47,293) (46,976)
------------ ------------ ------------
OPERATING INCOME ................... 5,128 4,927 4,200
Interest expense ..................... (20,904) (19,132) (19,166)
Other expense ........................ (3,633) (3,700) (5,590)
Effect of accounting change .......... (657) -- --
------------ ------------ ------------
NET LOSS ........................... $(20,066) $ (17,905) $ (20,556)
============ ============ ============
Cash Flows
Cash flows from operating activities . $ 34,946 $ 30,043 $ 30,452
Cash flows from investing activities . (8,731) (15,369) (14,794)
Cash flows from financing activities . (34,525) (15,279) (17,009)
------------ ------------ ------------
(DECREASE) IN CASH AND CASH
EQUIVALENTS ................... (8,310) (605) (1,351)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR ............................... 13,525 5,215 4,610
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR .......................... $ 5,215 $ 4,610 $ 3,259
============ ============ ============
</TABLE>
F-19
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 7 -- INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (Continued)
Summarized unaudited financial information of affiliates other than Garden
State, accounted for under the equity method, at December 31, 1994 and 1995,
is as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Financial Position
Cash and cash equivalents ................. $ 5,349 $ 10,206
Accounts receivable, net .................. 10,558 15,458
Prepaid expenses .......................... 2,333 1,425
Property and equipment, net ............... 50,253 67,061
Due from the Company ...................... 3,000 --
Due from related party (not the Company) .. 274 15
Deferred tax asset ........................ 3,223 2,122
Other assets, net ......................... 33,801 14,898
---------- ----------
TOTAL ASSETS ............................ $108,791 $111,185
========== ==========
Liabilities to the Company ................ $ 1,815 $ 2,514
Accounts payable and accrued expenses ..... 20,846 20,945
Debt ...................................... 45,997 31,193
Deferred tax liability .................... 5,879 9,716
Payable to related party (not the Company) . 59,803 66,194
Deficit ................................... (25,549) (19,377)
---------- ----------
TOTAL LIABILITIES AND DEFICIT ........... $108,791 $111,185
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Results of Operations
Revenues ............................ $ 81,073 $ 99,256 $124,171
Operating expenses .................. (63,209) (68,382) (84,615)
Depreciation and amortization ....... (7,538) (12,122) (15,876)
---------- ---------- -----------
OPERATING INCOME .................. 10,326 18,752 23,680
Interest expense .................... (4,495) (7,748) (8,988)
Other income (expense) .............. (4,034) (2,064) (2,548)
---------- ---------- -----------
NET INCOME ........................ $ 1,797 $ 8,940 $ 12,144
========== ========== ===========
Cash Flows
Cash flows from operating activities . $ 12,208 $ 16,384 $ 18,146
Cash flows from investing activities . (17,048) (14,213) (24,598)
Cash flows from financing activities . 6,359 (1,448) 4,289
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............. $ 1,519 $ 723 $ (2,163)
========== ========== ===========
</TABLE>
F-20
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 7 -- INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (Continued)
The following table reflects the carrying value of the Company's
investments, other than Garden State, accounted for under the equity method,
including related receivables, as of December 31, 1995:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Susquehanna Cable Co. Subsidiaries ("SCC Subs") (Note 4) . $11,889
Video JukeBox Network, Inc. ("VJN") (Note 4) ........... 6,832
Raystay Co. ("Raystay") (Note 4) ....................... 8,556
Videopole (Note 4) ..................................... 13,663
Bay Cable Advertising ("BCA") .......................... 4,058
MetroNet Communications and GlobeNet ("MetroNet") ...... 2,149
Cable Adcom ("Adcom") .................................. 786
Philadelphia Cable Advertising ("PCA") ................. 425
Other .................................................. 714
--------
$49,072
========
</TABLE>
CAH, Inc., a subsidiary of the Company, owned a 41.667% general
partnership interest in Bay Area Interconnect d/b/a Bay Cable Advertising, a
cable advertising interconnect serving the San Francisco, California, Area of
Dominant Influence ("ADI") (See Note 26). Suburban Cable TV Co. Inc., a
wholly owned subsidiary of the Company, owns a 25% and a 20% general
partnership interest in Cable Adcom and Greater Philadelphia Cable
Interconnect d/b/a Philadelphia Cable Advertising, respectively. These
partnerships are cable advertising interconnects that serve the Harrisburg,
Pennsylvania, and Philadelphia, Pennsylvania, ADI's. The Company's indirect,
wholly owned subsidiary, LenNet, Inc., owns a 50% general partnership
interest in MetroNet Communications, a company that provides microwave
transmissions of voice and data between two points of presence for its
customers located throughout the United States and a 50% general partnership
interest in GlobeNet, a company that provides long distance telephone service
for its customers located in foreign countries.
The following table reflects the Company's share of earnings or losses of
Garden State and each of the aforementioned affiliates:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Results of Operations
Garden State ........ $ (8,570) $ (7,476) $ (8,527)
SCC Subs ............ (857) (1,150) (1,263)
VJN ................. (74) (654) 132
Raystay ............. -- 132 (886)
Videopole ........... (382) (1,518) (2,644)
BCA ................. 1,457 2,143 1,711
MetroNet ............ 94 213 190
Adcom ............... 153 400 530
PCA ................. (36) (20) 7
Other ............... (235) (10) 68
----------- ----------- -----------
$ (8,450) $ (7,940) $ (10,682)
=========== =========== ===========
</TABLE>
F-21
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 8 -- OTHER INVESTMENTS
Other investments, accounted for under the cost method, are summarized as
follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Susquehanna Cable Co., Inc. (a) . $10,359 $10,359
Other .......................... 55 51
---------- ----------
$10,414 $10,410
========== ==========
</TABLE>
- ------
(a) The Company has 14.9% ownership of the voting stock of Susquehanna Cable
Co. Inc. and accounts for this investment under the cost method.
Susquehanna is an indirect subsidiary of Susquehanna Pfaltzgraff Co. and
is the parent company of five cable operating subsidiaries, of which the
Company has a direct ownership interest of the voting stock of 17.75%.
The Company's investment in these subsidiaries are accounted for under
the equity method because the Company's direct and indirect ownership
interests in these subsidiaries approximate thirty percent (30%).
NOTE 9 -- GOODWILL
The excess of the purchase price paid over the acquired net assets has
been allocated to goodwill. Accumulated amortization at December 31, 1994 and
1995, was $19,124,000 and $22,390,000, respectively.
NOTE 10 -- DEFERRED FRANCHISE COSTS AND OTHER INTANGIBLE ASSETS
A schedule of deferred franchise costs and other intangible assets and
accumulated amortization at December 31, 1994 and 1995, is as follows:
<TABLE>
<CAPTION>
Accumulated
Amount Amortization Net
----------- -------------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
December 31, 1994
Deferred franchise costs . $258,050 $111,574 $146,476
========= ========== =========
Debt acquisition costs .. $ 8,583 $ 2,278 $ 6,305
Covenants not to compete . 12,646 2,806 9,840
Other deferred assets ... 8,714 2,261 6,453
--------- ---------- ---------
$ 29,943 $ 7,345 $ 22,598
========= ========== =========
December 31, 1995
Deferred franchise costs . $260,321 $126,796 $133,525
========= ========== =========
Debt acquisition costs .. $ 8,104 $ 2,368 $ 5,736
Covenants not to compete . 12,646 4,409 8,237
Other deferred assets ... 9,970 3,424 6,546
--------- ---------- ---------
$ 30,720 $ 10,201 $ 20,519
========= ========== =========
</TABLE>
NOTE 11 -- MARKETABLE SECURITIES
In 1994, the Company changed its method of accounting for marketable
securities to conform to the requirements of Financial Accounting Standards
Board Statement (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". The adoption of SFAS 115 changed the Company's method
of accounting for certain investments from the lower of cost or market to
fair market value. Under this method, certain investments in debt and equity
securities are carried at their fair market value. Any unrealized
appreciation or depreciation is presented as a separate component of
stockholders' equity (deficit), net of deferred taxes. The new method of
accounting decreased stockholders' deficit as of January 1, 1994, by
$8,440,000.
F-22
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 11 -- MARKETABLE SECURITIES - (Continued)
The change in accounting has been applied prospectively and, accordingly,
the prior years' financial statements have not been restated. Prior to 1994,
the Company valued its marketable securities on the lower of cost or market
method. The Company's investment in the securities of Australis Media Limited
consists of 11,000,000 shares of voting stock and 173,000,000 non-voting
convertible debentures. The debentures are classified as equity securities by
Australis as the debentures are unsecured non-voting securities that have
interest entitlements equivalent in both timing and amount to the dividend
entitlements attaching to common stock and will be subordinated to all
creditors other than common stock shareholders upon any liquidation or
winding up. The convertible notes will not be redeemable for cash but will be
convertible into ordinary shares on a one-for- one basis providing that
certain conditions are met. The notes are convertible once they have been
transferred from the initial subscriber.
At December 31, 1994, the debentures were not listed on the Sydney or any
other exchange. As a result, the market value of the debentures could not be
determined directly. Management believes that, because there was no public
market for the debentures and debentures comprise the majority of the
securities, it was appropriate to discount the estimated fair value of such
debentures by 25% from the market value of the voting stock at December 31,
1994. Management selected the above discount rate because it felt this was a
realistic estimate of the value of the debentures off-market at that date.
The aggregate cost and market values of the securities at December 31, 1994
and 1995 and March 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross
Aggregate Unrealized Fair
Cost Gain (Loss) Value
----------- ------------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
December 31, 1994
QVC, Inc. ..................................... $ 28 $ 11,994 $ 12,022
Australis Media Limited convertible debentures . 85,534 23,150 108,684
Australis Media Limited common stock .......... 5,438 3,776 9,214
Other marketable equity securities ............ 5,161 32 5,193
-------- ---------- ---------
$96,161 $ 38,952 $135,113
======== ========== =========
December 31, 1995
Australis Media Limited convertible debentures . $85,534 $ 68,817 $154,351
Australis Media Limited common stock .......... 5,438 3,967 9,405
Other marketable equity securities ............ 4,809 1,016 5,825
-------- ---------- ---------
$95,781 $ 73,800 $169,581
======== ========== =========
March 31, 1996
Australis Media Limited convertible debentures . $85,534 $(11,775) $ 73,759
Australis Media Limited common stock .......... 5,438 (748) 4,690
Other marketable equity securities ............ 3,646 1,247 4,893
-------- ---------- ---------
$94,618 $(11,276) $ 83,342
======== ========== =========
</TABLE>
All of the Company's securities are considered to be available for sale.
Net realized gains (losses) from the sale of marketable securities, in the
amount of $3,292,000, $(209,000) and $13,517,000 are included in other income
(expense) in 1993, 1994 and 1995, respectively. The 1995 net realized gains
includes a net gain of approximately $13,100,000 from the sale of its QVC,
Inc. stock holdings. The specific identification method is used to determine
the cost of each security at the time of sale.
F-23
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 12 -- NOTES PAYABLE
Notes payable consisted of the following at December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
----------- ----------
(Dollars in thousands)
<S> <C> <C>
8.375% senior notes due November 1, 2005 (a) ........... $ -- $684,691
Notes payable to banks (b) ............................. 367,450 --
11.30% senior promissory notes due September 1, 2000 (c) . 86,000 75,000
11.84% senior promissory notes due May 15, 1998 (d) .... 42,000 31,500
9.93% senior promissory notes due September 30, 2001 (e) . 100,000 14,250
Notes payable to bank due June 30, 1999 (f) ............ -- 7,000
Notes payable to bank (g) .............................. 19,100 --
Promissory notes payable (h) ........................... 6,238 --
----------- ----------
Notes payable ........................................ $620,788 $812,441
=========== ==========
</TABLE>
- ------
(a) These notes, which are stated net of unamortized discount and issuance
costs of $15,309,000 at December 31, 1995, were issued through a public
offering in November 1995. The notes require semi-annual interest
payments. The notes are not redeemable at the option of the Company prior
to maturity. Upon a Change of Control Triggering Event, holders of the
notes may require the Company to purchase all or a portion of the notes
at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest. The net proceeds were used to provide funds
for the early extinguishment of debt, to pay off notes payable to banks,
and to provide funding for the exchange of assets with TCI (Note 26) and
to provide partial funding for the cable television systems acquired from
Sammons Communications, Inc. (Note 26).
(b) The credit agreement dated June 24, 1994, amended December 16, 1994, and
as of January 10, 1995, related to these notes were with a group
consisting of several banks provided for up to $450,000,000 of
borrowings. The credit agreement provided the financing to repay existing
debt and fund acquisitions, investments, capital expenditures and working
capital needs.
The interest rate was based upon the agent bank's base rate plus 1/8 % -
5/8 % or LIBOR plus 3/4 % - 1 5/8 %. The level of borrowing margin was
based upon the Company's and certain of its subsidiaries leverage ratio.
The Company also paid a commitment fee of 3/8 % per annum on the unused
portion of the facility. The Company's weighted-average effective
interest rate on borrowings at December 31, 1994, was 7.62%.
In November 1995, the then outstanding balance of $438,690,000 was paid
off with a portion of the proceeds from the notes described in (a) above.
(c) These notes are payable to a group consisting of several insurance
companies. The notes are payable in annual installments, with the final
payment due September 1, 2000. In connection with the offering described
in (a), the Company and the holders have agreed to amend the terms
thereof, which included increasing the interest rate from 10.15% to
11.30% per annum. Interest is payable quarterly.
(d) These notes are payable to an insurance company and to its assignees. The
notes are payable in annual installments, with the final payment due May
15, 1998. In connection with the offering described in (a), the Company
and the holders have agreed to amend the terms thereof, which included
increasing the interest rate from 10.69% to 11.84% per annum. Interest is
payable quarterly.
(e) At December 31, 1995, this consists of a note payable to an insurance
company. At December 31, 1994, these notes were payable to a group
consisting of several insurance companies. The outstanding note is
payable in annual installments, with the final payment due September 30,
2001. Interest is at the fixed rate of 9.93% per annum, payable
semi-annually. All of these notes, except for the outstanding note, were
redeemed in connection with the offering described in (a). The Company
incurred extraordinary charges associated with the early extinguishment
of these notes. These charges increased net loss by $6,739,000, net of
income tax benefit of $3,629,000 in 1995.
F-24
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 12 -- NOTES PAYABLE - (Continued)
The above debt agreements place certain financial restriction on the
Company and its restricted subsidiaries which, among others, require
meeting certain ratios relating to interest coverage and principal
coverage.
(f) These notes are payable by the Company's subsidiary, MicroNet, Inc., to a
bank, pursuant to a credit agreement dated January 3, 1995. The agreement
provides for a revolving loan not to exceed $7,000,000 through June 30,
1996, at which time the outstanding balance will convert to a term loan
payable in quarterly installments with the initial payment due July 1,
1996, and maturing on June 30, 1999. The loan is secured by the real and
personal property of MicroNet. The loan bears interest at either the
bank's base prime rate plus 3/4 % - 1 3/4 % ("Prime Based Rate") or LIBOR
plus 1 3/4 % - 2 1/4 % ("LIBOR Based Rate"). Interest is payable monthly
with respect to portions of the loan bearing interest at the Prime Based
Rate, and on the last day of each LIBOR maturity period with respect to
portions of the loan bearing interest at the LIBOR Based Rate, not to
exceed three months. The loan requires mandatory principal prepayments
when certain cash flow targets have been met.
(g) These notes were payable by South Jersey, to two banks, pursuant to a
credit agreement dated April 2, 1993. The agreement provided for a
revolving and term loan not to exceed $20,000,000 for a period of one
year at which time the outstanding balance under the revolving loan
converted to a loan payable in 24 consecutive quarterly installments with
the initial payment due on June 30, 1994, and maturing March 31, 2000.
These notes were repaid in 1995 with proceeds from the bank credit
facility described in (b) above.
(h) These eight notes were payable to Raystay Co. and selling shareholders.
The notes funded the initial investment in Raystay Co. by the Company's
subsidiary, Lenfest Raystay Holdings, Inc. The notes bore interest at the
rate of prime plus one percent (1%). The effective interest rate at
December 31, 1994 was 9.5%. These notes were paid in full in June 1995.
Maturities of notes payable, excluding unamortized discount and issuance
costs of $15,309,000, are as follows:
(Dollars in
thousands)
Year Ending December 31,
- ------------------------
1996 ................... $ 27,675
1997 ................... 28,960
1998 ................... 30,040
1999 ................... 18,950
2000 ................... 18,000
Thereafter ............. 704,125
----------
$827,750
==========
As of December 14, 1995, the Company entered into a new bank credit
facility in the aggregate amount of $600 million which consists of a $400
million term loan facility and a $200 million revolving credit facility. The
new bank facility will be used to fund the acquisition of the Salem, New
Jersey cable television system and to fund the balance of the acquisition of
the cable television systems from Sammons Communications, Inc. and to provide
funds for working capital purposes. There were no borrowings outstanding
under this credit facility at December 31, 1995. (See Note 26).
The Company has entered into interest rate cap agreements to reduce the
impact of changes in interest rates on its floating rate long-term debt. At
December 31, 1995, the Company had outstanding three interest rate cap
agreements with commercial banks, having notional principal amounts of
$50,000,000, $25,000,000, and $25,000,000. These agreements effectively
change the Company's interest rate exposure on $100,000,000 of its floating
rate debt to a maximum LIBOR rate of eight percent (8%) plus an applicable
level of borrowing margin. The interest rate cap agreements terminate on July
18, 1996, November 8, 1996, and February 27, 1997. In addition, the Company
has entered into an interest rate swap agreement with a commercial bank,
having a notional principal amount of $200,000,000. This interest rate swap
agreement terminates on June 28, 1996. Under the swap agreement, the Company
effectively converted $200,000,000 of its floating debt to a fixed rate of
6.11% plus applicable LIBOR margin.
F-25
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 12 -- NOTES PAYABLE - (Continued)
The Company is exposed to credit loss in the event of nonperformance by
the other party to the interest rate cap agreement. However, the Company does
not anticipate nonperformance by the counterparties.
NOTE 13 -- LEASES
Subsidiaries of the Company have entered into four leases for office and
warehouse space from H.F. Lenfest, a principal stockholder of the Company,
and his wife. The leases are classified as capital leases. At December 31,
1995, three of the leases provide for an aggregate minimum monthly payment of
$46,000. On each anniversary date of these three leases, the monthly payment
will increase by a minimum of 6%. At December 31, 1995, the minimum monthly
payment of the fourth lease is $22,000. On each anniversary date of the
fourth lease, the minimum monthly payment will increase by $957. For the
years ended December 31, 1993 and 1994, interest expense in the amounts of
$49,000 and $19,000 in excess of the minimum monthly payments has been
accrued and added to obligations under capital leases.
Future minimum lease payments under all capital leases and non-cancelable
operating leases with initial terms of one year or more consisted of the
following at December 31, 1995:
Capital
Leases -
Principal Operating
Stockholder Leases
------------- -----------
(Dollars in thousands)
Year Ending December 31,
----------------------------------------
1996 ................................... $ 845 $ 5,363
1997 ................................... 890 3,482
1998 ................................... 938 2,739
1999 ................................... 988 1,000
2000 ................................... 1,040 206
Thereafter ............................. 5,677 1,057
----------- --------
TOTAL MINIMUM LEASE PAYMENTS ........... 10,378 $13,847
========
LESS AMOUNT REPRESENTING INTEREST ...... (5,094)
-----------
PRESENT VALUE OF MINIMUM LEASE PAYMENTS . $ 5,284
===========
Property and equipment under capitalized leases at December 31, 1994 and
1995, are summarized as follows:
1994 1995
--------- ---------
(Dollars in thousands)
Buildings - related party . $5,132 $5,132
Office equipment ......... 10 --
--------- ---------
5,142 5,132
Accumulated depreciation . 1,470 1,849
--------- ---------
$3,672 $3,283
========= =========
Rental expense for all operating leases, principally office and warehouse
facilities, pole rent and satellite transponder, amounted to $6,697,000,
$7,691,000 and $7,986,000 for the years ended December 31, 1993, 1994 and
1995, respectively. In addition, the Company made total payments to a
principal stockholder for buildings under capitalized leases of $755,000,
$759,000 and $801,000 in 1993, 1994 and 1995, respectively.
In addition to fixed rentals, certain leases require payment of
maintenance and real estate taxes and contain escalation provisions based on
future adjustments in price indices. It is expected that, in the normal
course of business, expiring leases will be renewed or replaced by leases on
other properties; thus, it is anticipated that future minimum operating lease
commitments will not be less than the amount shown for 1996.
F-26
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 13 -- LEASES - (Continued)
In June 1989, the Company entered into a four-year agreement with GE
American Communications, Inc. requiring monthly payments of $160,000 to lease
a transponder on a communications satellite designated as Satcom C-4. The
lease commenced on January 1, 1993, the commercial operational date. The
Company has an option to renew the satellite service agreement for a first
renewal term of four (4) years at $160,000 per month and a second renewal
term of four (4) years at $170,000 per month.
On September 20, 1991, the Company entered into a six-year satellite
service agreement with GE American Communications, Inc. requiring monthly
payments of $162,500 to lease a second transponder on the Satcom C-4
communications satellite. The lease payments commenced on March 31, 1993. The
Company has an option to renew the satellite service agreement for a term of
six (6) years at $170,000 per month.
NOTE 14 -- FRANCHISE COMMITMENTS
The Company's operating cable television subsidiaries hold various
franchises and, in connection therewith, are obligated to pay franchise fees
based on certain gross revenues. For the years ended December 31, 1993 and
1994, franchise fees in the amount of $7,454,000 and $8,453,000 were paid.
For the year ended December 31, 1995, franchise fees in the amount of
$9,166,000 will be paid.
NOTE 15 -- RESEARCH AND DEVELOPMENT
The Company, through its subsidiaries StarNet Development, Inc. and
StarNet, Inc., incurred research and development costs of $2,053,000,
$2,095,000 and $1,037,000 for the years ended December 31, 1993, 1994 and
1995, respectively, in connection with the development of new equipment and
computer software. These costs have been included with programming expenses
on the accompanying consolidated statements of operations.
NOTE 16 -- EMPLOYEE HEALTH BENEFIT PLAN
On February 1, 1984, the Company established the Lenfest Group Employee
Health Benefit Plan (a trust), which provides health insurance for the
employees of most of its subsidiaries and affiliates. This trust is organized
under Internal Revenue Code Section 501(c)(9) - Voluntary Employees
Beneficiary Association (VEBA). Benefits are prefunded by contributions from
each participating subsidiary. Insurance expense is recognized as benefits
are incurred. The Company does not provide post retirement benefits to its
employees. Therefore, Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Post Retirement Benefits Other than Pensions, does
not have an impact on the Company's financial statements.
NOTE 17 -- 401(k) PLAN
The Company provides a 401(k) profit sharing plan. The Company matches the
entire amount contributed by a participating, eligible employee up to five
percent (5%) of salary. For the years ended December 31, 1993, 1994 and 1995,
the Company matched contributions of $670,000, $725,000 and $877,000,
respectively.
NOTE 18 -- CORPORATE INCOME TAXES
In 1993, the Company changed its method of accounting for income taxes to
conform to the requirements of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes". The adoption of SFAS 109
changed the Company's method of accounting for income taxes from the deferred
method to the asset and liability method. SFAS 109 requires recognition of
deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the financial statements or tax
returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Differences between financial reporting and tax bases arise most
frequently from differences in timing of income and expense recognition and
as a result of business acquisitions. Deferred income tax expense is measured
by the change in the net deferred income tax asset or liability during the
year.
F-27
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 18 -- CORPORATE INCOME TAXES - (Continued)
The provisions for income tax benefit (expense) consists of the following
components:
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Current
Federal ................................. $ (300) $ -- $ --
State ................................... (100) (40) --
---------- --------- ----------
(400) (40) --
Deferred
Federal ................................. 383 4,553 1,327
State ................................... 100 (217) 3,088
Benefit of operating loss carryforward .. 3,028 5,700 6,583
(Increase) decrease in valuation allowance (77) (267) 97
---------- --------- ----------
3,434 9,769 11,095
---------- --------- ----------
$3,034 $9,729 $11,095
========== ========= ==========
</TABLE>
The categories of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
Federal State
-------------------------- ----------------------------
1994 1995 1994 1995
----------- ----------- ------------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts ........ $ 241 $ 335 $ 87 $ 95
Deferred start-up costs ................ 959 308 -- --
Net operating loss carryforward ........ 58,872 69,086 -- --
Investments and other tax credits ...... 2,229 1,849 249 249
---------- ---------- ------------ ----------
Gross Deferred Tax Asset ............ 62,301 71,578 336 344
Deferred Tax Liabilities:
Property and equipment, principally due to
differences in depreciation ......... (11,321) (12,724) (4,884) (4,002)
Investments in affiliates, principally due
to differences in taxable income .... (5,123) (2,317) (1,783) (1,432)
Property and equipment and intangible assets
arising from purchase accounting
adjustments ......................... (16,311) (15,452) (6,698) (4,850)
Unrealized gain on marketable securities . (13,633) (25,830) -- --
---------- ---------- ------------ ----------
Gross Deferred Tax Liability ........ (46,388) (56,323) (13,365) (10,284)
---------- ---------- ------------ ----------
Net deferred tax asset (liability) before
valuation allowance ................. 15,913 15,255 (13,029) (9,940)
Valuation allowance .................... (645) (548) -- --
---------- ---------- ------------ ----------
Net Deferred Tax Asset (Liability) .. $ 15,268 $ 14,707 $(13,029) $ (9,940)
========== ========== ============ ==========
</TABLE>
F-28
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 18 -- CORPORATE INCOME TAXES - (Continued)
The difference between the net income tax benefit (expense) and the
amounts expected by applying the U.S. Federal income tax rate of 35% to loss
before income taxes is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Federal income tax benefit at statutory rates ............ $ 5,216 $10,020 $ 7,907
Nondeductible amortization of goodwill and other intangibles (949) (949) (949)
Provision for state income taxes, net of Federal income tax
benefit ................................................. -- (167) 2,007
Other .................................................... (1,233) 825 2,130
--------- --------- ---------
$ 3,034 $ 9,729 $11,095
========= ========= =========
</TABLE>
The Company has a net operating loss carryforward of approximately
$197,000,000 on a tax reporting basis. The carryforward will begin to expire
in 2001, if not utilized. The Company has available an alternative minimum
tax credit of $430,000 for indefinite carryover to subsequent years. The
Company also has available unused general business tax credits, after
reduction required under the Tax Reform Act of 1986, of approximately
$1,419,000 for carryover to subsequent years. The general business tax
credits expire as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1996 ................... $ 129,000
1997 ................... 166,000
1998 ................... 252,000
1999 ................... 361,000
2000 ................... 485,000
2001-2006 .............. 26,000
----------
$1,419,000
==========
</TABLE>
NOTE 19 -- OTHER INCOME (EXPENSE)
The schedules of other income (expense) for the years ended December 31,
1993, 1994 and 1995 and three months ended March 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
Year Ended December 31, March 31,
----------------------------------------- ------------------------
1993 1994 1995 1995 1996
------------ ------------ ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
(Loss) on disposal of assets upon rebuild of cable
systems ...................................... $ (1,445) $ (2,245) $ (282) $ -- $ --
Gain on sale of property and equipment ........ 1,150 371 143 75 20
Gain (loss) on sales of marketable securities . 3,292 (209) 13,517 13,115 27
Gain on disposal of partnership interest ...... -- -- -- -- 6,974
Interest and dividend income .................. 632 1,244 2,086 325 1,795
Minority interest in net loss of unconsolidated
subsidiaries ................................. 78 581 1,347 108 1,225
Litigation settlements ........................ (4,348) (250) (1,900) -- --
Ad Valorem tax reassessment ................... 821 1,656 -- -- --
Traffic Pro 2000 costs ........................ (1,507) -- -- -- --
Miscellaneous income (expense) ................ (20) (225) 77 677 905
----------- ----------- --------- ---------- ----------
$ (1,347) $ 923 $14,988 $14,300 $10,946
=========== =========== ========= ========== ==========
</TABLE>
F-29
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 19 -- OTHER INCOME (EXPENSE) - (Continued)
In December 1995, the Company's subsidiary, LenComm, Inc. d/b/a Bay
Cablevision, paid a contractor $1,550,000 under a binding arbitration award
in connection with a breach of contract action.
In October 1995, the Company's subsidiary, Lenfest West, Inc. d/b/a Cable
Oakland, under an order by the Superior Court of the State of California,
County of Alameda, paid $350,000 into a settlement fund in settlement of a
class action which alleged that the charges imposed by Cable Oakland for
delinquent payments from subscribers were illegally high. Approximately
$207,000 of the settlement was distributed to local non-profit and municipal
entities. The remaining balance was used to defray plaintiffs' attorney fees
and other costs.
In December 1993, the United States government filed a civil action
alleging false filings of copyright royalty statements with the Register of
Copyrights of the United States. The complaint alleged that the Company
misreported its subscriber rates to the copyright office and underpaid
copyright royalty fees. The Company settled this claim in 1994 with a payment
of $5,000,000. The settlement was accrued as a liability at December 31, 1993
and expensed in that year. The Company classified $4,348,000 relating to
copyright fee liability for years prior to 1993 as "other expense".
The Company, through its subsidiary, LenComm, Inc., was reassessed for
prior years' ad valorem taxes, namely, California Business Personal Property
and Possessory Interest taxes. The Company contested the reassessment and, in
1993 and 1994, received reductions in the amounts of $821,000 and $1,656,000,
respectively.
The Company, through its subsidiary, StarNet Development, Inc. ("SDI")
acquired the assets related to the cable TV services division of LJ
Development, Inc. and Unibase Data Entry, Inc. Included in the assets were
all rights and privileges to the development of traffic and billing software
known as Traffic Pro 2000. Included in the acquisition of these assets by SDI
was capitalized software development costs of $1,265,000 net of 1992
amortization of $31,000. In 1993, SDI incurred additional capitalized
software development costs of $242,000. In January 1994, the Company
responded to pressure from its customer base to port the Traffic Pro 2000
over a more flexible operating system. Therefore, the Company decided to
reformat the Traffic Pro 2000 programs to make it easier to use and more
widely accepted. As a result, the Company has recorded as a charge against
income all software development costs that were acquired or capitalized. This
charge amounts to $1,507,000 for the year ended December 31, 1993.
NOTE 20 -- COMMITMENTS AND CONTINGENCIES
Mr. Lenfest and TCI have jointly and severally guaranteed a $67 million
obligation of Australis incurred in connection with the purchase of program
licenses in April 1995. The amount of such guaranty will be reduced to $35
million upon Australis providing a letter of credit in connection with such
licenses. In addition, in February 1996, Mr. Lenfest provided his personal
guaranty of an approximately $18.7 million loan to Lenfest Australis, Inc. by
two commercial banks. (See Note 26). The Company has agreed to indemnify Mr.
Lenfest against losses incurred by him in connection with his guarantees to
the fullest extent permitted under the Company's debt obligations. Mr.
Lenfest has unilaterally agreed to limit the amount of the indemnity he would
seek to the amount available under the Company's New Credit Facility.
On January 20, 1995, an individual ("the Plaintiff") filed suit in the
Federal Court of Australia, New South Wales District Registry against the
Company and several other entities and individuals (the "Defendants"),
including H.F. Lenfest, the Company's president and chief executive officer,
involved in the acquisition of a company owned by the Plaintiff, the assets
of which included the right to acquire Satellite License B from the
Australian government. The Plaintiff alleges that the Defendants defrauded
him by making certain representations to him in connection with the
acquisition of his company and claims total damages of Australian $718
million (approximately U.S. $534 million). The Plaintiff also alleges that
Australis and H.F. Lenfest owed to him a fiduciary duty and that both parties
breached this duty. The Defendants have denied all claims made against them
by the Plaintiff and stated their belief that the Plaintiff's allegations are
without merit and their intention to defend this action vigorously.
F-30
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 20 -- COMMITMENTS AND CONTINGENCIES - (Continued)
On August 16, 1993, LJ Development, Inc. ("LJ") (See Note 19) served a
complaint against StarNet Development, Inc. ("SDI"), a subsidiary of the
Company. The claim is for an alleged breach of an Asset Purchase Agreement
for computer software called Traffic Pro 2000 and other assets purchased from
LJ. On November 30, 1994, the parties reached a settlement. SDI agreed to pay
LJ $250,000 plus royalties. LJ will be entitled to a 10% royalty on the first
$5,000,000 of revenue arising out of the sale, marketing or licensing by SDI
of the Traffic Pro 2000 software to third parties. No royalty obligation will
exist for the next $5,000,000 of gross revenue. LJ will be entitled to a 5%
royalty on the third $5,000,000 of gross revenue, that is $10,000,000--
$15,000,000. No additional royalty will be owed if revenues exceed
$15,000,000. No royalty or other obligation will exist after November 30,
1996. If the gross revenues from the sale or licensing of the Traffic Pro
2000 are less than $1,500,000 in the two year period or if SDI abandons or
terminates its interest in Traffic Pro 2000, LJ will be entitled to a minimum
additional cash payment of $150,000.
The Company has also been named as a defendant in various legal
proceedings arising in the ordinary course of business. In the opinion of
management, the ultimate amount of liability with respect to the above
actions, will not materially affect the financial position, the results of
operations or the cash flows of the Company.
As mentioned in Note 4, the Company is obligated to purchase additional
shares of stock valued at a total of 63,670,000 French francs (approximately
$12,982,000) in Videopole for the years 1996-1997. The Company's future
commitment in dollars is subject to changes in the exchange rate.
NOTE 21 -- RELATED PARTY TRANSACTIONS
The Company has entered into an agreement whereby Satellite Services,
Inc., an affiliate of TCI, provides certain cable television programming to
the Company and its unconsolidated cable television affiliates. This
agreement provides the Company and its unconsolidated cable television
affiliates with programming services at a rate which is not more than the
Company could obtain independently. For the years ended December 31, 1993,
1994 and 1995, the Company recorded programming expenses of $29,851,000,
$33,782,000 and $37,685,000, respectively, under this agreement.
The Company, through its subsidiary, Lenfest Australia Group Pty Limited,
has entered into a ten year technical services agreement with Australis.
Under the agreement, the Company, through its subsidiary, has agreed to
provide technical expertise and assistance to Australis for ten years for an
annual fee based on a percentage of gross revenues of 5% in year one
decreasing to 1% in year six capped at a maximum of 6.5 million Australian
dollars (approximately 5 million U.S. dollars). The term of the technical
services agreement commenced January 1, 1996.
The Company, through its subsidiaries, StarNet and SDI, generates revenue
from cross channel tune-in promotional services for cable television and
equipment sales to affiliates of TCI. For the years ended December 31, 1993,
1994 and 1995, the Company has generated revenues of $1,561,000, $1,525,000
and $3,900,000, respectively, from affiliates of TCI.
Cable AdNet Partners, an affiliate of TCI, paid Suburban Cable TV Co. Inc.
("Suburban"), a subsidiary of the Company, approximately $1,139,000,
$1,500,000 and $2,637,000 for the years ended December 31, 1993, 1994 and
1995, respectively, for Suburban's share of advertising revenue under certain
advertising agreements.
The Company paid TelVue Corporation, an affiliate of the Company,
$117,000, $174,000 and $190,000 for the years ended December 31, 1993, 1994
and 1995, respectively, for pay-per-view order placement services.
In January 1995, H.F. Lenfest advanced $10,000,000 to the Company in
connection with the investment by the Company's subsidiary, Lenfest Jersey,
Inc., in Garden State Cablevision, L.P. The advance was repaid on April 20,
1995.
F-31
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 21 -- RELATED PARTY TRANSACTIONS - (Continued)
In January 1995, the Company loaned $19,240,000 to Australis (See Note 4).
The funds were used to prepay license fees to U.S. movie studios in
connection with and under certain contracts to supply movies to Australis.
The loan bore interest at a rate equal to the rate charged to the Company its
related borrowing under its bank credit facility dated June 24, 1994. The
loan was repaid on April 20, 1995.
In 1994, the Company sold the assets of one of its subsidiaries, Stockdale
Productions, Inc., to TCI for $225,000.
In 1993, H.F. Lenfest advanced $5,972,000 to the Company in connection
with the investment by the Company's subsidiary, Lenfest Australia, Inc., in
Australis Media, Ltd. The loan was repaid in June 1994.
Subsidiaries of the Company have entered into various leasing arrangements
with a principal stockholder for office and warehouse facilities. (See Note
13 -- Leases)
NOTE 22 -- SEGMENT INFORMATION
The Company operates primarily in the cable television industry. Certain
subsidiaries of the Company operate in other industries which provide
microwave transmission and promotional, cable advertising traffic and billing
services.
<TABLE>
<CAPTION>
Cable Other Total
----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
Year Ended December 31, 1993
Revenues .................................... $197,630 $ 15,610 $213,240
========= ========== =========
Operating income (loss) ..................... $ 39,809 $ (9,823) $ 29,986
========= ========== =========
Depreciation and amortization ............... $ 60,654 $ 4,541 $ 65,195
========= ========== =========
Capital expenditures, including acquisitions . $117,394 $ 33,535 $150,929
========= ========== =========
Identifiable assets ......................... $448,623 $183,720 $632,343
========= ========== =========
Year Ended December 31, 1994
Revenues .................................... $212,800 $ 23,395 $236,195
========= ========== =========
Operating income (loss) ..................... $ 34,843 $ (8,705) $ 26,138
========= ========== =========
Depreciation and amortization ............... $ 70,867 $ 4,651 $ 75,518
========= ========== =========
Capital expenditures, including acquisitions . $ 42,162 $ 6,363 $ 48,525
========= ========== =========
Identifiable assets ......................... $440,640 $224,706 $665,346
========= ========== =========
Year Ended December 31, 1995
Revenues .................................... $232,155 $ 34,094 $266,249
========= ========== =========
Operating income (loss) ..................... $ 44,199 $ (9,557) $ 34,642
========= ========== =========
Depreciation and amortization ............... $ 71,054 $ 6,646 $ 77,700
========= ========== =========
Capital expenditures, including acquisitions . $ 47,658 $ 16,420 $ 64,078
========= ========== =========
Identifiable assets ......................... $576,855 $274,893 $851,748
========= ========== =========
</TABLE>
NOTE 23 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is presented in accordance with the provisions of SFAS No. 107
"Disclosures about Fair Value of Financial Instruments". The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
F-32
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 23 -- FAIR VALUE OF FINANCIAL INSTRUMENTS - (Continued)
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND DEPOSITS
ON CONVERTERS
The carrying amount approximates fair market value because of the short
maturity of those instruments
MARKETABLE SECURITIES
The fair market values of securities are estimated based on quoted market
prices for those investments.
OTHER INVESTMENTS
The Company's investment in Susquehanna Cable Co., Inc. is carried at
cost. (See Note 8). There are no quoted market prices for Susquehanna, which
is a holding company that has majority ownership in cable operating
Subsidiaries in which the Company also has ownership interests. The Company
uses the equity method to account for its ownership in the Subsidiaries. (See
Notes 4 and 7). Because of its relationship with Subsidiaries, the Company
does not believe that it is practicable to estimate fair market value for its
investment in Susquehanna.
LONG-TERM DEBT
The fair value is based on current rates at which the Company could borrow
funds with similar remaining maturities.
INTEREST RATE SWAP AND CAP AGREEMENTS
The fair values of the interest rate swap and cap agreements are estimated
based on mark-to-market values.
The estimated fair values of the Company's financial instruments as of
December 31, 1995 are as follows:
Carrying Fair
Amount Value
----------- ------------
(Dollars in thousands)
Balance Sheet Financial Instruments
Cash and cash equivalents ............. $ 164,943 $ 164,943
Marketable securities ................. 169,581 169,581
Long-term debt ........................ (817,725) (838,791)
Deposits on converters ................ (5,853) (5,853)
Off Balance Sheet Financial Instruments
Interest rate swap .................... $ -- $ (619)
Interest rate caps .................... -- --
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature, involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
NOTE 24 -- 1992 CABLE ACT
On April 1, 1993, the Federal Communications Commission ("FCC") adopted
regulations ("Rate Rule I") under The Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") governing rates charged to
subscribers for basic and tier service and for equipment and installation
charges (the "Regulated Services"). The 1992 Cable Act placed the Company's
regulated services under the jurisdiction of local franchising authorities
and the FCC. The rate regulations do not apply to services offered on an
individual service basis, such as per-channel or pay-per-view services. The
FCC's rate regulations became effective on September 1, 1993. Under Rate Rule
I, the regulated services were evaluated against competitive "benchmark"
rates established by the FCC. Cable operators could justify basic and service
tier rates that were above the benchmarks
F-33
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 24 -- 1992 CABLE ACT - (Continued)
by using reasonable cost-of-service principles. During 1995, the FCC
announced its revised benchmark rules ("Rate Rule II") and its interim
cost-of-service rule. Rate Rule II revised the benchmark formulas established
by the FCC in 1993 and is applied prospectively from May 15, 1994. Rate Rule
II requires cable operators to reduce existing rates to the higher of (i) the
rates calculated using the revised benchmarks or (ii) a level 17 percent
below such cable operators' rates as of September 30, 1992, adjusted for
inflation and certain increases in programming costs. Rates may be increased
periodically to reflect inflation and increases in certain external costs. In
addition, rates may be increased for tier service when new programming
channels are added. At the end of 1995, the FCC adopted final cost of service
rules ("COS Rule"). Cable operators which cannot or do not wish to comply
with Rate Rule II may choose to justify their existing rates under the "COS
Rule". This rule established a cost-of-service rate system which evaluates
the rates charged by cable operators based on their operating expenses and
capital costs.
The Company believes that is has complied in all material respects with
the provision of the 1992 Cable Act, including its rate setting provisions.
However, the Company's rates for Regulated Services are subject to review by
the FCC, if a complaint has been filed, or the appropriate franchise
authority, if such authority has been certified. If, as a result of the
review process, a cable system cannot substantiate its rates, it could be
required to retroactively reduce its rates to the appropriate benchmark and
refund the excess portion of rates received. Any refunds of the excess
portion of tier service rates would be retroactive to the date of complaint.
Any refunds of the excess portion of all other Regulated Service rates would
be retroactive to the later of September 1, 1993, or one year prior to the
Refund Order issued by the applicable franchise authority. The amount of
refunds, if any, which could be payable by the Company in the event that
systems rates are successfully challenged by franchising authorities is not
considered to be material.
NOTE 25 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following as of
December 31:
1994 1995
---------- ----------
(Dollars in thousands)
Accounts payable -- unrelated parties . $ 7,251 $10,403
Accounts payable -- affiliate ....... 7,638 7,205
Accrued copyright fees .............. 1,102 685
Accrued franchise fees .............. 4,701 5,301
Accrued interest .................... 6,006 11,371
Accrued payroll and fringe benefits . 706 934
Accrued sales taxes ................. 378 273
Accrued other ....................... 1,581 4,959
---------- ----------
$29,363 $41,131
========== ==========
NOTE 26 -- SUBSEQUENT EVENTS
On January 19, 1996, the Company loaned $18,530,000 to Australis (See Note
4) for short-term operating and capital funding needs, which loan accrues
interest at the rate of 14%. In March and April 1996, the Company loaned an
additional $15.5 million to Australis from cash on hand. These loans were
repaid with interest at the rate of 14% on May 11, 1996.
On April 24, 1996, the Company guaranteed up to $75,000,000 of a new
$125,000,000 Australis bank facility as part of recapitalization plans
currently being pursued by Australis. Australis has announced that it plans
to repay the Australis bank facility with the proceeds of long-term debt and
equity financing in conjunction with its proposed recapitalization. In
connection with such long-term financing, the Company has agreed to make an
additional $20,000,000 equity investment in Australis, subject to a number of
conditions, including the completion of the recapitalization and the equity
contributions of certain other investors. If the Australis long-
F-34
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 26 -- SUBSEQUENT EVENTS - (Continued)
term financing is completed, Australis will repay the $18,500,000 loan, with
interest, and the $75,000,000 guaranty will expire. There can be no assurance
that the Australis long-term financing will be completed or completed on a
timely basis. The board of directors of Australis has publicly stated that if
Australis is unable to obtain the long-term financing prior to the expiration
of the Australis bank facility (scheduled to expire on October 31, 1996),
there is substantial doubt as to Australis' ability to continue as a going
concern. If the Australis long-term financing is not completed, the
$18,500,000 loan will not be repaid, the $75,000,000 guaranty may be drawn in
whole or in part and the Company's existing equity investment in Australis
may lose all or a substantial portion of its value. As of August 1, 1996, the
investment had a market value of approximately U.S.$25.6 million.
Effective February 12, 1996, the Company exchanged the assets of its cable
television systems in the East San Francisco Bay area and its 41.67%
partnership interest in Bay Cable Advertising for the Wilmington, Delaware
and surrounding area cable television system, owned by a subsidiary of TCI.
In connection with the exchange, the Company acquired cable systems for
approximately $45 million. These cable systems were included with the assets
transferred to TCI. For financial reporting purposes, the Company will
account for this exchange as a nonmonetary exchange of productive assets in
accordance with Accounting Principles Board Opinion Number 29, whereby the
assets acquired will be valued at the historical cost values of the assets
disposed. The acquisition of these cable systems were financed with proceeds
from the Company's public debt offering described in Note 12.
On February 29, 1996, the Company acquired four cable television systems
from Sammons Communications, Inc. for approximately $531,000,000. The
systems, which are located in Bensalem and Harrisburg, Pa. and in Vineland
and Atlantic City/Pleasantville, N.J., pass approximately 358,000 homes and
serve approximately 277,000 basic subscribers. For financial reporting
purposes, the Company will account for the acquisition of these assets under
the purchase method. The acquisition was funded in part by $420,000,000
borrowed on the new bank credit facility described in Note 12, and excess
proceeds from the public debt offering.
On March 28, 1996, the Company signed an agreement to acquire from Cable
TV Fund 14-A, Ltd., an affiliate of Jones Intercable, Inc., its Turnersville
cable television system in New Jersey for approximately $84,500,000, subject
to certain adjustments. At closing, which the parties have agreed will occur
in the first quarter of 1997, the Company expects that the Turnersville
system will pass approximately 46,200 homes and serve approximately 36,300
basic subscribers. For financial reporting purposes, the Company will account
for the acquisition of these assets under the purchase method. Funds to
acquire this system are expected to be provided in part by borrowings under
the New Bank Credit Facility as described below.
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, its Salem cable television system for
approximately $16,000,000. The system, located in Salem, N.J., passes
approximately 10,600 homes and serves approximately 7,700 basic subscribers.
On the same date, the Company acquired from Shore Cable Company of New Jersey
its Shore cable television system for approximately $11,000,000. The system
passes approximately 6,100 homes and serves approximately 5,000 basic
subscribers. For financial reporting purposes, the Company will account for
the acquisition of these assets under the purchase method. These acquisitions
were funded in part by the existing bank credit facility described in Note
12.
The results of operations for these acquisitions will be included with the
results of the Company from the respective dates of acquisitions. Assuming
the acquisitions, New Debt Offering (described below) and New Bank Credit
Facility had occurred on January 1, 1995, the Company's pro forma revenues,
loss before extraordinary loss and net loss would have been approximately
$394,000,000, $(37,500,000) and $(44,500,000), respectively. These pro forma
amounts include adjustments for programming costs using rates under the SSI
programming agreement, interest on debt, amortization on intangibles
including goodwill and depreciation on revalued property and equipment. These
pro forma amounts are not necessarily indicative of operating results which
would have occurred if the cable systems acquired had been operated under
Company management.
F-35
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE 26 -- SUBSEQUENT EVENTS - (Continued)
On May 3, 1996, The News Corporation Limited ("News") filed an action
against the Company for unspecified damages in the Supreme Court of New South
Wales, Australia. The action claims that the Company violated an alleged oral
agreement it made to inform News prior to taking any steps to effect a
recapitalization plan for Australis Media Limited. The Company does not
believe that the suit has merit. On June 6, 1996, the Company filed suit in
federal court in Philadelphia seeking a declaration that no oral agreement
was made with News to notify News prior to making a separate refinancing
proposal to Australis and that there is no agreement whatsoever with News
that would delay or prevent the Company's participation in providing
refinancing to Australis.
On March 21, 1996, the Company entered into a three-year agreement
requiring monthly payments of $55,000 to lease office space. The lease will
commence on June 15, 1996. The Company has an option to renew the agreement
for a term of two (2) years. The Company has an option to purchase the
property for $4,750,000.
On June 27, 1996, the Company issued $300,000,000 10 1/2 % Senior
Subordinated Notes Due 2006, through a private offering ("New Debt
Offering"). The proceeds of the notes are net of the initial purchasers'
discount and issuance costs of $6,500,000. The notes require semi-annual
interest payments. The notes are not redeemable at the option of the Company
prior to maturity. Upon a Change of Control Triggering Event, holders of the
notes may require the Company to purchase all or a portion of the notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest. The net proceeds will be used to provide for the partial
early extinguishment of bank debt.
On June 27, 1996, the Toronto-Dominion Bank, PNC Bank, N.A. and
NationsBank of Texas, N.A. and certain other lenders party thereto
(collectively, the "Lenders") entered into a credit agreement with the
Company pursuant to which the Lenders provided the Company with a
$450,000,000 New Bank Credit Facility ($150,000,000 term and $300,000,000
revolving). Principal payments under the term loan facility and commitment
reductions under the revolving loan facility will commence on March 31, 1999,
with quarterly reductions thereafter until termination of the New Bank Credit
Facility on September 30, 2003. Loans outstanding under the New Bank Credit
Facility will bear interest, at the Company's option, at either (i) the Base
Rate plus an applicable margin ranging from 0% to 1 3/8 % or (ii) LIBOR plus
an applicable margin ranging from 3/4 % to 2 3/8 %, in each case based upon
certain levels of leverage ratios.
F-36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Heritage Cable of Delaware, Inc. and
Lenfest Communications, Inc.
We have audited the accompanying balance sheets of The Wilmington, Delaware
System (A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets
Transaction) as of December 31, 1994 and 1995, and the related statements of
operations, changes in equity investment and cash flows for each of the years
in the three-year period ended December 31, 1995. 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 the 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 The Wilmington, Delaware
System (A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets
Transaction) as of December 31, 1994 and 1995, and the results of its
operations and its cash flows for each year in the three-year period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
April 5, 1996
F-37
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Heritage Cable of Delaware, Inc. and
Lenfest Communications, Inc.
We have reviewed the accompanying statements of operations of the Wilmington,
Delaware System (A Cable Television System of Heritage Cable of Delaware,
Inc. Acquired by Lenfest Communications, Inc. in an Exchange of Assets
Transaction) for the three months ended March 31, 1995 and the period ended
February 12, 1996. These financial statements are the responsibility of the
System's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
May 17, 1996
F-38
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
BALANCE SHEETS
(Dollars in thousands)
December 31,
---------------------------
1994 1995
----------- -----------
ASSETS
Cash ........................................ $ 726 $ 114
Accounts receivable - trade and other ....... 729 1,326
Less allowance for doubtful accounts ....... 130 243
----------- -----------
599 1,083
Prepaid expenses ............................ 23 39
Property and equipment ...................... 67,157 71,485
Less accumulated depreciation .............. 32,305 36,831
----------- -----------
34,852 34,654
Deferred franchise costs, net of amortization . 107,247 103,946
----------- -----------
$143,447 $139,836
=========== ===========
LIABILITIES AND EQUITY INVESTMENT
Accounts payable and accrued expenses ....... $ 1,441 $ 1,813
Deferred Federal and state tax liability .... 48,749 52,893
----------- -----------
TOTAL LIABILITIES ................. 50,190 54,706
COMMITMENTS AND CONTINGENCIES
Equity investment ........................... 93,257 85,130
----------- -----------
$143,447 $139,836
=========== ===========
See accompanying notes.
F-39
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------
Three
Months Period
Year Ended December 31, Ended Ended
------------------------------------- March 31, February 12,
1993 1994 1995 1995 1996
---------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
REVENUES .................. $55,372 $55,448 $58,030 $13,901 $6,948
OPERATING EXPENSES
Service ................. 4,123 4,089 4,278 966 984
Programming -- affiliate . 8,716 9,271 11,123 2,740 1,412
Programming -- other .... 1,136 2,365 2,381 544 141
Selling and marketing ... 2,575 2,355 1,719 264 152
General and administrative 9,303 8,408 9,305 1,804 1,341
Depreciation ............ 4,712 4,695 4,854 1,187 411
Amortization ............ 3,301 3,301 3,301 825 275
---------- ---------- ---------- ----------- --------------
33,866 34,484 36,961 8,330 4,716
---------- ---------- ---------- ----------- --------------
OPERATING INCOME ..... 21,506 20,964 21,069 5,571 2,232
OTHER EXPENSE
Interest expense ........ 13,808 9,743 9,164 2,291 957
---------- ---------- ---------- ----------- --------------
INCOME BEFORE INCOME
TAXES .............. 7,698 11,221 11,905 3,280 1,275
INCOME TAX EXPENSE ........ 4,214 4,709 4,936 1,360 529
---------- ---------- ---------- ----------- --------------
NET INCOME ........... $ 3,484 $ 6,512 $ 6,969 $ 1,920 $ 746
========== ========== ========== =========== ==============
</TABLE>
See accompanying notes.
F-40
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
STATEMENTS OF CHANGES IN EQUITY INVESTMENT
(Dollars in thousands)
BALANCE AT JANUARY 1, 1993 ......................... $103,422
Net income ......................................... 3,484
Reduction in equity investment ...................... (9,840)
----------
BALANCE AT DECEMBER 31, 1993 ....................... 97,066
Net income ......................................... 6,512
Reduction in equity investment ...................... (10,321)
----------
BALANCE AT DECEMBER 31, 1994 ....................... 93,257
Net income ......................................... 6,969
Reduction in equity investment ...................... (15,096)
----------
BALANCE AT DECEMBER 31, 1995 ....................... $ 85,130
==========
See accompanying notes.
F-41
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 3,484 $ 6,512 $ 6,969
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization ............................. 8,013 7,996 8,155
Deferred tax expense ...................................... 1,362 267 4,144
Changes in operating assets and liabilities
Accounts receivable ....................................... 873 229 (484)
Prepaid expenses .......................................... (44) 42 (16)
Accounts payable and accrued expenses ..................... (77) 416 372
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............... 13,611 15,462 19,140
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment .......................... (3,057) (4,779) (4,656)
Other investing activities ................................... -- (10) --
---------- ---------- ----------
NET CASH (USED BY) INVESTING ACTIVITIES ................. (3,057) (4,789) (4,656)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in cash overdraft ................................... (340) -- --
Net decrease in equity investment ............................ (9,840) (10,321) (15,096)
---------- ---------- ----------
NET CASH (USED BY) FINANCING ACTIVITIES ................. (10,180) (10,321) (15,096)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH ......................... 374 352 (612)
CASH AT BEGINNING OF YEAR ...................................... -- 374 726
---------- ---------- ----------
CASH AT END OF YEAR ..................................... $ 374 $ 726 $ 114
========== ========== ==========
</TABLE>
See accompanying notes.
F-42
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include the accounts of a cable television system
serving the Wilmington, Delaware area, which, as of December 31, 1995, was
owned by Heritage Cable of Delaware, Inc. ("Heritage" or the "System").
Heritage is a wholly owned subsidiary of Tele-Communications, Inc. ("TCI").
On September 8, 1995, TCI entered into an amended and restated agreement to
exchange the assets of the cable television system of Heritage for certain
assets of cable television systems serving the Oakland, California area and
the 41.67% partnership interest in or proportionate share of the assets of
Bay Area Interconnect that are owned by Subsidiaries of Lenfest
Communications, Inc. ("Lenfest"). In addition to the above consideration,
Lenfest agreed to acquire and deliver the Fort Collins, CO cable television
system. (See Note L). These financial statements present the historical basis
on the books of Heritage of assets, liabilities and operations of the
Wilmington, Delaware system. In addition, these financial statements include
allocations of certain corporate administrative costs attributed to the
Wilmington, Delaware system. The methods by which such amounts are
attributable or allocated are deemed reasonable by the management of TCI.
USE OF ESTIMATES
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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, including acquisition costs
allocated to tangible assets acquired. Construction costs of cable television
systems, including interest during construction and applicable overhead, are
capitalized. Interest capitalized during 1993, 1994 and 1995 was not
material.
Depreciation is computed on a straight-line basis using estimated useful
lives of 3 to 15 years for cable distribution systems and 3 to 40 years for
support equipment and buildings.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales or
other dispositions of property, the original cost and cost of removal of such
property are charged to accumulated depreciation, and salvage, if any, is
credited thereto. Gains or losses are only recognized in connection with the
sales of properties in their entirety.
DEFERRED FRANCHISE COSTS
Deferred franchise costs include the difference between the cost of
acquiring cable television systems and amounts assigned to their tangible
assets. Given the nature of the franchise right renewal process, such amounts
are generally amortized on a straight-line basis over 40 years.
The System continually reevaluates the propriety of the carrying amount of
deferred franchise costs as well as the amortization period to determine
whether current events and circumstances warrant adjustments to the carrying
value and/or revisions of the estimated useful lives. At this time, the
System believes that no significant impairment of the deferred franchise
costs has occurred.
F-43
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
EQUITY INVESTMENT
Equity investment represents the excess of assets over liabilities for the
System. Equity investment is increased, or decreased, by the net income
(loss) of the System plus or minus advances from or to TCI and affiliates.
UNAUDITED INTERIM STATEMENTS
The financial statements for the three months ended March 31, 1995 and
period ended February 12, 1996 are unaudited; however, in the opinion of TCI
management, all adjustments (consisting solely of normal recurring
adjustments) necessary to a fair presentation of the financial statements for
these interim periods have been made. The results for the interim periods
ended March 31, 1995 and February 12, 1996 are not necessarily indicative of
the results to be obtained for a full fiscal year.
The interim financial statements for 1996 only include the activity of the
System under the ownership of Heritage, and therefore do not include any
activity subsequent to February 12, 1996.
INCOME TAXES
The System adopted Statement of Financial Accounting Standards No. 109 in
1993 and has applied the provisions of Statement No. 109 retroactively to
January 1, 1986. Statement No. 109 requires a change from the deferred method
of accounting for income taxes of APB Opinion No. 11 to the asset and
liability method of accounting for income taxes. Under the asset and
liability method of Statement No. 109, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or settled.
Under Statement No. 109, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in the statement of operations in the
period that includes the enactment date.
The System computes the provision for federal income taxes on a separate
company basis.
NOTE B -- SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS
1993 1994 1995
---------- --------- ---------
(Dollars in thousands)
Cash paid during the year for:
Interest -- affiliates ....... $13,808 $9,743 $9,164
========== ========= =========
Income taxes ................. $ 2,852 $4,442 $ 792
========== ========= =========
NOTE C -- PROPERTY AND EQUIPMENT
The schedule of property and equipment at December 31, 1994 and 1995, is
as follows:
1994 1995
---------- ---------
(Dollars in thousands)
Land .......................... $ 474 $ 474
Cable distribution systems .... 61,541 65,045
Support equipment and building . 5,142 5,966
---------- ---------
$67,157 $71,485
========== =========
F-44
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE D -- DEFERRED FRANCHISE COSTS
A schedule of deferred franchise costs and accumulated amortization at
December 31, 1994 and 1995, is as follows:
1994 1995
----------- -----------
(Dollars in thousands)
Deferred franchise costs . $131,679 $131,679
Accumulated amortization . 24,432 27,733
----------- -----------
$107,247 $103,946
=========== ===========
NOTE E -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following as of
December 31:
1994 1995
--------- --------
(Dollars in thousands)
Accounts payable ......... $ 84 $ 104
Accrued copyright fees ... 114 120
Accrued franchise fees ... 319 319
Accrued programming costs . 204 247
Accrued refunds .......... 415 231
Accrued sales taxes ...... 186 389
Accrued bonuses .......... -- 239
Accrued other ............ 119 164
--------- --------
$1,441 $1,813
========= ========
NOTE F -- ADVANCES FROM AFFILIATES
TCI and its affiliates have advanced funds to the System. Interest is
charged to the System based on the System's related intercompany balances.
These funds are included in equity investment on the accompanying balance
sheets because the intercompany payables are not included in the exchange
transactions and, therefore, will not be repaid by either the System or
Lenfest. The amounts of these advances included in equity investment are as
follows: 1993, $144,653,000; 1994, $137,474,000 and 1995, $121,586,000.
F-45
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE G -- LEASES
The total rental expense under operating leases for pole rent and office
space amounted to $463,000, $574,000 and $602,000 for the years ended
December 31, 1993, 1994 and 1995, respectively. Future minimum lease payments
under all non-cancelable operating leases with initial terms of one year or
more consisted of the following at December 31, 1995:
(Dollars in
Year Ending December 31, thousands)
1996 ....................................................... $319
1997 ...................................................... 303
1998 ...................................................... 300
1999 ...................................................... 300
2000 ...................................................... 300
Thereafter ................................................ 775
--------
$2,297
========
It is expected that, in the normal course of business, expiring leases
will be renewed or replaced by other leases; thus, it is anticipated that
future minimum operating lease payments will not be less than the amount
expensed for 1995.
NOTE H -- RELATED PARTY TRANSACTIONS
The System pays TCI and other related parties for various services. In
addition, the System reimburses TCI for certain general and operating
expenses. These amounts are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Cable television programming expense ................ $ 8,716 $9,271 $11,123
Interest expense .................................... 13,775 9,743 9,164
Reimbursement of general and administrative expenses . 1,864 1,647 2,076
</TABLE>
F-46
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE I -- INCOME TAXES
The System joins in the filing of a consolidated Federal income tax return
with TCI and subsidiaries. Income tax expense or benefit for the System for
reporting purposes has been computed on a separate company basis.
The provision for income tax expense consists of the following components:
1993 1994 1995
--------- --------- --------
(Dollars in thousands)
Current
Federal ........ $2,242 $3,491 $ 623
State .......... 610 951 169
--------- --------- --------
2,852 4,442 792
--------- --------- --------
Deferred
Federal ........ 1,304 210 3,257
State .......... 58 57 887
--------- --------- --------
1,362 267 4,144
--------- --------- --------
$4,214 $4,709 $4,936
========= ========= ========
The categories of temporary differences that give rise to deferred tax assets
and liabilities are as follows:
1994 1995
------------ ------------
(Dollars in thousands)
Deferred tax assets:
Allowance for doubtful accounts $ 53 $ 99
Net operating loss carryforwards... 6,085 --
Investment and other tax credits... 457 457
------------ ------------
Gross Deferred Tax Asset ..... 6,595 556
Deferred tax liabilities:
Property and equipment ........... (11,754) (11,202)
Amortization of franchise costs ... (43,590) (42,247)
------------ ------------
Gross Deferred Tax Liability . (55,344) (53,449)
------------ ------------
Net Deferred Tax Liability ... $ (48,749) $ (52,893)
============ ============
F-47
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE I -- INCOME TAXES - (Continued)
The difference between the net income tax expense and the amounts expected
by applying the U.S. Federal income tax rate of 35% to income before income
taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Federal income tax expense at statutory rates ............ $2,694 $3,927 $4,167
Provision for state income taxes, net of Federal income tax
benefit ................................................. 434 655 686
Effect of one percent Federal tax rate increase on deferred
tax balance at January 1, 1993 .......................... 1,093 -- --
Other .................................................... (7) 127 83
--------- --------- ---------
$4,214 $4,709 $4,936
========= ========= =========
</TABLE>
NOTE J -- FAIR VALUE OF FINANCIAL STATEMENTS
The following disclosure of the estimated fair value of financial
instruments is presented in accordance with the provisions of SFAS No. 107
"Disclosures about Fair Value of Financial Instruments". The following
methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practical to estimate that value:
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amount approximates fair market value because of the short
maturity of those instruments.
NOTE K -- COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In 1993 and
1994, the FCC adopted certain rate regulations required by the 1992 Cable Act
and imposed a moratorium on certain rate increases. As a result of such
actions, the System's basic and tier service rates and its equipment and
installation charges (the "Regulated Services") are subject to the
jurisdiction of local franchising authorities and the FCC. Basic and tier
service rates are evaluated against competitive benchmark rates as published
by the FCC, and equipment and installation charges are based on actual costs.
Any rates for Regulated Services that exceeded the benchmarks were reduced as
required by the 1993 and 1994 rate regulations.
The System believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including its rate setting provisions.
However, the System's rates for tier services are subject to review by the
FCC, if a complaint has been filed, or, in the case of basic service rates,
by the appropriate franchise authority, if such authority has been certified.
If, as a result of the review process, a system cannot substantiate its
rates, it could be required to retroactively reduce its rates to the
appropriate level and refund the excess portion of rates received. The System
has recorded a refund liability in the amount of $231,000, which amount is
classified in the balance sheet caption accounts payable and accrued
expenses.
NOTE L -- SUBSEQUENT EVENTS
Effective February 12, 1996, Heritage exchanged the assets of the System
for certain assets of cable television systems serving Oakland, CA, the East
San Francisco Bay area and a 41.67% partnership interest in Bay
F-48
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc.
Acquired by Lenfest Communications, Inc. in an Exchange of Assets Transaction)
NOTES TO FINANCIAL STATEMENTS - (Continued)
December 31, 1993, 1994 and 1995
(Information for the three months ended March 31, 1995
and the period ended February 12, 1996 is unaudited)
NOTE L -- SUBSEQUENT EVENTS - (Continued)
Cable Advertising owned by subsidiaries of Lenfest. In addition, under the
terms of the asset exchange agreement, Lenfest agreed to acquire and deliver
the Fort Collins, CO, cable television system. Effective February 16, 1996,
Lenfest acquired and delivered the Fort Collins system to Heritage in
completion of the asset exchange at a cost to Lenfest of approximately $45
million. The asset exchange is subject to final working capital and other
adjustments, as defined in the asset exchange agreement.
F-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Sammons Communications, Inc. and
Lenfest Communications, Inc.:
We have audited the accompanying combined balance sheets of Sammons Cable (as
defined in Note 1) as of December 31, 1994 and 1995, and the related combined
statements of income, changes in equity investment and cash flows for each of
the three years in the period ended December 31, 1995. These combined
financial statements are the responsibility of Sammons Communications, Inc.
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 the 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 combined financial position of Sammons Cable as of
December 31, 1994 and 1995, and the combined results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 18, 1996
F-50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Sammons Communications, Inc. and
Lenfest Communications, Inc.:
We have reviewed the accompanying combined statements of income of Sammons
Cable (as defined in Note 1) for the three months ended March 31, 1995 and
the two months ended February 29, 1996. These financial statements are the
responsibility of Sammons Communications, Inc. management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of material modifications that should
be made to the accompanying combined statements of income for them to be in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
June 5, 1996
F-51
<PAGE>
SAMMONS CABLE
COMBINED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................ $ 496 $ 703
Accounts receivable subscribers, net of allowance of $163 in 1994 and $157
in 1995.................................................................. 5,153 5,565
Deferred federal and state income taxes .................................. 6,532 5,884
----------- -----------
Total current assets ........................................... 12,181 12,152
----------- -----------
Property and equipment:
Cable systems ....................................................... 197,909 204,892
Vehicles and other .................................................. 8,519 8,541
Land and buildings .................................................. 4,915 4,736
----------- -----------
211,343 218,169
Less accumulated depreciation ....................................... (127,908) (142,474)
----------- -----------
Net property and equipment ..................................... 83,435 75,695
Franchises and goodwill, net of accumulated amortization of $25,215 in 1994
and $28,195 in 1995 .................................................... 95,495 92,516
Other assets ............................................................. 1,805 5,128
----------- -----------
Total assets ................................................... $ 192,916 $ 185,491
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the combined financial statements.
F-52
<PAGE>
SAMMONS CABLE
COMBINED BALANCE SHEETS, CONTINUED
(AMOUNTS IN THOUSANDS)
December 31,
----------------------------
1994 1995
---------- ----------
LIABILITIES AND EQUITY INVESTMENT
Current liabilities:
Accounts payable, trade ............ $ 1,851 $ 932
Interest payable ................... 1,034 --
Accrued expenses ................... 5,896 4,853
Deferred revenue ................... 3,846 3,981
Federal and state income taxes payable 109 161
Notes payable--parent .............. 134,724 --
---------- ----------
Total current liabilities ..... 147,460 9,927
Accrued pensions and other .............. 715 666
Subscriber advance payments and deposits . 377 363
Deferred federal and state income taxes . 21,579 25,393
---------- ----------
Total liabilities ............. 170,131 36,349
Commitments and contingencies (Note 7)
Equity investment ....................... 22,785 149,142
---------- ----------
Total liabilities and equity
investment .................. $192,916 $185,491
========== ==========
The accompanying notes are an integral part
of the combined financial statements.
F-53
<PAGE>
SAMMONS CABLE
COMBINED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Two
Year Ended December 31, Months Ended Months Ended
------------------------------------- March 31, February 29,
1993 1994 1995 1995 1996
---------- ---------- ---------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues ................................... $ 93,893 $ 95,241 $100,619 $23,975 $16,512
---------- ---------- ---------- -------------- --------------
Operating Expenses:
Service expense .......................... 12,561 12,682 11,129 2,621 2,127
Local origination expense ................ 217 235 296 60 43
Pay-per view expense ..................... 998 924 925 169 164
Marketing expense ........................ 1,452 1,698 1,140 360 106
Programming cost ......................... 20,222 23,321 25,219 6,030 4,221
General and administrative ............... 14,256 14,480 15,647 3,468 2,994
Management fees .......................... 4,696 4,771 5,037 1,204 827
Depreciation and amortization ............ 17,315 17,924 17,877 4,357 3,140
---------- ---------- ---------- -------------- --------------
71,717 76,035 77,270 18,269 13,622
---------- ---------- ---------- -------------- --------------
Operating income ....................... 22,176 19,206 23,349 5,706 2,890
Other income ............................... 192 473 615 202 110
Interest expense ........................... (12,850) (12,923) (12,399) (2,805) --
---------- ---------- ---------- -------------- --------------
Income before provision for federal and
state income taxes ................... 9,518 6,756 11,565 3,103 3,000
Provision for federal and state income taxes . (4,411) (2,941) (4,703) (1,260) (1,218)
---------- ---------- ---------- -------------- --------------
Net income ............................ $ 5,107 $ 3,815 $ 6,862 $ 1,843 $ 1,782
========== ========== ========== ============== ==============
</TABLE>
The accompanying notes are an integral part
of the combined financial statements.
F-54
<PAGE>
SAMMONS CABLE
COMBINED STATEMENTS OF CHANGES IN EQUITY INVESTMENT
(AMOUNTS IN THOUSANDS)
Balance at January 1, 1993 ................. $ 36,354
Net income ............................... 5,107
Reduction in equity investment ........... (10,950)
----------
Balance at December 31, 1993 ............... 30,511
Net income ............................... 3,815
Reduction in equity investment ........... (11,541)
----------
Balance at December 31, 1994 ............... 22,785
Net income ............................... 6,862
Conversion of note payable -- parent (Note 2) 134,724
Reduction in equity investment ........... (15,229)
----------
Balance at December 31, 1995 ............... $149,142
==========
The accompanying notes are an integral part
of the combined financial statements.
F-55
<PAGE>
SAMMONS CABLE
COMBINED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................. $ 5,107 $ 3,815 $ 6,862
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for uncollectible receivables ............. 836 776 691
Depreciation and amortization ....................... 17,315 17,924 17,877
Provision for deferred income taxes ................. 4,196 2,760 4,462
Gain on sales of property and equipment ............. (32) (178) (88)
Changes in certain assets and liabilities:
Accounts receivable, subscribers .................. (1,490) (749) (1,103)
Other assets ...................................... (794) 369 (991)
Accounts payable, trade ........................... 473 180 (919)
Interest payable .................................. 512 (1) (1,034)
Accrued expenses .................................. 513 (912) (1,092)
Subscriber advance payments and deposits .......... (6) 27 (14)
Deferred revenue .................................. 104 940 135
Federal and state income taxes payable ............ 22 (25) 52
---------- ---------- ----------
Total adjustments .............................. 21,649 21,111 17,976
---------- ---------- ----------
Net cash provided by operating activities ...... 26,756 24,926 24,838
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sales of property and equipment .......... 90 179 262
Cable system acquisitions .............................. (17,386) -- --
Purchases of property and equipment .................... (13,241) (13,273) (7,262)
Investment in partnerships ............................. -- -- (2,402)
---------- ---------- ----------
Net cash used in investing activities .......... (30,537) (13,094) (9,402)
---------- ---------- ----------
Cash flows from financing activities: ....................
Net change in equity investment ........................ (10,950) (11,541) (15,229)
Issuance of notes payable -- parent .................... 14,724 -- --
Issuance of term debt .................................. 75 -- --
Payments of term debt .................................. -- (75) --
---------- ---------- ----------
Net cash provided by (used in) financing activities 3,849 (11,616) (15,229)
---------- ---------- ----------
Net increase in cash and cash equivalents ................ 68 216 207
Cash and cash equivalents, beginning of year ............. 212 280 496
---------- ---------- ----------
Cash and cash equivalents, end of year ................... $ 280 $ 496 $ 703
========== ========== ==========
Supplemental information:
Interest paid .......................................... $ 12,338 $ 12,924 $ 13,433
========== ========== ==========
Income taxes paid ...................................... $ 191 $ 207 $ 189
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the combined financial statements.
F-56
<PAGE>
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Basis of Presentation
The combined financial statements include the accounts of certain cable
television systems which were previously owned by Sammons Communications,
Inc. ("SCI") (collectively, "Sammons Cable"). SCI is a wholly- owned
subsidiary of Sammons Enterprises, Inc. ("SEI"). In May 1995, SCI entered
into an asset purchase agreement (the "Agreement") to sell Sammons Cable and
other cable systems to TCI Communications, Inc. ("TCI") for approximately
$800,000,000 in cash, subject to various conditions and approvals as defined
in the agreement. Upon closing of the transaction (see Note 11), Sammons
Cable is to be assigned to Lenfest Communications, Inc. ("Lenfest"). These
combined financial statements include the historical basis of assets,
liabilities and operations of the cable television systems to be assigned to
Lenfest. In addition, these financial statements include allocations of
certain corporate administrative costs attributed to the cable systems to be
assigned to Lenfest. The methods by which such amounts are attributable or
allocated are deemed reasonable by management of SCI. All significant
intersystem balances and transactions have been eliminated from the combined
financial statements. The following cable television systems are included in
the accompanying combined financial statements:
System Coverage Area
------- ---------------------------
Sammons Communications of New Jersey, Inc. Vineland, NJ
AtlanticCity/Pleasantville, NJ
Oxford Valley Cablevision, Inc. Bensalem, PA
Sammons Communications of Pennsylvania, Inc. Harrisburg, PA
Cash and Cash Equivalents
Sammons Cable considers all demand deposit accounts to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related assets as
follows:
Cable systems 5 to 15 years
Vehicles and other 4 to 10 years
Buildings 15 to 25 years
The material and labor costs for the initial connection of a residence are
capitalized and depreciated over ten years. The costs of subsequently
disconnecting and reconnecting a residence are charged to expense in the
period incurred.
Certain costs incurred during the period of cable system construction are
deferred and amortized over the estimated useful lives of the related cable
systems.
When property is retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any resulting gain
or loss is reflected in income in the period incurred.
Franchises and Goodwill
Goodwill acquired prior to October 31, 1970 is not being amortized.
Goodwill acquired subsequent to October 31, 1970 is capitalized and amortized
on a straight-line basis over forty years.
The direct costs to acquire cable television franchises are capitalized
and amortized on a straight-line basis over the lives of the franchises, not
exceeding forty years.
F-57
<PAGE>
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
1. Organization and Summary of Significant Accounting Policies:
- (Continued)
Sammons Cable continually reevaluates the propriety of the carrying amount
of goodwill and other intangibles as well as the amortization period to
determine whether current events and circumstances warrant adjustments to the
carrying value and/or revisions of the estimated useful lives. At this time,
Sammons Cable believes that no significant impairment of goodwill or other
intangibles has occurred.
Equity Investment
Equity investment represents the excess of assets over liabilities for
Sammons Cable. Equity investment is increased or decreased by the net income
(loss) of Sammons Cable plus or minus advances from or to the parent.
Income Taxes
Sammons Cable is a member of SEI's consolidated United States federal
income tax group. The policy for intercompany allocation of federal income
taxes provides that Sammons Cable computes the provision for federal income
taxes on a separate company basis. Sammons Cable makes payments to, or
receives payments from, SEI in the amount they would have paid to or received
from the Internal Revenue Service had they not been members of the
consolidated tax group. The separate company provisions and payments are
computed using the tax elections made by SEI. Sammons Cable uses the
"flow-through" method of accounting for investment tax credits.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," deferred tax liabilities
and assets are recognized based upon the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Accounting Estimates
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.
Other Accounting Issues
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of." This
statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of this standard has been assessed by management and
should not have a material effect on Sammons Cable's financial statements.
Interim Financial Information
The combined statements of operations for the three months ended March 31,
1995 and the two months ended February 29, 1996 have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
included only normal, recurring adjustments) necessary to present fairly the
results of operations for all periods presented have been made. The results
of operations for the interim periods are not necessarily indicative of the
operating results for the full year.
2. NOTES PAYABLE--PARENT:
During 1995, Sammons Cable renewed a financing arrangement with SEI which
provided revolving lines of credit of $134,723,541 maturing May 30, 1996.
Outstanding borrowings under the revolving lines of credit bear interest at
9% payable quarterly. Borrowings against these lines totaled $134,723,541 at
December 31, 1994; such borrowings were settled during 1995 through
intercompany accounts and have been appropriately reflected as such in the
equity investment.
F-58
<PAGE>
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
3. INCOME TAXES:
The provision for income taxes consists of the following (amounts in
thousands):
1993 1994 1995
-------- -------- --------
Current:
Federal ...... $ 215 $ 181 $ 241
State ........ -- -- --
Deferred:
Federal ...... 3,153 2,129 3,734
State ........ 1,043 631 728
-------- -------- --------
$4,411 $2,941 $4,703
======== ======== ========
The components of the net deferred tax liability are as follows (amounts
in thousands):
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax liability:
Amortization -- franchise cost ............................. $(29,295) $(28,302)
Basis in property and equipment ............................ (18,285) (16,773)
----------- -----------
(47,580) (45,075)
----------- -----------
Deferred tax asset:
Net opeating loss ("NOL") carryforwards .................... 29,338 22,330
Investment credit ("ITC") carryforwards and alternative
minimum tax credits....................................... 2,575 2,736
Accrued pension liability .................................. 114 33
Various accrued expenses not currently deductible .......... 506 467
----------- -----------
32,533 25,566
Valuation allowance .......................................... -- --
----------- -----------
Net deferred tax liability ................................... $(15,047) $(19,509)
=========== ===========
Net current deferred tax asset ............................... $ 6,532 $ 5,884
Net noncurrent deferred tax liability ........................ (21,579) (25,393)
----------- -----------
Net deferred tax liability ................................... $(15,047) $(19,509)
=========== ===========
</TABLE>
The difference between the provision for income taxes attributable to
income before income taxes and the amounts that would be expected using the
U.S. federal statutory income tax rate of 35% is as follows (amounts in
thousands):
1993 1994 1995
-------- -------- --------
Federal income taxes at the statutory rate . $3,331 $2,365 $4,048
State income taxes ....................... 679 410 474
Amortization of nondeductible
intangibles ............................. 97 97 97
Effect of one percent federal tax rate increase
on deferred tax balance at January 1, 1993 226 -- --
Other .................................... 78 69 84
-------- -------- --------
Provision for income taxes ............... $4,411 $2,941 $4,703
======== ======== ========
F-59
<PAGE>
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
3. Income Taxes: - (Continued)
The NOL carryforwards, ITC tax carryforwards and AMT credit carryforwards
have been utilized by other members of SEI's consolidated tax group.
Consistent with SEI's policy for intercompany allocation of federal income
taxes, Sammons Cable will be reimbursed at such time as the credit and
carryforwards could be utilized on a separate company basis. The NOL
carryforwards expire in the years 2002 -- 2006 and the ITC tax carryforwards
in 1998.
4. EMPLOYEE STOCK OWNERSHIP PLAN:
SCI is a participant in the Sammons Enterprises, Inc. Employee Stock
Ownership Plan ("ESOP"). Sammons Cable's allocated contribution to the ESOP
was approximately $486,000 and $299,000 for 1993 and 1994, respectively.
There was no ESOP contribution in 1995.
5. EMPLOYEE BENEFIT PLANS:
Sammons Cable is a participant in SEI's noncontributory defined benefit
pension plan (the "Pension Plan") covering certain full-time employees.
Pension benefits are generally based upon years of service and include
accruing pension cost currently, contributing the maximum amount deductible
for federal income taxes and meeting minimum funding standards of the
Employee Retirement Income Security Act of 1974 as determined by an actuarial
valuation. Pension Plan assets consist primarily of cash equivalents, listed
stocks and bonds, and group annuity contracts with an affiliated insurance
company.
As a participant in the Plan, Sammons Cable is allocated a portion of the
Plan's annual expense. Sammons Cable's allocated share of the 1993, 1994 and
1995 pension expense was approximately $164,000, $182,000 and $183,000,
respectively.
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
Sammons Cable provides certain postretirement health care and life
insurance benefits for eligible active and retired employees through SEI's
defined benefit plan (the "Postretirement Plan"). As a participant in the
Postretirement Plan, Sammons Cable is allocated a portion of the
Postretirement Plan's annual expense. Sammons Cable's allocated share of the
1993, 1994 and 1995 expense was approximately $64,000, $72,000 and $87,000,
respectively.
7. COMMITMENTS AND CONTINGENCIES:
Sammons Cable generally acts as a self-insurer with regard to loss or
damage to its cable distribution systems. No provision for future losses has
been provided.
At December 31, 1994, Sammons Cable had purchase commitments of
approximately $427,000 for property and equipment. There were no purchase
commitments at December 31, 1995.
Sammons Cable pays pole use, vehicle, office space, land and plant
facilities rentals under various agreements. Rental expense for 1993, 1994
and 1995 was approximately $1,036,000, $1,275,000 and $1,312,000, including
amounts paid to a related party of approximately $325,000, $418,000 and
$492,000, respectively.
F-60
<PAGE>
SAMMONS CABLE
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
7. Commitments and Contingencies: - (Continued)
Approximate minimum future rentals under noncancelable operating leases
are as follows (amounts in thousands):
Year ending December 31:
1996 ................... $106
1997 ................... 81
1998 ................... 58
1999 ................... 26
2000 ................... 10
Thereafter ............. 21
------
$302
======
8. ACQUISITIONS:
During 1993, Sammons Cable acquired the assets of several cable television
systems for an aggregate purchase price of $17,086,000 including franchise
agreements and goodwill of $12,423,000. The acquisitions were accounted for
as purchases, and accordingly, the results of operations have been included
in the combined financial statements from their respective dates of
acquisition, principally April 1993.
9. RELATED PARTY TRANSACTIONS:
Sammons Cable pays SCI and other related parties for various services. In
addition, Sammons Cable reimburses SCI for certain general and operating
expenses. These amounts are as follows (amounts in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Management fee expense ............................. $4,696 $4,771 $5,037
Reimbursement of general and administrative expenses . 2,284 2,420 2,732
</TABLE>
10. LITIGATION:
In the course of conducting its business, Sammons Cable is from time to
time named as a defendant in litigation actions. Sammons Cable is currently
involved as a defendant in certain legal issues. Management currently
believes the disposition of all claims and disputes, individually or in the
aggregate, should not have a material adverse effect on Sammons Cable's
combined financial position.
11. SUBSEQUENT EVENT:
On February 29, 1996, the purchase and assignment of Sammons Cable to
Lenfest was completed, subject to a purchase price adjustment, as defined in
the purchase agreement.
F-61
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden State Cablevision L.P.:
We have audited the accompanying balance sheets of Garden State Cablevision
L.P. (a Delaware Limited Partnership) as of December 31, 1994 and 1995, and
the related statements of operations, partners' deficit and cash flows for
each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Partnership'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 the 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 Garden State Cablevision
L.P. as of December 31, 1994 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 16, 1996
F-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden State Cablevision L.P.:
We have reviewed the accompanying balance sheet of Garden State Cablevision
L.P. (a Delaware Limited Partnership) as of March 31, 1996, and the related
statements of operations and cash flows for the three-month periods ended
March 31, 1995 and 1996. These financial statements are the responsibility of
the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
June 4, 1996
F-63
<PAGE>
GARDEN STATE CABLEVISION L.P.
BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, March 31,
-------------------------- -----------
1994 1995 1996
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 4,610 $ 3,259 $ 3,823
Accounts receivable, less allowance for doubtful
accounts of $642 in 1994, $609 in 1995 and $667
in 1996 ..................................... 2,227 2,640 2,242
Prepaids and other ............................. 564 858 440
----------- ----------- -----------
Total current assets ........................ 7,401 6,757 6,505
PREPAID INTEREST ................................. 541 246 173
PROPERTY, PLANT AND EQUIPMENT, net ............... 75,695 72,485 70,090
DEFERRED CHARGES, net ............................ 142,997 113,711 106,359
----------- ----------- -----------
$226,634 $193,199 $183,127
=========== =========== ===========
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses .......... $ 9,521 $ 11,303 $ 11,101
Accrued interest ............................... 1,017 603 476
Subscribers' advance payments and deposits ..... 1,022 971 979
----------- ----------- -----------
Total current liabilities ................... 11,560 12,877 12,556
LONG-TERM DEBT ................................... 262,000 245,000 239,000
DEFERRED MANAGEMENT AND CONSULTING FEES .......... 11,341 14,083 14,808
OTHER LIABILITIES ................................ 902 964 1,001
CONTINGENCY (Note 11)
PARTNERS' DEFICIT ................................ (59,169) (79,725) (84,238)
----------- ----------- -----------
$226,634 $193,199 $183,127
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-64
<PAGE>
GARDEN STATE CABLEVISION L.P.
STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
------------------------------------------- -------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
SERVICE INCOME ............................ $ 90,824 $ 92,514 $ 92,815 $22,997 $24,179
COSTS AND EXPENSES:
Operating ............................... 27,351 29,710 31,003 7,636 8,286
Selling, general and administrative ..... 10,663 10,584 10,636 2,624 2,566
Depreciation and amortization ........... 47,682 47,293 46,976 11,603 12,076
------------ ------------ ------------ ----------- ----------
Operating income ..................... 5,128 4,927 4,200 1,134 1,251
OTHER EXPENSES:
Management, consulting and other fees ... 3,633 3,700 5,590 1,380 1,451
Interest expense, net of interest income of
$178, $227, $247, $67 and $68 ........ 20,904 19,132 19,166 5,024 4,313
------------ ------------ ------------ ----------- ----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE .................... (19,409) (17,905) (20,556) (5,270) (4,513)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (Note 10) ..................... (657) -- -- -- --
------------ ------------ ------------ ----------- ----------
NET LOSS .................................. $ (20,066) $ (17,905) $ (20,556) $ (5,270) $ (4,513)
============ ============ ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-65
<PAGE>
GARDEN STATE CABLEVISION L.P.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended March 31,
---------------------------------------- ------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss .......................... $(20,066) $ (17,905) $(20,556) $(5,270) $(4,513)
Noncash items included in net loss--
Cumulative effect of change in
accounting principle ......... 657 -- -- -- --
Depreciation and amortization .. 47,682 47,293 46,976 11,603 12,076
Deferred interest payable ...... 1,881 -- -- -- --
Loss on disposal of property, plant
and equipment ................ 362 183 323 13 12
Amortization of prepaid interest . -- 49 295 73 73
Deferred management and consulting
fees ......................... 2,725 926 2,742 701 725
(Increase) decrease in accounts
receivable and prepaids and other 223 (678) (707) 1,226 816
Increase (decrease) in accounts
payable and accrued expenses,
accrued interest and subscribers'
advance payments and deposits . 1,360 52 1,317 (1,803) (322)
Increase in other long-term
liabilities .................. 122 123 62 -- 37
----------- ----------- ----------- ---------- ----------
Net cash provided by operating
activities ................ 34,946 30,043 30,452 6,543 8,904
----------- ----------- ----------- ---------- ----------
INVESTING ACTIVITIES
Additions to property, plant and
equipment ...................... (8,731) (15,298) (14,652) (2,652) (2,331)
Additions to deferred charges ..... -- (71) (142) (56) (9)
----------- ----------- ----------- ---------- ----------
Net cash used in investing
activities ................ (8,731) (15,369) (14,794) (2,708) (2,340)
----------- ----------- ----------- ---------- ----------
FINANCING ACTIVITIES
Repayments of debt, net ........... (34,525) (285,402) (17,000) (4,000) (6,000)
Proceeds from long-term borrowing . -- 275,000 -- --
Deferred financing costs .......... -- (4,286) (9) -- --
Prepaid interest .................. -- (591) -- -- --
----------- ----------- ----------- ---------- ----------
Net cash used in financing
activities ................ (34,525) (15,279) (17,009) (4,000) (6,000)
----------- ----------- ----------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ....................... (8,310) (605) (1,351) (165) 564
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ............................ 13,525 5,215 4,610 4,610 3,259
----------- ----------- ----------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,215 $ 4,610 $ 3,259 $ 4,445 $ 3,823
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-66
<PAGE>
GARDEN STATE CABLEVISION L.P.
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
(AMOUNT IN THOUSANDS)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
---------- -------------- ------------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1993 ........... $23,541 $ (44,739) $ (21,198)
Net loss ......................... (201) (19,865) (20,066)
---------- -------------- ------------
BALANCE, DECEMBER 31, 1993 ......... 23,340 (64,604) (41,264)
Net loss ......................... (179) (17,726) (17,905)
---------- -------------- ------------
BALANCE, DECEMBER 31, 1994 ......... 23,161 (82,330) (59,169)
Net loss ......................... (206) (20,350) (20,556)
---------- -------------- ------------
BALANCE, DECEMBER 31, 1995 ......... 22,955 (102,680) (79,725)
Net loss (unaudited) ............. (45) (4,468) (4,513)
---------- -------------- ------------
BALANCE, MARCH 31, 1996 (unaudited) . $22,910 $ (107,148) $ (84,238)
========== ============== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-67
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(INFORMATION AS OF MARCH 31, 1996, AND FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND 1996, IS UNAUDITED)
1. ORGANIZATION AND PARTNERS' INTERESTS
FORMATION AND BUSINESS
Garden State Cablevision L.P. (the "Partnership"), a Delaware limited
partnership, was formed on February 17, 1989, to acquire, own, operate and
maintain a cable television system (the "System") servicing Camden,
Burlington, Gloucester, Ocean and Salem counties in New Jersey. The System
was acquired by the Partnership on August 15, 1989, from The New York Times
Company. Through January 10, 1995, the General Partner was Garden State
Cablevision, Inc. ("GSC"). On January 10, 1995, the General Partner's
interest was purchased by Comcast Garden State, Inc., an affiliate of Comcast
Corporation, and Lenfest Jersey, Inc., an affiliate of Lenfest
Communications, Inc. The Limited Partners are AWACS Garden State, Inc., an
indirect subsidiary of Comcast Corporation, and Lenfest Jersey, Inc.
PARTNERS' CAPITAL
GSC contributed $25 million and each Limited Partner contributed $50
million to the Partnership. If the General Partner determines that the
Partnership requires additional capital beyond the Partnership's borrowing
capacity, then additional capital contributions may be requested from the
partners in proportion to each partner's percentage interest.
DISTRIBUTION RATIOS
Net losses are allocated 1% to the General Partner and 99% to the Limited
Partners.
PARTNERSHIP AGREEMENT
Each Limited Partner may at any time, without the approval of any other
partner, transfer all of its Partnership interests to any of its affiliates
subject to the maintenance of certain criteria as specified by the Credit
Agreement. Remaining partners have the right of first refusal to purchase the
interests of a partner seeking to transfer ownership to a third party.
On January 10, 1995, the Partnership Agreement was amended to reflect the
purchase of the previous General Partner's interest by Lenfest Jersey, Inc.
and Comcast Garden State, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGES IN ACCOUNTING PRINCIPLES
The Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," effective January 1, 1993 (see Note 10).
The Partnership adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1994. The adoption of this
statement did not have a material effect on the Partnership's financial
position or results of operations.
PERVASIVENESS OF ESTIMATES
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.
F-68
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
(Information as of March 31, 1996, and for the three months ended
March 31, 1995 and 1996, is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
CASH EQUIVALENTS
Cash equivalents consist of bank commercial paper that is readily
convertible to cash and is recorded at cost plus accrued interest which
approximates its market value.
PREPAID INTEREST
Prepaid interest represents the unamortized portion of prepaid two-year
interest rate protection agreements which are amortized over such period.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
using the straight-line method over estimated useful lives, as follows:
Distribution plant ...................... 3 to 12 years
Converters ..............................3 to 4 1/4 years
Subscriber drop installations ........... 8 years
Building ................................ 20 years
Other operating facilities .............. 6 to 12 years
Other equipment ......................... 3 to 6 years
DEFERRED CHARGES
Deferred charges consist principally of subscriber contracts, franchise
operating rights and fees, debt acquisition costs, organization costs and the
cost of the acquired business in excess of amounts allocated to specific
assets based on their fair values, and are being amortized on a straight-line
basis over their legal or estimated useful lives to a maximum of 40 years
(see Note 6). The Company continually evaluates whether events or
circumstances have occurred that indicate that the remaining useful lives of
the deferred charges should be revised or that the remaining balance of such
assets may not be recoverable. As of March 31, 1996, management believes that
no revisions to the remaining useful lives or write-downs of deferred charges
are required.
INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership believes that the carrying value of all financial
instruments, including the aggregate carrying value of long-term debt, is a
reasonable estimate of fair value at December 31, 1994 and 1995. The fair
value of long-term debt was estimated using interest rates that would be
currently available to the Partnership for debt issuances of similar terms
and remaining maturities.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
F-69
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
(Information as of March 31, 1996, and for the three months ended
March 31, 1995 and 1996, is unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
INTERIM FINANCIAL INFORMATION
The unaudited interim financial statements as of March 31, 1996, and for
the three-month periods ended March 31, 1995 and 1996, include all
adjustments (consisting only of normal recurring accruals) that the
Partnership believes are necessary for a fair presentation of the financial
statements. The interim operating results are not necessarily indicative of
the results for a full year.
3. SUPPLEMENTAL CASH FLOW DISCLOSURES
The Partnership paid interest of $19.8 million, $28.8 million and $19.8
million in 1993, 1994 and 1995, respectively. The Company also paid interest
of $4.8 million and $4.5 million for the three months ended March 31, 1995
and 1996, respectively.
4. PREPAID EXPENSES AND OTHER
December 31,
-----------------------------------
1994 1995
------ ------
Prepaid expenses ............... $ 67 $361
Nontrade receivables ............ 497 497
------ ------
$564 $858
====== ======
5. PROPERTY, PLANT AND EQUIPMENT
December 31,
---------------------------------
1994 1995
---------- ----------
Distribution plant ............ $ 78,572 $ 90,956
Converters .................... 34,329 33,185
Subscriber drop installations . 19,787 19,787
Land and building ............. 5,417 5,433
Other operating facilities .... 6,050 6,133
Other equipment ............... 8,225 9,491
---------- ----------
152,380 164,985
Less- Accumulated depreciation . (76,685) (92,500)
---------- ----------
$ 75,695 $ 72,485
========== ==========
6. DEFERRED CHARGES
<TABLE>
<CAPTION>
December 31,
--------------------------------
1994 1995
----------- -----------
<S> <C> <C>
Subscriber contracts ............... $ 163,251 $ 163,251
Franchise operating rights and fees . 136,139 136,186
Goodwill ........................... 9,379 9,379
Debt acquisition costs ............. 4,286 4,295
Organization costs ................. 716 95
----------- -----------
313,771 313,206
Less-Accumulated amortization ...... (170,774) (199,495)
----------- -----------
$ 142,997 $ 113,711
=========== ===========
</TABLE>
F-70
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
(Information as of March 31, 1996, and for the three months ended
March 31, 1995 and 1996, is unaudited)
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31,
-----------------------------
1994 1995
--------- ---------
Accounts payable ..................... $1,382 $ 650
Subscriber refund liability (Note 10) . -- 1,925
Franchise fees ....................... 1,600 1,543
Accrued wages and benefits ........... 642 771
Management fees ...................... 701 796
Programming costs .................... 2,355 2,787
Deferred advertising revenues ........ 940 981
Other ................................ 1,901 1,850
--------- ---------
$9,521 $11,303
========= =========
8. LONG-TERM DEBT
On May 10, 1994, the Partnership entered into a $300,000,000 Credit
Agreement ("the 1994 Credit Agreement") with various banks to refinance the
bank term loan, subordinated debt, and deferred and accrued interest.
Scheduled principal reductions of the total commitment began on December 31,
1994, and extend through March 2002. At December 31, 1994 and 1995, $262
million and $245 million, respectively was outstanding under the 1994 Credit
Agreement.
Interest rate options under the 1994 Credit Agreement are periodically
fixed for defined terms based on one or more of the following rates, as
agreed by the Partnership and the banks:
Base rate (higher of federal funds rate plus 1/2% or prime) plus up to
3/8%.
Eurodollar Rate (Eurodollar Rate divided by a percentage equal to 1 minus
the reserve requirement in effect) plus 7/8% to 1-1/2%.
The level of the preceding applicable margin is based upon the leverage
ratio, as defined. The Partnership also pays a commitment fee of 3/8% on the
unused principal. The loan is secured by the ownership interests of the
General Partners and the Limited Partners in the assets of the Partnership.
All borrowings under the bank term loan were subject to the Eurodollar Rate
interest rate option, resulting in an interest rate of 7.43% as of December
31, 1995.
The 1994 Credit Agreement requires 50% of the aggregate principal amount
of the loan outstanding to be hedged against interest rate risk for at least
two years. The Partnership purchased three separate interest rate protection
agreements on $135,000 of the loan. The total cost of the agreements was
capitalized and will be amortized to interest expense over the two-year
terms.
The 1994 Credit Agreement is subject to certain restrictive covenants,
with which the Partnership was in compliance as of December 31, 1995.
Based upon the outstanding borrowings at December 31, 1995, maturities for
the four years after 1996 are as follows:
1997 ......................................................... $14,000
1998 ......................................................... 37,500
1999 ......................................................... 43,500
2000 ......................................................... 51,000
F-71
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
(Information as of March 31, 1996, and for the three months ended
March 31, 1995 and 1996, is unaudited)
8. LONG-TERM DEBT - (Continued)
The bank term loan and bank revolving credit agreement were originally
entered into on August 15, 1989, and matured on March 30, 1994, but were
extended until May 10, 1994. Interest rate options under the Senior Loan
Credit Agreement were periodically fixed for defined terms not to exceed one
year based upon one or more of the following rates, as agreed to by the
Partnership and the senior lenders:
Base rate (higher of federal funds plus 1/2% or prime) plus up to 1%.
Certificate of deposit rate plus 7/8% to 2-1/8%.
London Interbank Offered Rate ("LIBOR") plus 3/4% to 2%.
The Subordinated Debt Agreement, dated August 15, 1989, provided for an
original principal balance of $50 million. The interest rate on the
subordinated loan was fixed at 15.5%, 12.75% paid quarterly in arrears and
2.75% deferred until the loan matured. The deferred portion earned interest
at a rate of 15.5%. Both the 12.75% interest payments on the outstanding
principal balance and the 15.5% interest payments on the deferred portion
were funded by the bank and added to the principal balance of the loan
through January 15, 1992, and were repaid with the 1994 Credit Agreement.
9. MANAGEMENT AND CONSULTING FEES
In connection with the Amended and Restated Agreement of Limited
Partnership (Note 1) and Amended Consulting Agreement, Comcast Corporation
and Lenfest Communications, Inc. are each compensated for their services as
consultants at a fee equal to 3% of service income. Services include
providing the Partnership advice and consultation based on their industry
experience, knowledge and trained personnel. Payment of such fees is
subordinated to the prior payment of and provision for operating expenses and
capital requirements and pursuant to certain financial conditions as defined
in the 1994 Credit Agreement. In 1995, the Partnership paid $2 million under
the Amended Consulting Agreement and the remainder of fees have been accrued
with the unpaid fees from prior years, as a long-term liability in the
accompanying balance sheet.
Prior to January 10, 1995, in accordance with the terms of the original
Partnership Agreement, the General Partner was entitled to receive a
management fee equal to 1% of the System's service income. This fee was
currently payable provided the Partnership was in compliance with terms of
the loan agreement. The Limited Partners each received an amount equal to
1.25% of the System's service income as a payment for the use of their
original capital contributions. The Partnership had also entered into a
consulting agreement with Comcast Corporation and Lenfest Communications,
Inc. (the "Consultants"), whereby they are each entitled to a fee equal to
1/4% of the System's service income. In accordance with the loan agreement,
the payments to the Limited Partners and Consultants could not have been made
unless certain financial conditions, as defined in the agreements, were met.
In 1993, 1994 and 1995, the Partnership paid $896,000, $2,304,000 and
$715,000 to the Partners under the original Partnership Agreement.
10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, the Partnership adopted SFAS No.106, which
requires the Partnership to accrue the estimated cost of retiree benefits
earned during the years the employee provides services. The Partnership
previously expensed the cost of these benefits as claims were incurred. The
Partnership elected to immediately recognize the cumulative effect of the
change in accounting for postretirement benefits of $657, which represents
the accumulated postretirement benefit obligation ("APBO") existing at
January 1, 1993. The Partnership continues to fund benefit costs principally
on a pay-as-you-go basis, with the retiree paying a portion of the costs. The
Partnership's liability for postretirement benefits is included in other
liabilities.
F-72
<PAGE>
GARDEN STATE CABLEVISION L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(amounts in thousands)
(Information as of March 31, 1996, and for the three months ended
March 31, 1995 and 1996, is unaudited)
11. 1992 CABLE ACT
On April 1, 1993, the FCC adopted regulations under the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act")
governing the rates charged to subscribers for basic service and cable
programming service (the "Regulated Services"), other than programming
offered on a per-channel or per- program basis. The FCC's rate regulations
became effective on September 1, 1993. The FCC adopted a benchmark
methodology as the principal method of regulating rates for Regulated
Services. Cable operators with rates above the allowable level under the
FCC's benchmark methodology may justify such rates using reasonable
cost-of-service principles. Local franchising authorities may not elect
cost-of-service as their primary form of rate regulation but must apply the
FCC benchmark rules unless the operator justifies its basic rates on a
cost-of-service basis.
The Partnership is seeking to justify its existing rates on the basis of
cost-of-service showings; however, interim cost-of-service regulations
promulgated by the FCC do not support positions taken by the Partnership.
On February 12, 1996, the FCC placed on public notice, for a thirty-day
period, a proposed resolution of the Partnership's rate complaints. A final
release of the resolution is pending at the FCC. If accepted by the FCC, the
proposed resolution will, among other provisions, deem the Partnership's
programming service rates reasonable and provide for refunds in the amount of
$1.6 million plus interest. The Partnership will also forego certain
inflation and external cost adjustments. While the Partnership has no reason
to believe the current form of the proposed resolution will not be accepted
by the FCC, and has accrued the costs of the proposed settlement in the
accompanying balance sheet as of December 31, 1995, its ultimate outcome
cannot be predicted at this time.
12. RELATED-PARTY TRANSACTIONS
The Partnership has entered into an agreement whereby Lenfest
Communications, Inc., an affiliate of Lenfest Jersey, Inc., a Limited
Partner, provides certain cable television programming to the Partnership at
rates that are not more than the Partnership could obtain independently. For
the years ended December 31, 1993, 1994 and 1995, the Partnership expensed
approximately $10.2 million, $11.2 million and $12.3 million, respectively,
under this agreement.
A subsidiary of Comcast Corporation provides the Partnership with the use
of certain computerized financial systems at a rate that may be more
favorable than those available from unrelated parties. The Partnership
expensed $24 in 1993, 1994 and 1995 for such services.
In addition, the Partnership has acquired certain vendor services through
cooperative arrangements with affiliates of the Limited Partners. These
services include such items as pay-per-view programming, insurance and
association dues. The amounts paid for these services are not more than the
Partnership could obtain independently. Payments to affiliates of Lenfest
Jersey, Inc. totaled $159, $94 and $88 in 1993, 1994 and 1995, respectively.
Payments to affiliates of AWACS Garden State, Inc. were $551, $357 and $234
in 1993, 1994 and 1995, respectively.
F-73
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as
having been authorized by Lenfest. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of Lenfest since the
date as of which information is given in this Prospectus. This Prospectus
does not constitute an offer or solicitation by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.
------
TABLE OF CONTENTS
Page
--------
Available Information ..................... 3
Prospectus Summary ........................ 4
Risk Factors .............................. 14
Use of Proceeds ........................... 18
Capitalization ............................ 19
Pro Forma Financial Information ........... 20
Selected Consolidated Financial and
Operating Data ........................... 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 31
Business .................................. 41
Legislation and Regulation ................ 54
Management ................................ 61
Certain Transactions ...................... 64
Principal Stockholders .................... 65
Description of Other Debt Obligations ..... 66
Description of Notes ...................... 68
The Exchange Offer ........................ 85
Certain Federal Income Tax Consequences ... 92
Plan of Distribution ...................... 92
Legal Matters ............................. 93
Experts ................................... 93
Index to Consolidated Financial Statements . F-1
$300,000,000
Lenfest
Communications, Inc.
Offer to Exchange its
10 1/2 % Senior Subordinated
Notes Due 2006
for
10 1/2 % Senior Subordinated
Notes Due 2006
Which have been
Registered Under the
Securities Act of 1933
GRAPHIC
Prospectus
Dated August , 1996
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws provide that persons who are made a party to certain
actions (other than an action by or in the right by the Company) by reason of
the fact that they are or were a director, officer, employee or agent of the
Company shall be indemnified by the Company against expenses (including
attorneys' fees), judgments, fines and amounts incurred by such person if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to, the best interests of the Company.
With respect to actions by or in the right of the Company, such directors,
officers, employees and agents shall be indemnified by the Company against
expenses (including attorneys' fees) incurred in a defense if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Company; except, however, that no
indemnification shall be made in respect of any matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the Corporation.
Any indemnification shall be made upon a determination that such
indemnification is proper by a vote of the directors who are not parties to
the action, by independent legal counsel in a written opinion or by the
stockholders of the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following Exhibits are furnished as part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Title or Description
------------- -------------------------------------------------------------------------------------------
<S> <C>
1 -- Purchase Agreement, dated as of June 20, 1996, between the Registrant and Salomon Brothers
Inc as representatives of the several purchasers.
*2.1 -- Amended and Restated Asset Exchange Agreement, dated September 8, 1995, between Lencom, Inc.
and Lenfest West, Inc. and Heritage Cablevision of Delaware, Inc.
+++2.2 -- Asset Purchase Agreement, dated as of May 9, 1995, by and between TCI Communications, Inc.
and Sammons Communications of New Jersey, Inc., Oxford Valley Cablevision, Inc., Sammons
Communications of Pennsylvania, Inc., NTV Realty, Inc., Capital Telecommunications, Inc. and
AC Communications, Inc.
*2.3 -- Assignment and Assumption Agreement, dated as of June 1, 1995, among TCI Communications, Inc.,
TKR Cable Company and Lenfest Communications, Inc.
*2.4 -- Asset Purchase Agreement, dated as of September 7, 1995, by and between Lenfest Atlantic,
Inc. and Tri-County Cable Television Company.
*2.5 -- Letter Agreement, dated July 13, 1995, between Suburban Cable TV Co., Inc. and Service Electric
Cable TV, Inc.
*2.6 -- Letter Agreement, dated August 11, 1995, between Suburban Cable TV Co., Inc. and Service Electric
Cablevision, Inc.
++2.7 -- Assignment and Assumption Agreement, dated as of February 16, 1996, by and between Heritage
Cablevision of Delaware, Inc. and Lenfest New Castle County, a Delaware general partnership.
++2.8 -- Bill of Sale, Assignment and Assumption and Release, dated as of February 16, 1996, by and
among Lenfest New Castle County, Heritage Cablevision of Delaware, Inc. and The World Company.
***2.9 -- Asset Purchase Agreement, dated March 28, 1996, between Cable TV Fund 14-A, Ltd. and Lenfest
Atlantic, Inc.
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.2 -- Amended and Restated By-laws of the Registrant.
*4.1 -- Form of $700,000,000 8 3/8 % Senior Note Due 2005
II-1
<PAGE>
Exhibit
Number Title or Description
------------- -------------------------------------------------------------------------------------------
**4.2 -- Indenture, dated as of November 1, 1995, between the Registrant and The Bank of New York.
4.3 -- Indenture, dated as of June 15, 1996, between the Registrant and The Bank of New York.
4.4 -- Form of Certificated Note, dated June 27, 1996 between the Registrant and Salomon Brothers
Inc (In accordance with Item 601 of Regulation S-K similar Notes between the Registrant and
Salomon Brothers Inc have not been filed because they are identical in all material respects
to the filed exhibit.)
4.5 -- Form of 10 1/2 % Senior Subordinated Note, dated June 27, 1996 in the principal sum of $296,700,000.
4.6 -- Registration Agreement, dated as of June 20, 1996, between the Registrant and Salomon Brothers
Inc., Toronto Dominion Securities (USA) Inc., CIBC Wood Gundy Securities Corp. and Nationsbanc
Capital Markets, Inc.
5 -- Opinion of Saul, Ewing, Remick & Saul (to be filed by Amendment).
*10.1 -- Credit Agreement, dated as of June 24, 1994, as amended December 16, 1994 and January 10,
1995, among Lenfest Communications, Inc., the Toronto-Dominion Bank and PNC Bank, National
Association as Managing Agents, the Lenders and Toronto- Dominion (Texas), Inc., as Administrative
Agent.
*10.2 -- Note Agreement, dated as of May 22, 1989, among Lenfest Communications, Inc. and the Prudential
Insurance Company of America with respect to $50,000,000 10.69% Senior Notes due 1998.
*10.3 -- Note Agreement, dated as of September 14, 1988 among Lenfest Communications, Inc. and certain
Institutions described therein with respect to $125,000,000 10.15% Senior Notes due 2000.
*10.4 -- Note Agreement, dated as of September 27, 1991 among Lenfest Communications, Inc. and Certain
Institutions described therein with respect to $100,000,000 9.93% Senior Notes due 2001.
+++10.5 -- Programming Supply Agreement, effective as of September 30, 1986, between Satellite Services,
Inc. and Lenfest Communications, Inc.
*10.6 -- Lease, dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite Lenfest and Suburban
Cable TV Co. Inc.
*10.7 -- Lease, dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite Lenfest and Suburban
Cable TV Co. Inc.
*10.8 -- Lease, dated as of May 24, 1990 by and between H.F. Lenfest and Marguerite Lenfest and MicroNet,
Inc.
*10.9 -- Lease, dated as of June 20, 1991, as amended January 1, 1995, by and between H.F. Lenfest
and Marguerite Lenfest and StarNet, Inc. (as successor to NuStar).
*10.10 -- Supplemental Agreement, dated December 15, 1981, by and between TCI Growth, Inc., H.F. Lenfest,
Marguerite Lenfest and Lenfest Communications, Inc. and Joinder Agreement executed by LMC
Lenfest, Inc.
*10.11 -- Amendment to Supplemental Agreement, dated May 4, 1984 between Lenfest Communications, Inc.
and TCI Growth, Inc.
*10.12 -- Agreement, dated July 1, 1990, between H.F. Lenfest, Marguerite B. Lenfest, Diane A. Lenfest,
H. Chase Lenfest, Brook J. Lenfest and the Lenfest Foundation, Telecommunications, Inc. and
Liberty Media Corporation.
*10.13 -- Agreement and Consent, dated as of November 1, 1990, by and among TCI Development Corporation,
TCI Holdings, Inc., TCI Liberty, Inc., Liberty Cable, Inc., H.F. Lenfest, Marguerite B. Lenfest,
H. Chase Lenfest, Brook J. Lenfest, Diane A. Lenfest and Lenfest Communications, Inc.
*10.14 -- Letter Agreement, dated as of December 18, 1991, among Liberty Media Corporation, Lenfest
Communications, Inc., Marguerite B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brooke J.
Lenfest and the Lenfest Foundation.
II-2
<PAGE>
Exhibit
Number Title or Description
------------- ------------------------------------------------------------------------------------------- -----
*10.15 -- Irrevocable Proxies of H. Chase Lenfest, Diane A. Lenfest and Brook J. Lenfest, each dated
March 30, 1990.
*10.16 -- Partnership Agreement of L-TCI Associates, dated April 1993 between Lenfest International,
Inc. and UA-France, Inc.
*10.17 -- Stock Pledge Agreement, dated May 28, 1993, between Lenfest York, Inc. and Core- State Bank,
N.A., as Collateral Agent.
*10.18 -- Pledge Agreement, dated July 29, 1994, between Lenfest Raystay Holdings, Inc. and Farmers
Trust Company as Collateral Agent.
+++10.19 -- Agreement, dated September 30, 1986, between Lenfest Communications, Inc and Tele-Communications,
Inc.
*10.20 -- Agreement for the Sale of Advertising on Cable Television Stations, dated as of November 25,
1991 between Suburban Cable TV Co. Inc. and Cable Ad Net Partners.
**10.21 -- Letter Agreement, dated November 8, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and J.P. Morgan Investment Management Co. and Banker's Trust have not been filed because
they are identical in all material respects to the filed exhibit.)
**10.22 -- Letter Agreement, dated November 8, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and MLB Life Assurance Corp., Full & Co., AUSA Life Insurance Company, Inc. and Equitable
Life Assurance Society have not been filed because they are identical in all material respects
to the filed exhibit.)
**10.23 -- Letter Agreement, dated October 31, 1995, between the Company and PPM America. (In accordance
with Item 601 of Regulation S-K, agreements between the Company and Unum Life Insurance Company
of America and First Unum Life Insurance Company, New York Life Insurance Co., SAFECO Life
Insurance Co., American Enterprise Life Insurance Company, IDS Life Insurance Company of New
York and Teachers Insurance and Annuity Association of America have not been filed because
they are identical in all material respects to the filed exhibit.)
**10.24 -- Letter Agreement, dated November 9, 1995, between the Company and Unum Life Insurance Company
of America and First Unum Life Insurance Company.
**10.25 -- Credit Agreement, dated as of December 14, 1995, among Lenfest Communications, Inc., The
Toronto-Dominion Bank, PNC Bank, National Association and NationsBank of Texas, as Arranging
Agents, the Lenders and Toronto-Dominion (Texas), Inc., as Administrative Agent.
***10.26 -- First Amendment to Credit Agreement, dated as of February 29, 1996 by and among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank, National Association and NationsBank
of Texas, N.A., as Arranging Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
***10.27 -- Agreement, dated as of February 29, 1996, in favor of the Company by H.F. Lenfest.
***10.28 -- Credit Agreement, dated as of February 29, 1996, between Lenfest Australia, Inc. and The
Toronto-Dominion Bank and NationsBank of Texas, N.A. and Toronto- Dominion (Texas), Inc. as
Administrative Agent.
***10.29 -- Sublease Agreement, dated March 21, 1996, between Suburban Cable TV Co. Inc. and Surgical
Laser Technologies, Inc.
***10.30 -- Letter Agreement, dated November 30, 1995, between the Company and The Prudential Insurance
Company of America.
***10.31 -- Letter Agreement, dated November 30, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and MLB Life Assurance Corp. and Full & Co. have not been filed because they are identical
in all material respects to the filed exhibit.)
II-3
<PAGE>
Exhibit
Number Title or Description
------------- ----------------------------------------------------------------------------------------------------
+10.32 -- Form of Second Amendment, dated as of April 29, 1996, to Credit Agreement, dated as of December
14, 1995, by and among Lenfest Communications, Inc., The Toronto- Dominion Bank, PNC Bank,
National Association and NationsBank of Texas, N.A., as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
+10.33 -- Form of Letter Agreement, dated May 2, 1996, between the Company and The Prudential Insurance
Company of America.
+10.34 -- Form of Letter Agreement, dated May 2, 1996 between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and ECM Fund, L.P.I. and Equitable Life Insurance Society have not been filed because
they are identical in all material respects to the filed exhibit.)
+10.35 -- Form of Senior Subordinated Credit Agreement, dated as of May 2, 1996, between Lenfest Communications,
Inc. and The Toronto-Dominion Bank.
10.36 -- Letter Agreement, dated June 11, 1996, and accepted June 20, 1996, between the Company and
MBL Life Assurance Corporation. (In accordance with Item 601 of Regulation S-K, an agreement
between the Company and The Prudential Insurance Company of America has not been filed because
it is identical in all material respects to the filed exhibit.)
10.37 -- Letter Agreement, dated June 20, 1996, between the Company and The Prudential Insurance Company
of America.
10.38 -- Credit Agreement, dated June 27, 1996 between the Company, the Toronto-Dominion Bank, PNC
Bank, National Association and NationsBank of Texas, as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
15.1 -- Acknowledgement of Pressman Ciocca & Smith
15.2 -- Acknowledgement of Arthur Andersen LLP
15.3 -- Acknowledgement of Coopers & Lybrand L.L.P.
*21 -- Subsidiaries of Registrant.
23.1 -- Consent of Saul, Ewing, Remick & Saul (included in Exhibit 5).
23.2 -- Consent of Fleishman & Walsh (FCC Counsel).
23.3 -- Consent of Pressman Ciocca & Smith.
23.4 -- Consent of Arthur Andersen LLP
23.5 -- Consent of Coopers & Lybrand L.L.P.
25 -- Statement of Eligibility on Form T-1 of The Bank of New York.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Guaranteed Delivery Procedures.
99.3 -- Form of Exchange Agent Agreement between the Company and The Bank of New York.
</TABLE>
- ------
* Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(File No. 33-96804) declared effective by the Securities and Exchange
Commission on November 8, 1995, and incorporated herein by reference.
** Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q
(File No. 33-96804) for the quarter ended September 30, 1995, and
incorporated herein by reference.
***Filed as an Exhibit to the Registrant's Annual Report on Form 10-K (File
No. 33-96804) for the year ended December 31, 1995.
+Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (File
No. 33-96804) for the quarter ended March 31, 1996, and incorporated
herein by reference.
++Filed as an Exhibit to the Registrant's Report on Form 8-K (File No.
33-96804) for the period ended February 26, 1996 and incorporated herein
by reference.
+++Confidential portions have been omitted pursuant to Rule 406 and filed
separately with the Commission.
II-4
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedules are included in Part II
beginning on page II-7:
(1) Report of Pressman Ciocca & Smith on Schedules
Schedule II -- Valuation and Qualifying Accounts
Lenfest Communications, Inc. and Subsidiaries
(2) Report of Pressman Ciocca & Smith on Schedules
Schedule II -- Valuation and Qualifying Accounts
The Wilmington, Delaware System
(3) Report of Arthur Andersen LLP on Schedules
Schedule II -- Valuation and Qualifying Accounts
Garden State Cablevision L.P.
(4) Report of Coopers & Lybrand L.L.P. on Schedules
Schedule II -- Valuation and Qualifying Accounts
Sammons Cable
ITEM 22. UNDERTAKINGS.
The Company hereby undertakes with respect to the securities offered by
it:
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted as to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
2. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
3. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia, Commonwealth of Pennsylvania, on the 6th day of August, 1996.
LENFEST COMMUNICATIONS, INC.
By /s/ H.F. LENFEST
---------------------------------
H.F. Lenfest
President and,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ H.F. LENFEST President, Chief Executive August 6, 1996
----------------------------- Officer and Director
H.F. Lenfest (Principal Executive Officer)
/s/ MARGUERITE B. LENFEST Director August 6, 1996
-----------------------------
Marguerite B. Lenfest
Director August , 1996
----------------------------
John C. Malone
Director August , 1996
----------------------------
Brendan R. Clouston
/s/ SAMUEL W. MORRIS, JR. Director August 6, 1996
----------------------------
Samuel W. Morris, Jr.
/s/ HARRY F. BROOKS Executive Vice President August 6, 1996
---------------------------- and Director (Principal
Harry F. Brooks Financial Officer)
/s/ ROBERT W. MOHOLLEN Assistant Treasurer August 6, 1996
---------------------------- (Chief Accounting Officer)
Robert W. Mohollen
II-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
We have audited in accordance with generally accepted auditing standards, the
consolidated balance sheets of Lenfest Communications, Inc. and subsidiaries
as of December 31, 1994 and 1995 and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for each
of the years in the three-year period ended December 31, 1995, and have
issued our report thereon dated July 18, 1996, which is included in the
accompanying prospectus. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule II. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
July 18, 1996
II-7
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ------------ ------------ ------------ ----------
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Deductions of Year
------------ ------------ ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1993:
Allowance for doubtful accounts . $1,287 $3,182 $3,608 $ 861
============ ============ ============ ==========
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Allowance for doubtful accounts . $ 861 $3,173 $3,206 $ 828
============ ============ ============ ==========
FOR THE YEAR ENDED
DECEMBER 31, 1995:
Allowance for doubtful accounts . $ 828 $3,842 $3,566 $1,104
============ ============ ============ ==========
</TABLE>
II-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Lenfest Communications, Inc. and
Heritage Cable of Delaware, Inc.
We have audited in accordance with generally accepted auditing standards, the
balance sheets of The Wilmington, Delaware System (A Cable Television System
of Heritage Cable of Delaware, Inc. Acquired by Lenfest Communications, Inc.
in an Exchange of Assets Transactions) as of December 31, 1994 and 1995, and
the related statements of operations, changes in equity investment and cash
flows for each of the years in the three- year period ended December 31, 1995
and have issued our report thereon dated April 5, 1996, which is included in
the accompanying prospectus. In connection with our audits of the
aforementioned financial statements, we also audited the related financial
statement schedule II. This financial statement schedule is the
responsibility of the System's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as whole, present fairly, in
all material respects, the information set forth therein.
PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
April 5, 1996
II-9
<PAGE>
THE WILMINGTON, DELAWARE SYSTEM
(A Cable Television System of Heritage Cable of Delaware, Inc. Acquired by
Lenfest Communications, Inc. in an Exchange of Assets Transaction)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------------- ------------ ------------ -------------
Additions
Balance of Charged to
Beginning of Cost and Balance at
Year Expenses Deductions End of Year
-------------- ------------ ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1993:
Allowance for doubtful accounts $252 $649 $650 $251
============== ============ ============ =============
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Allowance for doubtful accounts $251 $516 $637 $130
============== ============ ============ =============
FOR THE YEAR ENDED
DECEMBER 31, 1995:
Allowance for doubtful accounts $130 $622 $509 $243
============== ============ ============ =============
</TABLE>
II-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden State Cablevision L.P.:
We have audited in accordance with generally accepted auditing standards, the
financial statements for Garden State Cablevision L.P. and have issued our
report thereon dated February 16, 1996, which is included in this
registration statement. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule of
valuation and qualifying accounts is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken
as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 16, 1996
II-11
<PAGE>
GARDEN STATE CABLEVISION L.P.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Additions
Balance of Charged to
Beginning of Cost and Balance at
Year Expenses Deductions End of Year
-------------- ------------ ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Allowance for doubtful accounts .... $598 $830 $760 $668
-------------- ------------ ------------ -------------
For the year ended December 31, 1994:
Allowance for doubtful accounts .... $668 $701 $727 $642
-------------- ------------ ------------ -------------
For the year ended December 31, 1995:
Allowance for doubtful accounts .... $642 $658 $691 $609
-------------- ------------ ------------ -------------
</TABLE>
II-12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
SAMMONS COMMUNICATIONS, INC. AND
LENFEST COMMUNICATIONS, INC.:
In connection with our audits of the combined financial statements of
Sammons Cable as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, which financial statements are
included in the Prospectus, we have also audited the financial statement
schedule listed in Item 21 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
Dallas, Texas
April 18, 1996
COOPERS & LYBRAND L.L.P.
II-13
<PAGE>
SAMMONS CABLE
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------- ------------ ---------------- ---------- -----------
Balance at Additions
Beginning of Charged to Costs Balance at
Year and Expenses Deductions End of Year
------------ ---------------- ---------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Allowance for doubtful accounts ..... $203 $836 $(854) $185
==== ==== ===== ====
For the year ended December 31, 1994:
Allowance for doubtful accounts .... $185 $776 $(798) $163
==== ==== ===== ====
For the year ended December 31, 1995:
Allowance for doubtful accounts .... $163 $691 $(697) $157
==== ==== ===== ====
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Title or Description Page
------------- ------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1 -- Purchase Agreement, dated as of June 20, 1996, between the Registrant and Salomon Brothers
Inc as representatives of the several purchasers.
*2.1 -- Amended and Restated Asset Exchange Agreement, dated September 8, 1995, between Lencom, Inc.
and Lenfest West, Inc. and Heritage Cablevision of Delaware, Inc.
+++2.2 -- Asset Purchase Agreement, dated as of May 9, 1995, by and between TCI Communications, Inc.
and Sammons Communications of New Jersey, Inc., Oxford Valley Cablevision, Inc., Sammons
Communications of Pennsylvania, Inc., NTV Realty, Inc., Capital Telecommunications, Inc. and
AC Communications, Inc.
*2.3 -- Assignment and Assumption Agreement, dated as of June 1, 1995, among TCI Communications, Inc.,
TKR Cable Company and Lenfest Communications, Inc.
*2.4 -- Asset Purchase Agreement, dated as of September 7, 1995, by and between Lenfest Atlantic,
Inc. and Tri-County Cable Television Company.
*2.5 -- Letter Agreement, dated July 13, 1995, between Suburban Cable TV Co., Inc. and Service Electric
Cable TV, Inc.
*2.6 -- Letter Agreement, dated August 11, 1995, between Suburban Cable TV Co., Inc. and Service Electric
Cablevision, Inc.
++2.7 -- Assignment and Assumption Agreement, dated as of February 16, 1996, by and between Heritage
Cablevision of Delaware, Inc. and Lenfest New Castle County, a Delaware general partnership.
++2.8 -- Bill of Sale, Assignment and Assumption and Release, dated as of February 16, 1996, by and
among Lenfest New Castle County, Heritage Cablevision of Delaware, Inc. and The World Company.
***2.9 -- Asset Purchase Agreement, dated March 28, 1996, between Cable TV Fund 14-A, Ltd. and Lenfest
Atlantic, Inc.
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.2 -- Amended and Restated By-laws of the Registrant.
*4.1 -- Form of $700,000,000 8 3/8 % Senior Note Due 2005
<PAGE>
Exhibit
Number Title or Description Page
------------- ------------------------------------------------------------------------------------------- -----
**4.2 -- Indenture, dated as of November 1, 1995, between the Registrant and The Bank of New York.
4.3 -- Indenture, dated as of June 15, 1996, between the Registrant and The Bank of New York.
4.4 -- Form of Certificated Note, dated June 27, 1996 between the Registrant and Salomon Brothers
Inc (In accordance with Item 601 of Regulation S-K similar Notes between the Registrant and
Salomon Brothers Inc have not been filed because they are identical in all material respects
to the filed exhibit.)
4.5 -- Form of 10 1/2 % Senior Subordinated Note, dated June 27, 1996 in the principal sum of $296,700,000.
4.6 -- Registration Agreement, dated as of June 20, 1996, between the Registrant and Salomon Brothers
Inc, Toronto Dominion Securities (USA) Inc., CIBC Wood Gundy Securities Corp. and Nationsbanc
Capital Markets, Inc.
5 -- Opinion of Saul, Ewing, Remick & Saul (to be filed by Amendment).
*10.1 -- Credit Agreement, dated as of June 24, 1994, as amended December 16, 1994 and January 10,
1995, among Lenfest Communications, Inc., the Toronto-Dominion Bank and PNC Bank, National
Association as Managing Agents, the Lenders and Toronto- Dominion (Texas), Inc., as Administrative
Agent.
*10.2 -- Note Agreement, dated as of May 22, 1989, among Lenfest Communications, Inc. and the Prudential
Insurance Company of America with respect to $50,000,000 10.69% Senior Notes due 1998.
*10.3 -- Note Agreement, dated as of September 14, 1988 among Lenfest Communications, Inc. and certain
Institutions described therein with respect to $125,000,000 10.15% Senior Notes due 2000.
*10.4 -- Note Agreement, dated as of September 27, 1991 among Lenfest Communications, Inc. and Certain
Institutions described therein with respect to $100,000,000 9.93% Senior Notes due 2001.
+++10.5 -- Programming Supply Agreement, effective as of September 30, 1986, between Satellite Services,
Inc. and Lenfest Communications, Inc.
*10.6 -- Lease, dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite Lenfest and Suburban
Cable TV Co. Inc.
*10.7 -- Lease, dated as of May 1, 1990 by and between H.F. Lenfest and Marguerite Lenfest and Suburban
Cable TV Co. Inc.
*10.8 -- Lease, dated as of May 24, 1990 by and between H.F. Lenfest and Marguerite Lenfest and MicroNet,
Inc.
*10.9 -- Lease, dated as of June 20, 1991, as amended January 1, 1995, by and between H.F. Lenfest
and Marguerite Lenfest and StarNet, Inc. (as successor to NuStar).
*10.10 -- Supplemental Agreement, dated December 15, 1981, by and between TCI Growth, Inc., H.F. Lenfest,
Marguerite Lenfest and Lenfest Communications, Inc. and Joinder Agreement executed by LMC
Lenfest, Inc.
*10.11 -- Amendment to Supplemental Agreement, dated May 4, 1984 between Lenfest Communications, Inc.
and TCI Growth, Inc.
*10.12 -- Agreement, dated July 1, 1990, between H.F. Lenfest, Marguerite B. Lenfest, Diane A. Lenfest,
H. Chase Lenfest, Brook J. Lenfest and the Lenfest Foundation, Telecommunications, Inc. and
Liberty Media Corporation.
*10.13 -- Agreement and Consent, dated as of November 1, 1990, by and among TCI Development Corporation,
TCI Holdings, Inc., TCI Liberty, Inc., Liberty Cable, Inc., H.F. Lenfest, Marguerite B. Lenfest,
H. Chase Lenfest, Brook J. Lenfest, Diane A. Lenfest and Lenfest Communications, Inc.
*10.14 -- Letter Agreement, dated as of December 18, 1991, among Liberty Media Corporation, Lenfest
Communications, Inc., Marguerite B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brooke J.
Lenfest and the Lenfest Foundation.
<PAGE>
Exhibit
Number Title or Description Page
------------- ------------------------------------------------------------------------------------------- -----
*10.15 -- Irrevocable Proxies of H. Chase Lenfest, Diane A. Lenfest and Brook J. Lenfest, each dated
March 30, 1990.
*10.16 -- Partnership Agreement of L-TCI Associates, dated April 1993 between Lenfest International,
Inc. and UA-France, Inc.
*10.17 -- Stock Pledge Agreement, dated May 28, 1993, between Lenfest York, Inc. and Core- State Bank,
N.A., as Collateral Agent.
*10.18 -- Pledge Agreement, dated July 29, 1994, between Lenfest Raystay Holdings, Inc. and Farmers
Trust Company as Collateral Agent.
+++10.19 -- Agreement, dated September 30, 1986, between Lenfest Communications, Inc and Tele-Communications,
Inc.
*10.20 -- Agreement for the Sale of Advertising on Cable Television Stations, dated as of November 25,
1991 between Suburban Cable TV Co. Inc. and Cable Ad Net Partners.
**10.21 -- Letter Agreement, dated November 8, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and J.P. Morgan Investment Management Co. and Banker's Trust have not been filed because
they are identical in all material respects to the filed exhibit.)
**10.22 -- Letter Agreement, dated November 8, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and MLB Life Assurance Corp., Full & Co., AUSA Life Insurance Company, Inc. and Equitable
Life Assurance Society have not been filed because they are identical in all material respects
to the filed exhibit.)
**10.23 -- Letter Agreement, dated October 31, 1995, between the Company and PPM America. (In accordance
with Item 601 of Regulation S-K, agreements between the Company and Unum Life Insurance Company
of America and First Unum Life Insurance Company, New York Life Insurance Co., SAFECO Life
Insurance Co., American Enterprise Life Insurance Company, IDS Life Insurance Company of New
York and Teachers Insurance and Annuity Association of America have not been filed because
they are identical in all material respects to the filed exhibit.)
**10.24 -- Letter Agreement, dated November 9, 1995, between the Company and Unum Life Insurance Company
of America and First Unum Life Insurance Company.
**10.25 -- Credit Agreement, dated as of December 14, 1995, among Lenfest Communications, Inc., The
Toronto-Dominion Bank, PNC Bank, National Association and NationsBank of Texas, as Arranging
Agents, the Lenders and Toronto-Dominion (Texas), Inc., as Administrative Agent.
***10.26 -- First Amendment to Credit Agreement, dated as of February 29, 1996 by and among Lenfest
Communications, Inc., The Toronto-Dominion Bank, PNC Bank, National Association and NationsBank
of Texas, N.A., as Arranging Agents, the Lenders and Toronto-Dominion (Texas), Inc., as
Administrative Agent.
***10.27 -- Agreement, dated as of February 29, 1996, in favor of the Company by H.F. Lenfest.
***10.28 -- Credit Agreement, dated as of February 29, 1996, between Lenfest Australia, Inc. and The
Toronto-Dominion Bank and NationsBank of Texas, N.A. and Toronto- Dominion (Texas), Inc. as
Administrative Agent.
***10.29 -- Sublease Agreement, dated March 21, 1996, between Suburban Cable TV Co. Inc. and Surgical
Laser Technologies, Inc.
***10.30 -- Letter Agreement, dated November 30, 1995, between the Company and The Prudential Insurance
Company of America.
***10.31 -- Letter Agreement, dated November 30, 1995, between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and MLB Life Assurance Corp. and Full & Co. have not been filed because they are identical
in all material respects to the filed exhibit.)
<PAGE>
Exhibit
Number Title or Description Page
------------- ----------------------------------------------------------------------------------------------- -----
+10.32 -- Form of Second Amendment, dated as of April 29, 1996, to Credit Agreement, dated as of December
14, 1995, by and among Lenfest Communications, Inc., The Toronto- Dominion Bank, PNC Bank,
National Association and NationsBank of Texas, N.A., as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
+10.33 -- Form of Letter Agreement, dated May 2, 1996, between the Company and The Prudential Insurance
Company of America.
+10.34 -- Form of Letter Agreement, dated May 2, 1996 between the Company and The Prudential Insurance
Company of America. (In accordance with Item 601 of Regulation S-K, agreements between the
Company and ECM Fund, L.P.I. and Equitable Life Insurance Society have not been filed because
they are identical in all material respects to the filed exhibit.)
+10.35 -- Form of Senior Subordinated Credit Agreement, dated as of May 2, 1996, between Lenfest Communications,
Inc. and The Toronto-Dominion Bank.
10.36 -- Letter Agreement, dated June 11, 1996, and accepted June 20, 1996, between the Company and
MBL Life Assurance Corporation. (In accordance with Item 601 of Regulation S-K, an agreement
between the Company and The Prudential Insurance Company of America has not been filed because
it is identical in all material respects to the filed exhibit.)
10.37 -- Letter Agreement, dated June 20, 1996, between the Company and The Prudential Insurance Company
of America.
10.38 -- Credit Agreement, dated June 27, 1996 between the Company, the Toronto-Dominion Bank, PNC
Bank, National Association and NationsBank of Texas, as Arranging Agents, the Lenders and
Toronto-Dominion (Texas), Inc., as Administrative Agent.
15.1 -- Acknowledgement of Pressman Ciocca & Smith
15.2 -- Acknowledgement of Arthur Andersen LLP
15.3 -- Acknowledgement of Coopers & Lybrand L.L.P.
*21 -- Subsidiaries of Registrant.
23.1 -- Consent of Saul, Ewing, Remick & Saul (included in Exhibit 5).
23.2 -- Consent of Fleishman & Walsh (FCC Counsel).
23.3 -- Consent of Pressman Ciocca & Smith.
23.4 -- Consent of Arthur Andersen LLP
23.5 -- Consent of Coopers & Lybrand L.L.P.
25 -- Statement of Eligibility on Form T-1 of The Bank of New York.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Guaranteed Delivery Procedures.
99.3 -- Form of Exchange Agent Agreement between the Company and The Bank of New York.
</TABLE>
- ------
* Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(File No. 33-96804) declared effective by the Securities and Exchange
Commission on November 8, 1995, and incorporated herein by reference.
** Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q
(File No. 33-96804) for the quarter ended September 30, 1995, and
incorporated herein by reference.
***Filed as an Exhibit to the Registrant's Annual Report on Form 10-K (File
No. 33-96804) for the year ended December 31, 1995.
+Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (File
No. 33-96804) for the quarter ended March 31, 1996, and incorporated
herein by reference.
++Filed as an Exhibit to the Registrant's Report on Form 8-K (File No.
33-96804) for the period ended February 26, 1996 and incorporated herein
by reference.
+++Confidential portions have been omitted pursuant to Rule 406 and filed
separately with the Commission.
<PAGE>
EXECUTION COPY
LENFEST COMMUNICATIONS, INC.
$300,000,000
10.50% Senior Subordinated Notes Due 2006
PURCHASE AGREEMENT
New York, New York
June 20, 1996
To: SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES (USA) INC.
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Lenfest Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Purchaser") $300,000,000
principal amount of its 10.50% Senior Subordinated Notes Due 2006 (the
"Securities"), to be issued under an indenture (the "Indenture") to be dated as
of June 15, 1996, between the Company and The Bank of New York, as trustee (the
"Trustee").
The sale of the Securities to you will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Act"), in reliance upon the exemption from the registration requirements of the
Act provided by Section 4(2) thereof. You have advised the Company that you will
make an offering of the Securities purchased by you hereunder in accordance with
Section 4
<PAGE>
hereof on the terms set forth in the Final Memorandum (as defined below), as
soon as you deem advisable after this Agreement has been executed and delivered.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated June 11, 1996 (the
"Preliminary Memorandum"), and a final offering memorandum, dated June 20, 1996
(the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company and the
Securities. The Company hereby confirms that it has authorized the use of the
Preliminary Memorandum and the Final Memorandum in connection with the offering
and resale by the Purchaser of the Securities. Any references herein to the
Preliminary Memorandum or the Final Memorandum shall be deemed to include all
exhibits thereto and all documents incorporated by reference therein which were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on or before the Execution Time (as defined below); and any reference
herein to the terms "amend", "amendment" or "supplement" with respect to the
Final Memorandum shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Execution Time which is incorporated
by reference therein.
1. Representations and Warranties. The Company
represents and warrants to, and agrees with, the Purchaser
as set forth below in this Section 1.
(a) Each of the Preliminary Memorandum and the Final
Memorandum as of its date did not, and the Final Memorandum (as the
same may have been amended or supplemented) as of the Closing Date will
not, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or
warranties as to the information contained in or omitted from the
Preliminary Memorandum or the Final Memorandum in reliance upon and in
conformity with information furnished in writing to the Company by the
Purchasers specifically for inclusion in the Preliminary Memorandum or
the Final Memorandum (and any amendment or supplement thereof or
thereto). All documents incorporated by reference in the Preliminary
Memorandum or the Final Memorandum which were filed under the Exchange
Act on or before the Execution Time
2
<PAGE>
complied, and all such documents which are filed under the Exchange Act
after the Execution Time and on or before the Closing Date will comply,
in all material respects with the applicable requirements of the
Exchange Act and the rules thereunder.
(b) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Rule 10b-6 under the Exchange Act
in connection with the offering of the Securities.
(c) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Act ("Regulation D")) of the Company
has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or will be integrated with
the sale of the Securities in a manner that would require the
registration of the Securities under the Act or (ii) engaged in any
form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offering of the Securities.
(d) It is not necessary in connection with the offer, sale and
delivery of the Securities in the manner contemplated by this Agreement
and the Final Memorandum to register the Securities under the Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
(e) None of the Company, its affiliates or any person acting
on behalf of the Company or its affiliates has engaged in any directed
selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Securities, and the Company and
its affiliates and any person acting on its or their behalf have
complied with the offering restrictions requirement of Regulation S.
(f) The Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the
Exchange Act.
(g) The Securities satisfy the requirements set
forth in Rule 144A(d)(3) under the Act. The Company
has been advised by the National Association of Securities
3
<PAGE>
Dealers, Inc. PORTAL Market that the Securities have or will be
designated PORTAL eligible securities in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc.
(h) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Final Memorandum; and the
company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, other than where the failure to so qualify could not,
individually or in the aggregate, have a material adverse effect on the
financial condition or business, properties, net worth or results of
operations of the Company and its subsidiaries taken as a whole.
(i) Each Significant Subsidiary (as defined in Rule 1-02(a) of
Regulation S-X promulgated under the Act) of the Company has been duly
incorporated or formed and is an existing corporation or partnership in
good standing under the laws of the jurisdiction of its incorporation
or organization, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Final
Memorandum; and each Significant Subsidiary of the Company is duly
qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or
the conduct of its business required such qualification, other than
when the failure to qualify could not, individually or in the
aggregate, have a material adverse effect on the financial condition or
business, properties, net worth or results of operations of the Company
and its Significant Subsidiaries taken as a whole; all of the issued
and outstanding capital stock of each Significant Subsidiary of the
Company has been duly authorized and validly issued and is fully paid
and nonassessable; and the capital stock or partnership interest of
each Significant Subsidiary owned by the Company, directly or through
Significant Subsidiaries, is owned free from liens, encumbrances and
defects, except for such proxies, liens, encumbrances and options
disclosed in the Final Memorandum.
4
<PAGE>
(j) The Indenture has been duly authorized; the Securities
have been duly authorized; and when the Securities are delivered and
paid for pursuant to this Agreement on the Closing Date, the Indenture
will be duly executed, authenticated, issued and delivered and will
conform to the description thereof contained in the Final Memorandum
and the Indenture and the Securities will constitute valid and legally
binding obligations of the Company, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(k) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement
in connection with the issuance and sale of the Securities by the
Company, except such as have been obtained and made under the Act and
such as may be required under state securities laws.
(l) The execution, delivery and performance of the Indenture
and this Agreement, and the issuance and sale of the Securities and
compliance with the terms and provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws
(or, if applicable, the partnership agreement) of the Company or any
such subsidiary, and the Company has full power and authority to
authorize, issue and sell the securities as contemplated by this
Agreement.
(m) This Agreement has been duly authorized,
executed and delivered by the Company.
(n) Except as disclosed in the Final Memorandum,
the Company and its subsidiaries have good and
5
<PAGE>
marketable title to all material real properties and all other
properties and assets owned by them, in each case free from liens,
encumbrances and defects that could materially affect the value thereof
or materially interfere with the use made or presently contemplated to
be made thereof by them; and except as disclosed in the Final
Memorandum, the Company and its subsidiaries hold any leased real or
personal property under valid and enforceable leases with no exceptions
that are material or could materially interfere with the use made or
presently contemplated to be made thereof by them.
(o) The Company and its Significant Subsidiaries possess
adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them other than those the absence of which could not
reasonably be expected to, individually or in the aggregate, have a
material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
Significant Subsidiaries taken as a whole and have not received any
notice of proceedings relating to the revocation or modification of any
such certificate, authority or permit that, if determined adversely to
the Company or any of its Significant Subsidiaries, could reasonably be
expected to individually or in the aggregate have a material adverse
effect on the financial condition or business, properties, net worth or
results of operations of the Company and its subsidiaries taken as a
whole.
(p) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
could reasonably be expected to, individually or in the aggregate, have
a material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries taken as a whole.
(q) The Company and its Significant Subsidiaries own, possess
or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property necessary to
conduct the business now operated by them, other
6
<PAGE>
than those the absence of which could not, individually or in the
aggregate, have a material adverse effect on the financial condition or
business, properties, net worth or results of operations of the Company
and its Significant Subsidiaries taken as a whole, or presently
employed by them, and have not received any notice of infringement of
or conflict with asserted rights of others with respect to any
trademarks, trade names or other rights to inventions, know-how,
patents, copyrights, confidential information or other intellectual
property that, if determined adversely to the Company or any of its
subsidiaries, could individually or in the aggregate have a material
adverse effect on the financial condition or business, properties, net
worth or results of operations of the Company and its Significant
Subsidiaries taken as a whole.
(r) Except as disclosed in the Final Memorandum, there are no
pending actions, suits or proceedings against or affecting the company,
any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of it subsidiaries, could
reasonably be expected to individually or in the aggregate have a
material adverse effect on the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries taken as a whole, or would materially and adversely affect
the ability of the Company to perform its obligations under the
Indenture or this Agreement, or which are otherwise material in the
context of the sale of the Securities; and, to the Company's knowledge,
no such actions, suits or proceedings are threatened.
(s) The financial statements included in the Final Memorandum
present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent
basis, except as otherwise stated therein; and the schedules included
in the Final Memorandum present fairly in all material respects the
information required to be stated therein.
7
<PAGE>
(t) Except as disclosed in the Final Memorandum, since the
date of the latest audited financial statements included in the Final
Memorandum there has been no material adverse change, nor any
development or event which could reasonably be expected to result in a
material adverse change, in the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in the Final
Memorandum, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(u) Except to the extent set forth in the Final Memorandum,
the Company has not received any notice of, nor does it have any actual
knowledge of, any failure by it or any of its Significant Subsidiaries
to be in substantial compliance with all existing statutes and
regulations applicable to it or such subsidiaries, which failure could
materially and adversely affect the financial condition or business,
properties, net worth or results of operations of the Company and its
subsidiaries taken as a whole.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to the Purchasers, and the Purchasers agree to purchase
from the Company, at a purchase price of 98.00% of the principal amount thereof,
plus accrued interest, if any, from June 27, 1996, to the Closing Date, the
principal amount of the Securities.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 AM, New York City time, on June 27, 1996, or
such later date (not later than July 3, 1996) as the Purchasers designate, which
date and time may be postponed by agreement between the Purchasers and the
Company or as provided in Section 9 hereof (such date and time of delivery and
payment for the Securities being herein called the "Closing Date"). Delivery of
the Securities shall be made to the Purchasers against payment by the Purchasers
of the purchase price thereof to or upon the order of the Company by certified
or official bank check or checks drawn on or by a New York Clearing House bank
and payable in same day funds. Delivery of the Securities shall be made at such
location as the Purchasers shall reasonably designate at least one business day
in advance of the
8
<PAGE>
Closing Date and payment for the Securities shall be made at the office of
Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York. Certificates for
the Securities shall be registered in such names and in such denominations as
the Purchasers may request not less than three full business days in advance of
the Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the Purchaser in New York, New York, not
later than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities; Restrictions on Transfer. (a) The
Purchasers represent and warrant to and agree with the Company that (i) they
have not solicited and will not solicit any offer to buy or offer to sell the
Securities by means of any form of general solicitation or general advertising
(within the meaning of Regulation D) or in any manner involving a public
offering within the meaning of Section 4(2) of the Act or, with respect to
Securities sold in reliance on Regulation S, by means of any directed selling
efforts and (ii) they have solicited and will solicit offers to buy the
Securities only from, and have offered and will offer, sell or deliver the
Securities only to, (A) persons who they reasonably believe to be qualified
institutional buyers (as defined in Rule 144A under the Act) or, if any such
person is buying for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has represented to them that
each such account is a qualified institutional buyer, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A, (B) persons who they reasonably
believe to be institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D), and who provide to them a letter in
the form of Exhibit A hereto or (C) persons to whom, and under circumstances
which, they reasonably believe offers and sales of Securities may be made
without registration of the Securities under the Act in reliance upon Regulation
S thereunder and have complied or will comply with the offering restriction
requirements of Regulation S. The Purchasers also represent and warrant and
agree that they have offered and will offer to sell the Securities only to, and
have solicited and will solicit offers to buy the Securities only from, persons
that in purchasing such Securities will be deemed to have represented and agreed
as
9
<PAGE>
provided under "Investor Representations and Restrictions on
Resale" in Exhibit B hereto.
(b) The Purchasers represent and warrant that (i) they have
not offered or sold, and will not offer or sell, in the United Kingdom, by means
of any document, any Securities other than to persons whose ordinary business it
is to buy or sell shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public within the meaning
of the United Kingdom Companies Act 1985, (ii) they have complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by them in relation to the
Securities in, from or otherwise involving the United Kingdom and (iii) they
have only issued or passed on, and will only issue or pass on, in the United
Kingdom any document received by them in connection with the issue of the
Securities to a person who is of the kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988
or is a person to whom the document may otherwise lawfully be issued or passed
on.
5. Agreements. The Company agrees with the
Purchaser that:
(a) The Company will furnish to the Purchaser, without charge,
during the period mentioned in paragraph (c) below, as many copies of
the Final Memorandum and any supplements and amendments thereof or
thereto as the Purchasers may reasonably request. The Company will pay
the expenses of printing or other production of all documents relating
to the offering.
(b) The Company will not amend or supplement the Final
Memorandum, other than by filing documents under the Exchange Act which
are incorporated by reference therein, without prior consent of the
Purchasers. Prior to the completion of the sale of the Securities by
the Purchasers, the Company will not file any document under the
Exchange Act which is incorporated by reference in the Final Memorandum
unless the Company has furnished you a copy for your review prior to
filing and will not file any such document to which you reasonably and
timely object.
(c) The Company will promptly advise the
Purchasers when, prior to the completion of the sale of
10
<PAGE>
the Securities by the Purchasers, any document filed under the Exchange
Act which is incorporated by reference in the Final Memorandum shall
have been filed with the Securities and Exchange Commission (the
"Commission").
(d) If at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which the
Final Memorandum as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend or supplement the Final Memorandum (including any
document incorporated by reference therein which was filed under the
Exchange Act) to comply with the Exchange Act or the rules thereunder
or other applicable law, the Company promptly will notify the
Purchasers of the same and, subject to paragraph (b) of this Section 5,
will prepare and provide to the Purchasers pursuant to paragraph (a) of
this Section 5 an amendment or supplement which will correct such
statement or omission or effect such compliance and, in the case of
such an amendment or supplement which is to be filed under the Exchange
Act and which is incorporated by reference in the Final Memorandum,
will file such amendment or supplement with the Commission.
(e) The Company will arrange for the qualification of the
Securities for sale under the laws of such jurisdictions as the
Purchasers may designate, will maintain such qualifications in effect
so long as required for the sale of the Securities and will arrange for
the determination of the legality of the Securities for purchase by
institutional investors. The Company will promptly advise the Purchaser
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(f) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D) of the Company will solicit any offer to buy or
offer or sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation
D).
11
<PAGE>
(g) None of the Company, its affiliates nor any person acting
on behalf of the Company or its affiliates will engage in any directed
selling efforts with respect to the Securities within the meaning of
Regulation S, and the Company, its affiliates and each such person
acting on its or their behalf will comply with the offering
restrictions requirement of Regulation S.
(h) The Company shall, during any period in the three years
after the Closing Date in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, make available, upon request, to any
holder of such Securities in connection with any sale thereof and any
prospective purchaser of Securities from such holder the information
("Rule 144A Information") specified in Rule 144A(d)(4) under the Act.
(i) The Company will not, and will not permit any of its
affiliates (as defined in Rule 501(b) of Regulation D) to, resell any
Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them.
(j) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D) will sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in
the Act) the offering of which security will be integrated with the
sale of the Securities in a manner which would require the registration
of the Securities under the Act.
(k) The Company shall include information substantially in the
form set forth in Exhibit B in each Final Memorandum.
(l) The Company shall use its best efforts in cooperation with
the Purchaser to permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(m) The Company will not, for a period of 90 days following
the Execution Time without prior written consent of Salomon Brothers
Inc, offer, sell or contract to sell, or otherwise dispose of, directly
or indirectly, or announce the offering of, any debt securities issued
or guaranteed by the Company (other than the Securities).
12
<PAGE>
(n) The Company will apply the net proceeds from the sale of
the Notes sold by it substantially in accordance with its statements
under the caption "Use of Proceeds" in the Final Memorandum.
6. Conditions to the Obligations of the Purchasers. The
obligations of the Purchasers to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Company
contained herein as of the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Company shall have furnished to the Purchasers the
opinion of Saul, Ewing, Remick & Saul, counsel for the Company, dated
the Closing Date, to the effect that:
(i) each of the Company, Suburban Cable TV Co. Inc.,
LenComm, Inc., Lenfest West, Inc., Lenfest Atlantic, Inc.,
Lenfest South Jersey Investments, Inc., South Jersey
Cablevision Associates, Lenfest Newcastle County, Lenfest
Newcastle County, Inc. and CAH, Inc. (individually a "Cable
Television Subsidiary" and collectively the "Cable Television
Subsidiaries"), has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and
conduct its business as described in the Final Memorandum, and
is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction which
requires such qualification wherein it owns or leases material
properties or conducts material business;
(ii) all the outstanding shares of capital stock of
each Cable Television Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Final Memorandum,
all
13
<PAGE>
outstanding shares of capital stock of the Cable Television
Subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interests,
claims, liens or encumbrances;
(iii) the Company's authorized equity capitalization
is as set forth in the Final Memorandum; and the Securities
conform to the description thereof contained in the Final
Memorandum;
(iv) the Indenture has been duly authorized, executed
and delivered, and constitutes a legal, valid and binding
instrument enforceable against the Company in accordance with
its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and subject, as
to enforceability, to general principles of equity, regardless
of whether such enforceability is considered in a proceeding
in equity or at law); and the Securities have been duly
authorized and, when executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid
for by the Purchasers pursuant to this Agreement, will
constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture;
(v) such counsel has no reason to believe that as of
the Execution Time the Final Memorandum contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading or that the Final Memorandum
includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
14
<PAGE>
(vii) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transactions contemplated herein, except
such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the Securities by the Purchasers and such other approvals
(specified in such opinion) as have been obtained;
(viii) neither the issue and sale of the Securities,
the execution and delivery of the Indenture, the consummation
of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in
a breach or violation of, or constitute a default under any
law or the charter or by-laws of the Company or the terms of
any indenture or other agreement or instrument known to such
counsel and to which the Company or any of its subsidiaries is
a party or bound or any judgment, order or decree known to
such counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries; and
(ix) it is not necessary in connection with the
offer, sale and delivery of the Securities in the manner
contemplated by this Agreement to register the Securities
under the Act or to qualify the Indenture under the Trust
Indenture Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
State of Pennsylvania or the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel
of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Purchasers and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Final
Memorandum in this paragraph (a) include any amendments or supplements
thereof or thereto at the Closing Date.
15
<PAGE>
(b) The Company shall have furnished to the Purchasers the
opinion of Fleischman and Walsh, L.L.P., special counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company and its subsidiaries have been
granted and presently hold the Federal Communications
Commission (the "FCC") authorizations necessary for the
Company and its subsidiaries to conduct their respective
businesses as presently conducted or proposed to be conducted
other than those that could not reasonably be expected to,
individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries taken as a whole;
to the knowledge of such counsel such FCC authorizations are
in full force and effect; and to the knowledge of such
counsel, except as set forth in a schedule to such opinion, no
proceedings to revoke such FCC authorizations are pending or
threatened;
(ii) to the knowledge of such counsel after due
inquiry, such counsel is of the opinion that the Company and
its subsidiaries are not, nor with the passage of time or the
giving of notice or both would be, in violation of any
judgement, injunction, order or decree of the FCC relating
specifically to the Company or its subsidiaries or to any
properties of the Company or its subsidiaries other than those
that cold not reasonably be expected to, individually or in
the aggregate, have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(iii) the execution and delivery of this Agreement
and the Securities by the Company, and the performance by the
Company of its obligations under this Agreement and the
Securities, do not violate the Communications Act of 1934, as
amended, or any rules or the regulation thereunder binding on
the Company or its subsidiaries or any order, writ, judgement,
injunction, decree or award of the FCC binding on the Company
or its subsidiaries of which such counsel has knowledge after
due inquiry:
16
<PAGE>
(iv) there is no proceeding or investigation pending
before the FCC, or, to the knowledge of such counsel, any
investigation pending or threatened by the FCC against the
Company or its subsidiaries which, if adversely determined,
could have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(v) the execution, delivery and performance of this
Agreement does not constitute the transfer or assignment,
directly or indirectly, or any license existing as of the
Closing Date issued by the FCC in connection with the
operations of the Company or its subsidiaries or the transfer
of control of the Company or its subsidiaries within the
meaning of Section 310(d) of the Communications Act of 1934,
as amended; and
(vi) the statements in the Final Memorandum under the
heading "Legislation and Regulation" fairly summarize the
matters therein described.
(c) The Purchasers shall have received an opinion, dated the
Closing Date, of Samuel W. Morris, Jr., Esq., Vice President--General
Counsel of the Company, to the effect that, (i) to the best knowledge
of such counsel after due inquiry, no franchising authority has claimed
in writing that the Company or any subsidiary is in default under any
franchise that, if revoked, would have a material adverse effect,
individually or in the aggregate, on the Company and its subsidiaries
taken as a whole and (ii) to the best knowledge of such counsel, there
is no pending or threatened action, suit or proceeding before any court
or governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries of a character that would be
required to be disclosed in a registration statement filed under the
Act which is not adequately disclosed in the Final Memorandum, and
there is no franchise, contract or other document of a character
required to be described in a registration statement filed under the
Act, or required to be filed as an exhibit to such a registration
statement, which is not described in the Final Memorandum; and the
statements in the Final Memorandum under the heading "Legal Matters"
fairly summarize the matters therein described.
17
<PAGE>
(d) The Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the Securities,
the Indenture, the Final Memorandum (together with any amendment or
supplement thereof or thereto) and other related matters as the
Purchasers may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(e) The Company shall have furnished to the Purchasers a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any amendment
or supplement to the Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Company has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing
Date; and
(ii) since the date of the most recent financial
statements included in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto), there has been no
material adverse change in the condition (financial or other),
earnings, business or properties of the Company and its
subsidiaries, whether or not arising from transactions in the
ordinary course of business, except as set forth in or
contemplated in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).
(f) At the Execution Time and at the Closing Date, Pressman
Ciocca & Smith shall have furnished to the Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Purchasers,
confirming that they are independent accountants within the meaning of
the Exchange Act and the applicable
18
<PAGE>
published rules and regulations thereunder and that they have performed
a review of the unaudited interim financial information of the Company
for the three-month period ended March 31, 1996 in accordance with
Statement of Accounting Standards No. 71 and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules and pro forma financial
statements included or incorporated in the Final Memorandum
and reported on by them comply in form in all material
respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and its subsidiaries; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders and directors of the Company
and its subsidiaries; and inquiries of certain officials of
the Company who have responsibility for financial and
accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 1995,
nothing came to their attention which caused them to believe
that:
(1) any unaudited financial statements
included or incorporated in the Final Memorandum do
not comply in form in all material respects with
applicable accounting requirements and with the
published rules and regulations of the Commission
with respect to financial statements included or
incorporated in quarterly reports on Form 10-Q under
the Exchange Act; and said unaudited financial
statements are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited
financial statements included or incorporated in the
Final Memorandum; or
19
<PAGE>
(2) with respect to the period subsequent to
March 31, 1996, there were any changes, at a
specified date not more than five business days prior
to the date of the letter, in the Notes and Mortgages
Payable or decreases in the Stockholders' Equity of
the Company as compared with the amounts shown on the
March 31, 1996, consolidated balance sheet included
or incorporated in the Final Memorandum, or for the
period from April 1, 1996 to such specified date
there were any decreases, as compared with the
corresponding period in the preceding year in Net
Income (Loss) or Income (Loss) Before Income Taxes or
in Operating Income, except in all instances for
changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance
thereof unless said explanation is not deemed
necessary by the Purchasers; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Final
Memorandum, including the information set forth under the
captions "Offering Memorandum Summary", "Summary Consolidated
Financial and Operating Data", "Risk Factors", "Use of
Proceeds", "Capitalization", "Pro Forma Financial
Information", "Selected consolidated Financial Data",
"Management's Discussion and Analysis of Results of Operations
and Financial Condition", Business", "Management", "Certain
Transactions", "Description of Other Debt Obligations" and
"Description of Notes" in the Final Memorandum, agrees with
the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation.
References to the Final Memorandum in this paragraph (f)
include any amendment or supplement thereof or thereto at the date of
the letter.
20
<PAGE>
The Purchasers shall have also received from Pressman, Ciocca
& Smith a letter stating that the Company's system of internal
accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objectives
pertain to the prevention or detection of errors or irregularities in
amounts that would be material in relation to the financial statements
of the Company and its subsidiaries.
(g) At the Execution Time and at the Closing Date, Pressman
Ciocca & Smith shall have furnished to the Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Purchasers,
confirming that they are independent accountants within the meaning of
the Act and the applicable published rules and regulations thereunder
and that they have performed a review of the unaudited statements of
operations of The Wilmington, Delaware System (the "Wilmington System")
for the 3-month period ended March 31, 1995 and the period ended
February 12, 1996, in accordance with Statement on Accounting Standards
No. 71 and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Final
Memorandum and reported on by them comply in form in all
material respects with the applicable accounting requirements
of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Wilmington System;
carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders and directors of the Wilmington System; and
inquiries of certain officials of the Wilmington System who
have responsibility for financial and accounting matters of
the Wilmington System as to transactions and events subsequent
to December 31,
21
<PAGE>
1995, nothing came to their attention which caused them to
believe that any unaudited financial statements of the
Wilmington System included in the Final Memorandum do not
comply in form in all material respects with applicable
accounting requirements of the Act and with the published
rules and regulations of the Commission with respect to
financial statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Final Memorandum; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Wilmington System) set forth in the Final Memorandum,
including the information set forth under the captions
"Offering Memorandum Summary", "Pro Forma Financial
Information" and "Business" in the Final Memorandum, agrees
with the accounting records of the Wilmington System,
excluding any questions of legal interpretation.
References to the Final Memorandum in this paragraph (g)
include any amendment or supplement thereof or thereto at the date of
the letter.
(h) At the Execution Time and at the Closing Date, Coopers &
Lybrand L.L.P. shall have furnished to the Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Purchasers,
confirming that they are independent accountants within the meaning of
the Act and the applicable published
22
<PAGE>
rules and regulations thereunder and that they have performed a review
of the unaudited combined statements of income of Sammons Cable for the
3-month period ended March 31, 1995, and the 2-month period ended
February 29, 1996, in accordance with Statement on Accounting Standards
No. 71 and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Final
Memorandum and reported on by them comply in form in all
material respects with the applicable accounting requirements
of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by Sammons Cable; carrying
out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with
respect to the comments set forth in such letter; a reading of
the minutes of the meetings of the stockholders and directors
of Sammons Communications, Inc.; and inquiries of certain
officials of Sammons Communications, Inc. who have
responsibility for financial and accounting matters of Sammons
Cable as to transactions and events subsequent to December 31,
1995, nothing came to their attention which caused them to
believe that any unaudited financial statements of Sammons
Cable included in the Final Memorandum do not comply in form
in all material respects with applicable accounting
requirements of the Act and with the published rules and
regulations of the Commission with respect to financial
statements included or incorporated in quarterly reports on
Form 10-Q under the Exchange Act; and said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Final Memorandum; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited
23
<PAGE>
to accounting, financial or statistical information derived
from the general accounting records of Sammons Communications,
Inc. and its subsidiaries) set forth in the Final Memorandum
to, including the information set forth under the captions
"Offering Memorandum Summary", "Pro Forma Financial
Information" and "Business" in the Final Memorandum, agrees
with the accounting records of Sammons Communications, Inc.,
excluding any questions of legal interpretation.
References to the Final Memorandum in this paragraph (h)
include any amendment or supplement thereof or thereto at the date of
the letter.
(i) At the Execution Time and at the Closing Date, Arthur
Andersen LLP shall have furnished to the Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Purchasers,
confirming that they are independent accountants within the meaning of
the Act and the applicable published rules and regulations thereunder
and that they have performed a review of the unaudited interim
financial information of Garden State Cablevision L.P. for the 3-month
period ended and as of March 31, 1996, in accordance with Statement on
Accounting Standards No. 71 and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Final
Memorandum and reported on by them comply in form in all
material respects with the applicable accounting requirements
of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by Garden State
Cablevision L.P.; carrying out certain specified procedures
(but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters
of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
partners of Garden State Cablevision L.P.; and inquiries of
certain officials of Garden State Cablevision L.P.
24
<PAGE>
who have responsibility for financial and accounting matters
of Garden State Cablevision L.P. as to transactions and events
subsequent to December 31, 1995, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements of
Garden State Cablevision L.P. included in the Final
Memorandum do not comply in form in all material
respects with applicable accounting requirements of
the Act and with the published rules and regulations
of the Commission with respect to financial
statements included or incorporated in quarterly
reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity
with generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included in the Final
Memorandum; or
(2) with respect to the period subsequent to
March 31, 1996, there were any changes, at a
specified date not more than five business days prior
to the date of the letter, in the Long-Term Debt or
increases in the Partners' Deficit of Garden State
Cablevision L.P. as compared with the amounts shown
on the March 31, 1996, consolidated balance sheet
included in the Final Memorandum, or for the period
from April 1, 1996, to such specified date there were
any decreases, as compared with the corresponding
period in the preceding year in Net Loss or in
Operating Income, except in all instances for changes
or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by
Garden State Cablevision L.P. as to the significance
thereof unless said explanation is not deemed
necessary by the Purchasers.
References to the Final Memorandum in this paragraph (i)
include any amendment or supplement thereof or thereto at the date of
the letter.
25
<PAGE>
(j) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Final Memorandum (exclusive of
any amendment or supplement thereof or thereto), there shall not have
been (i) any change or decrease specified in the letter or letters
referred to in paragraphs (f), (g), (h) or (i) of this Section 6 or
(ii) any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and its
subsidiaries the effect of which, in any case referred to in clause (i)
or (ii) above, is, in the judgment of the Purchasers, so material and
adverse as to make it impractical or inadvisable to market the
Securities as contemplated by the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto).
(k) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or any notice given
of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the direction
of the possible change.
(l) Prior to the Closing Date, the Company shall have
furnished to the Purchasers evidence that it has obtained all consents
or waivers necessary under the Private Placement Notes (as defined in
the Final Memorandum) to consummate the purchase and sale of the
Securities as herein contemplated.
(m) Prior to the Closing Date, the Company shall have
furnished to the Purchasers such further information, certificates and
documents as the Purchasers may reasonably request.
(n) Concurrently with or prior to the issue and sale of the
Securities by the Company, the Company shall have entered into the New
Bank Credit Facility (as defined in the Final Memorandum) and the
initial borrowings thereunder shall have occurred. The Initial
Purchasers shall have received conformed counterparts thereof and all
other documents and agreements entered into and received thereunder in
connection with the closing of the New Bank Credit Facility. There
shall exist at and as of the Closing Date (after giving
26
<PAGE>
effect to the transactions contemplated by this Agreement) no condition
that would constitute a default (or an event that with notice or lapse
of time, or both, would constitute a default) under the agreement
governing the New Bank Credit Facility.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Purchasers and counsel for the
Purchasers, this Agreement and all obligations of the Purchasers hereunder may
be canceled at, or at any time prior to, the Closing Date by the Purchasers.
Notice of such cancelation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cravath, Swaine & Moore, counsel for the
Purchasers, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the
Closing Date.
7. Reimbursement of Purchasers' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Purchasers, the Company will reimburse the Purchasers upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by it in connection with the proposed
purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Purchaser, the directors, officers, employees
and agents of each Purchaser and each person who controls any Purchaser within
the meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise,
27
<PAGE>
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any Rule 144A Information provided by the Company to any holder or
prospective purchaser of Securities pursuant to Section 5(h), or in any
amendment thereof or supplement thereto, or arise out of or are based upon 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, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchasers
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Each Purchaser severally agrees to indemnify and hold
harmless the Company, its directors, its officers, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Purchaser, but
only with reference to written information relating to such Purchaser furnished
to the Company by or on behalf of such Purchaser specifically for inclusion in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto. This indemnity agreement will be in addition to any
liability which any Purchaser may otherwise have. The Company acknowledges that
the statements set forth in the last paragraph of the cover page and under the
heading "Plan of Distribution" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or on behalf
of the several Purchasers for inclusion in the Preliminary Memorandum or the
Final Memorandum, and you, as the Representatives, confirm that such statements
are correct.
28
<PAGE>
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be
29
<PAGE>
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Purchasers agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Purchasers may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company and by the Purchasers from the
offering of the Securities; provided, however, that in no case shall the
Purchasers (except as may be provided in any agreement among Purchasers relating
to the offering of the Securities) be responsible for any amount in excess of
the purchase discount or commission applicable to the Securities purchased by
the Purchasers hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Purchasers
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and of the
Purchasers in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses), and benefits received by the Purchasers
shall be deemed to be equal to the total purchase discounts and commissions, in
each case as set forth on the cover page of the Final Memorandum. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or the Purchasers. The
Company and the Purchasers agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent
30
<PAGE>
misrepresentation. For purposes of this Section 8, each person who controls a
Purchaser within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of a Purchaser shall have the same rights
to contribution as such Purchaser, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each officer and
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Default by a Purchaser. If any one or more Purchasers shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Purchaser or Purchasers hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Purchasers shall be obligated severally to take up and
pay for (in the respective proportions which the principal amount of Securities
set forth opposite their names in Schedule I hereto bears to the aggregate
principal amount of Securities set forth opposite the names of all the remaining
Purchasers) the Securities which the defaulting Purchaser or Purchasers agreed
but failed to purchase; provided, however, that in the event that the aggregate
principal amount of Securities which the defaulting Purchaser or Purchasers
agreed but failed to purchase shall exceed 10% of the aggregate principal amount
of Securities set forth in Schedule I hereto, the remaining Purchasers shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such nondefaulting Purchasers do not
purchase all the Securities, this Agreement will terminate without liability to
any nondefaulting Purchaser or the Company. In the event of a default by any
Purchaser as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Purchasers shall determine in
order that the required changes in the Final Memorandum or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Purchaser of its liability, if any, to the Company
and any nondefaulting Purchaser for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Purchasers, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to such
time
31
<PAGE>
(i) trading in securities generally on the New York Stock Exchange shall have
been suspended or limited or minimum prices shall have been established on such
Exchange, (ii) a banking moratorium shall have been declared either by Federal
or New York State authorities or (iii) there shall have occurred any outbreak or
escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the judgment of the Purchasers, impracticable
or inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum (exclusive of any amendment or supplement
thereof or thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchasers set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchasers or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancelation of this
Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or telegraphed and confirmed to it, at Seven World Trade Center, New
York, New York, 10048; or, if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 200 Cresson Boulevard, Oaks, PA 19456,
attention of Samuel W. Morris, Jr., Esq.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
32
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company and the several Purchasers.
Very truly yours,
LENFEST COMMUNICATIONS, INC.
By:_____________________________
Name: Harry F. Brooks
Title: Executive Vice
President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON BROTHERS INC
By:______________________________
Name:
Title:
For itself and the other several
Purchasers named in Schedule I
to the foregoing Agreement.
33
<PAGE>
SCHEDULE I
Principal Amount
of Notes
Underwriter to be Purchased
----------- ----------------
Salomon Brothers Inc............................... $165,000,000
Toronto Dominion Securities (USA) Inc. 105,000,000
CIBC Wood Gundy Securities Corp.................... 15,000,000
NationsBanc Capital Markets, Inc................... 15,000,000
------------
Total..................................... $300,000,000
============
34
<PAGE>
EXHIBIT A
Form of Investment Letter
for Institutional Accredited Investors
Lenfest Communications, Inc.
c/o The Bank of New York
101 Barclay Street
New York, NY 10286
Dear Sirs:
In connection with our proposed purchase of $ aggregate
principal amount of 10.50% Senior Subordinated Notes Due 2006 (the "Notes") of
Lenfest Communications, Inc., a Delaware corporation (the "Company"), we confirm
that:
1. We understand that the Notes have not been registered under
the Securities Act of 1933 (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We understand and agree,
on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, (x) that such Notes are being offered only in a
transaction not involving any public offering within the meaning of the
Securities Act, (y) that if we decide to resell, pledge or otherwise
transfer such Notes within three years after the date of the original
issuance of the Notes or, thereafter, if within three months after we
cease to be an affiliate (within the meaning of Rule 144 under the
Securities Act) of the Company, such Notes may be resold, pledged or
transferred only (i) to the Company, (ii) so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities Act
("Rule 144A"), to a person whom we reasonably believe is a "qualified
institutional buyer" (as defined in Rule 144A) ("QIB") that purchases
for its own account or for the account of another QIB and to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the
certificate for the Notes), (iii) in an offshore transaction in
accordance with Rule 903 or 904 under the Securities Act, (iv) pursuant
to an exemption from registration under the Securities Act provided by
Rule 144 (if applicable) under the Securities Act, or (v) pursuant to
an effective registration statement under the Securities Act, in each
case in accordance with any applicable securities laws of any state of
the United States. We further understand that in connection with any
transfer of the Notes by us that the Company and the Trustee
<PAGE>
may request, and if so requested we will furnish, such certificates,
legal opinions and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing
restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Memorandum, we have knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we
and any accounts for which we are acting are each able to bear the
economic risk of our or its investment and can afford the complete loss
of such investment.
3. We understand that the minimum principal amount of Notes
that may be purchased by an institutional accredited investor is
$100,000.
4. We understand that the Company, Salomon Brothers Inc,
Toronto Dominion Securities (USA) Inc., CIBC Wood Gundy Securities
Corp. and NationsBanc Capital Markets, Inc., as the initial purchasers
of the Notes ("Initial Purchasers"), and others will rely upon the
truth and accuracy of the foregoing acknowledgements, representations
and agreements, and we agree that if any of the acknowledgements,
representations and warranties made by us in connection with our
purchase of Notes, for our own account or of one or more accounts as to
each of which we exercise sole investment discretion, are no longer
accurate, we shall promptly notify the Company and the Initial
Purchasers.
5. We are acquiring the Notes purchased by us for investment
purposes and not for distribution, for our own account or for one or
more accounts as to each of which we exercise sole investment
discretion, and we are or such account is an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act).
6. We have received a copy of the Offering Memorandum relating
to the Offering of the Notes and acknowledge that we have had access to
such financial and other information, and have been afforded the
opportunity to ask questions of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase Notes.
7. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any
-2-
<PAGE>
administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.
Very truly yours,
------------------------------
(Name of Purchaser)
By:
---------------------------
Date:
-------------------------
-3-
<PAGE>
EXHIBIT B
NOTICE TO INVESTORS
Offers and Sales by the Initial Purchasers
- ------------------------------------------
The Notes have not been registered under the Securities Act
and may not be offered or sold in the United States or to, or for the account or
benefit of, U.S. persons except in accordance with an applicable exemption from
the registration requirements thereof. Accordingly, the Notes are being offered
and sold only (1) in the United States to qualified institutional buyers
("Qualified Institutional Buyers") under Rule 144A under the Securities Act and
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) ("Institutional Accredited Investors") in a
private sale exempt from the registration requirements of the Securities Act,
and (2) outside the United States to non-U.S. persons ("foreign purchasers") in
reliance upon Regulation S under the Securities Act. Each Institutional
Accredited Investor that is a purchaser of Notes from an Initial Purchaser will
be required to sign a certificate in the form provided by an Initial Purchaser.
Investor Representations and Restrictions on Resale
- ---------------------------------------------------
Each purchaser of the Notes will be deemed to have represented
and agreed as follows:
(1) it is acquiring the Notes for its own account or for an
account with respect to which it exercises sole investment discretion,
and that it or such account is a Qualified Institutional Buyer, an
Institutional Accredited Investor acquiring the Notes for investment
purposes and not for distribution or a foreign purchaser outside the
United States;
(2) it acknowledges that the Notes have not been registered
under the Securities Act and may not be sold except as permitted below;
(3) it understands and agrees (x) that such Notes are being
offered only in a transaction not involving any public offering within
the meaning of the Securities Act, and (y) that (A) if within three
years after the date of original issuance of the Notes or, thereafter,
if within three months after it ceases to be an affiliate (within the
meaning of Rule 144A under the Securities Act) of the Company, it
decides to resell, pledge or otherwise transfer such Notes on which the
legend set forth below appears, such Notes may be resold, pledged or
transferred only (i) to the Company, (ii) so long as such security is
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a Qualified Institutional Buyer that purchases
for its own account or for the account of a Qualified Institutional
Buyer to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A (as
<PAGE>
indicated by the box checked by the transferor on the Certificate of
Transfer on the reverse of the Note if such Note is not in book-entry
form), (iii) in a transaction complying with the provisions of Rule 904
under the Securities Act, (iv) pursuant to an exemption from the
registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, or (v) pursuant.to an effective
registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the
United States, (B) the purchaser will, and each subsequent holder is
required to, notify any purchaser of Notes from it of the resale
restrictions referred to in (A) above, if then applicable, and (C) with
respect to any transfer of Notes by an Institutional Accredited
Investor, such holder will deliver to the Company and the Trustee such
certificates and other information as they may reasonably require to
confirm that the transfer by it complies with the foregoing
restrictions including, without limitation, a certificate in the form
of Exhibit A;
(4) it understands that the Notes will, until the third
anniversary of their date of original issue, unless otherwise agreed by
the Company and the holder thereof, bear a legend substantially to the
following effect:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF
THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY
TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED
BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN A
TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR 904
UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
-2-
<PAGE>
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO
THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT
IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (0)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT."
(5) it (i) is able to fend for itself in the transactions
contemplated by this Offering Memorandum; (ii) has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of it prospective investment in the
Notes; and (iii) has the ability to bear the economic risks of its
prospective investment and can afford the complete loss of such
investment;
(6) It has received a copy of the Offering Memorandum relating
to the offering of the Notes and acknowledges that it has had access to
such financial and other information, and has been afforded the
opportunity to ask questions of the Company and receive answers
thereto, as it deems necessary in connection with its decision to
purchase Notes; and
(7) it understands that the Company, the Initial Purchasers
and other will rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements and agrees that if any
of the acknowledgements, representations and warranties deemed to have
been made by it by its purchase of Notes are no longer accurate, it
shall promptly notify the Company and the Initial Purchaser. If it is
acquiring the Notes as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with
respect to each such account and it has full power to make the
foregoing acknowledgements, representations and agreements on behalf of
such account.
-3-
<PAGE>
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
RESTATED CERTIFICATE OF "LENFEST COMMUNICATIONS, INC.", FILED IN THIS OFFICE ON
THE FIRST DAY OF MAY, A.D. 1996, AT 1:30 O'CLOCK P.M.
------------------------------
Edward J. Freel,
Secretary of State
[Notarial Seal]
Authentication: 7995397
Date: 06-20-96
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LENFEST COMMUNICATIONS, INC.
*******************
LENFEST COMMUNICATIONS, INC., a corporation organized and
existing and incorporated on March 27, 1974 under and by virtue of the General
Corporation Law of the State of Delaware, as amended (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation duly
adopted resolutions setting forth a proposed amended and restated Certificate of
Incorporation, declaring said amendment and restatement to be advisable and
calling for consideration thereof at the next regularly scheduled meeting of the
stockholders of the Corporation. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the
Corporation be, and it hereby is, amended and restated so as
to read in full as follows:
1. The name of the corporation is LENFEST
COMMUNICATIONS, INC.
2. The address of its registered office in the State of
Delaware is 1105 North Market Street, Suite 1300,
Wilmington, New Castle County, Delaware, 19801. The
name of its registered agent at such address is
Delaware Corporate Management, Inc.
3. The nature of the business or purposes to be
conducted or promoted is:
To engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of Delaware.
4. The aggregate number of shares of the corporation
shall have authority to issue is 158,886 shares of
stock, par value one cent ($0.01) per share.
5. The name and mailing address of each incorporator is
as follows:
<PAGE>
Name Mailing Address
---- ---------------
G.J. Coyle 100 West Tenth Street
Wilmington, Delaware 19801
W.J. Reif 100 West Tenth Street
Wilmington, Delaware 19801
R.F. Andrews 100 West Tenth Street
Wilmington, Delaware 19801
6. The corporation is to have perpetual existence.
7. Until December 31, 2001, the number of directors
shall be five. During such time the shares directly
and/or beneficially owned by the Lenfest Family (any
one or more of H.F. Lenfest, Marguerite Lenfest,
their issue and the Lenfest Foundation and its
successors), represented by H.F. Lenfest if living
and if not by the Lenfest Foundation, shall have the
right to elect three directors, and the shares owned
directly or beneficially by LMC Lenfest, Inc. and its
successors ("LMC Lenfest") shall have the right to
elect two directors. Beginning on January 1, 2002,
the number of directors shall be six, whereupon, in
addition to the rights regarding the election of
directors set forth above, LMC Lenfest shall have the
right to elect one additional director, for a total
of three to be elected by LMC Lenfest. The right of
the Lenfest Family to elect three directors shall
continue so long as any member of the Lenfest Family
owns any stock in the corporation. Vacancies among
the directors elected by the Lenfest Family shall be
filled at the direction of the Lenfest Family;
vacancies among the directors elected by LMC Lenfest
shall be filled at the direction of LMC Lenfest.
8. In furtherance and not in limitation of the powers
conferred by statute, the affirmative vote of all
outstanding shares shall be required to take any
action, directly or indirectly or by effect, to:
(a) Amend, alter, modify, restate or repeal the
Certificate of Incorporation or By-Laws of
the corporation;
(b) Amend, alter, modify, restate or repeal the
By-Laws; and/or
(c) Dissolve, or recapitalize, or merge or
consolidate with or into any person (whether
or not this corporation shall survive such
merger or consolidation), or sell, lease or
exchange material assets of the corporation
(subject to right of a majority of the
-2-
<PAGE>
Board to create a bona fide pledge assets
and convey title to same in event of
foreclosure).
9. Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may
provide. The books of the corporation may be kept
(subject to any provision contained in the statutes)
outside the State of Delaware at such place or places
as may be designated from time to time by the board
of directors or in the By-Laws of the corporation.
Elections of directors need not be by written ballot
unless the By-Laws of the corporation shall so
provide.
10. No director of the corporation shall be personally
liable to the corporation or any stockholder for
monetary damages for breach of fiduciary duty as a
director, provided that the foregoing shall not
eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation
Law of Delaware, or (iv) for any transaction from
which the director derived an improper personal
benefit. Neither the amendment nor repeal of this
Article 10, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this
Article 10, shall eliminate or reduce the effect of
this Article 10 in respect of any matter occurring,
or any cause of action, suit or claim that, but for
this Article 10, would accrue or arise prior to such
amendment, repeal or adoption of an inconsistent
provision.
SECOND: That said amendment and restatement was unanimously
adopted by the stockholders of the Corporation at the Annual Meeting of
Stockholders.
THIRD: That said amendment and restatement was duly adopted in
accordance with the provisions of Sections 242 & 245 of the General Corporation
Law of the State of Delaware, as amended.
FOURTH: That the capital of the Corporation shall not be
reduced under or by reason of said amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, said Lenfest Communications, Inc. has
caused its corporate seal to hereunto affixed and this certificate to be signed
by H.F. Lenfest, its President, and Marguerite B. Lenfest, its Secretary, this
4th day of April, 1996.
LENFEST COMMUNICATIONS, INC.
BY:______________________________
H.F. Lenfest, President
[CORPORATE SEAL]
Attest:______________________
Marguerite B. Lenfest,
Secretary
-4-
<PAGE>
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of Philadelphia, State of Pennsylvania,
at such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with
the year 1975, shall be held on the first Monday of April if not a legal
holiday, and if a legal holiday, then on the next secular day following, or at
such other date and time as shall be designated from time to time by the board
of directors and stated in the notice of the meeting, at which
<PAGE>
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the President/CEO and shall be
called by the President/CEO or secretary at the request in writing of a majority
of the board of directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued
-2-
<PAGE>
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
-3-
<PAGE>
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than written consent shall be given to those
stockholders who have not consented in writing.
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ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be not less than three nor more than seven. The first board
shall consist of three directors. Thereafter, within the limits above specified,
the number of directors shall be determined by resolution of the board of
directors or by the stockholders at the annual meeting. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorships the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
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Section 3. The business of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the certificate
of incorporation or by these by-laws directed or required to be exercised or
done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereafter provided for special
meetings of the board of directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 6. The board of directors shall hold at least two, but
no more than four, regular meetings a year.
Section 7. Special meetings of the board of directors may be
called by the chairman of the board of directors or any two directors.
Section 8. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors
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present at any meeting at which there is a quorum shall be the act of the board
of directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation. If a quorum shall not be present at any
meeting of the board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one of more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a
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committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Amy such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of
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the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 14. (1) Any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by this corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceedings by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
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corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) Any person who was or is a party, or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was the director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified by this corporation
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation; except, however, that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the Court of Chancery of the county in which the registered
office of the corporation is located or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
the liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(3) To the extent that a director, officer, employee or agent
as above described has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraph 1 or 2 of this Article
or in defense of any claim, issue
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or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(4) Any indemnification under paragraphs 1 or 2 of this
Article (unless ordered by a court) shall be made upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such subsection. Such determination shall be made:
(a) By the vote of the board of directors consisting of
directors who were not parties to such action, suit
or proceedings; or
(b) If such action is not obtainable, or even if
obtainable the vote of the disinterested directors
so directs, by independent legal counsel in a
written opinion; or
(c) By the shareholders.
(5) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in paragraph 4 of this Article upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article.
(6) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under
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any by-law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(7) The corporation may, by action of the board of directors,
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these by-laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 2. Whenever any notice is required to given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a President/CEO, a vice-president, a
secretary and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a President/CEO, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their officers for
such terms and shall exercise such powers and preform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The President/CEO of the corporation shall be
elected by the unanimous action of all of the directors of the corporation. The
President/CEO may be
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removed at any time, by the unanimous vote of all of the directors of the
corporation. All other officers of the corporation shall hold office until their
successors are chosen and qualify. All other officers elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation, except President/CEO, shall be filled by the board of directors.
THE PRESIDENT/CEO
Section 6. The President/CEO shall also be the chief executive
officer of the corporation. The President/CEO shall have the fullest powers
permitted by the Delaware General Corporation Law. In addition, the
President/CEO shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall ensure that all orders and resolutions of the board of
directors are carried into effect. The powers of the President/CEO shall not be
diminished except by the unanimous action of all of the directors. H. F. Lenfest
shall serve as President/CEO until the first to occur of his death, resignation
or December 31, 2001 and until his successor is chosen and shall qualify.
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
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THE VICE-PRESIDENT
Section 8. In the absence of the President/CEO or in the event
of his inability or refusal to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation; then in the order of their
election) shall perform the duties of the President/CEO, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President/CEO. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or President/CEO, under whose supervision he shall be. He shall
have custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
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Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in use order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors way from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the President/CEO and the board of directors,
at its regular meetings, or when the board of directors so requires, an account
of all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and
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other property of whatever kind in his possession or under his control belonging
to the corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and such other powers as the board
of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation,
certifying the number of shares owned by him in the corporation.
Section 2. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of
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that fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record
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entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
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corporation, or for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall begin
January 1 of each year.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
AMENDMENTS
Section 1. These by-laws, including this Article VIII, may be
altered, amended, modified, restated or repealed by either the stockholders or
the board of directors, but in either case only in accordance with the
provisions and limitations set forth in the Certificate of Incorporation of the
corporation. Such action to alter, amend, modify, restate or repeal the by-laws
may be considered at any regular or special meeting of the stockholders and/or
the board of directors if notice thereof be contained in the notice of such
regular or special meeting.
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EXECUTION COPY
===============================================================================
LENFEST COMMUNICATIONS, INC.,
Issuer
10-1/2% Senior Subordinated Notes Due 2006
-------------------------------
INDENTURE
Dated as of June 15, 1996
-------------------------------
THE BANK OF NEW YORK,
Trustee
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ----------
310(a)(1) .............................. 6.10
(a)(2) .............................. 6.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(a)(5) .............................. 6.10
(b) .............................. 6.08; 6.10
(c) .............................. N.A.
311(a) .............................. 6.11
(b) .............................. 6.11
(c) .............................. N.A.
312(a) .............................. 2.05
(b) .............................. 10.03
(c) .............................. 10.03
313(a) .............................. 6.06
(b)(1) .............................. N.A.
(b)(2) .............................. 6.06
(c) .............................. 10.02
(d) .............................. 6.06
314(a) .............................. 3.03;
3.10; 10.02
(b) .............................. N.A.
(c)(1) .............................. 10.04
(c)(2) .............................. 10.04
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 10.05
(f) .............................. N.A.
315(a) .............................. 6.01
(b) .............................. 6.05; 10.02
(c) .............................. 6.01
(d) .............................. 6.01
(e) .............................. 5.11
316(a)(last sentence) ...................... 10.06
(a)(1)(A) .............................. 5.05
(a)(1)(B) .............................. 5.04
(a)(2) .............................. N.A.
(b) .............................. 5.07
(c) .............................. 5.07
317(a)(1) .............................. 5.08
(a)(2) .............................. 5.09
(b) .............................. 2.04
318(a) .............................. 10.01
N.A. means Not Applicable.
- ------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
Page
----
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 19
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 20
SECTION 1.04. Rules of Construction .................. 20
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 21
SECTION 2.02. Execution and Authentication ........... 21
SECTION 2.03. Registrar and Paying Agent ............. 22
SECTION 2.04. Paying Agent To Hold Money in Trust..... 22
SECTION 2.05. Securityholder Lists ................... 23
SECTION 2.06. Replacement Securities ................. 23
SECTION 2.07. Outstanding Securities ................. 23
SECTION 2.08. Temporary Securities ................... 24
SECTION 2.09. Cancellation ........................... 24
SECTION 2.10. Defaulted Interest ..................... 25
SECTION 2.11. Record Date ............................ 26
ARTICLE 3
Covenants
SECTION 3.01. Certain Covenants Suspended ............ 26
SECTION 3.02. Payment of Securities .................. 27
SECTION 3.03. SEC Reports ............................ 27
SECTION 3.04. Limitation on Indebtedness ............. 28
SECTION 3.05. Limitation on Restricted Payments ...... 28
SECTION 3.06. Limitation on Transactions with
Affiliates............................ 29
SECTION 3.07. Designation of Restricted and
Unrestricted Subsidiaries............. 30
SECTION 3.08. Change of Control Offer ................ 31
<PAGE>
Page
----
SECTION 3.09. Limitation on Layered
Indebtedness............................ 31
SECTION 3.10. Limitation on Subordinated
Liens .................................. 31
SECTION 3.11. Compliance Certificate ................... 34
ARTICLE 4
Successor Company
SECTION 4.01. When Company May Merge or Transfer
Assets ............................... 34
ARTICLE 5
Defaults and Remedies
SECTION 5.01. Events of Default ...................... 35
SECTION 5.02. Acceleration ........................... 38
SECTION 5.03. Other Remedies ......................... 38
SECTION 5.04. Waiver of Past Defaults ................ 39
SECTION 5.05. Control by Majority .................... 39
SECTION 5.06. Limitation on Suits .................... 39
SECTION 5.07. Rights of Holders To Receive Payment ... 40
SECTION 5.08. Collection Suit by Trustee ............. 40
SECTION 5.09. Trustee May File Proofs of Claim ....... 40
SECTION 5.10. Priorities ............................. 41
SECTION 5.11. Undertaking for Costs .................. 41
SECTION 5.12. Waiver of Stay or Extension Laws ....... 41
ARTICLE 6
Trustee
SECTION 6.01. Duties of Trustee ...................... 42
SECTION 6.02. Rights of Trustee ...................... 43
SECTION 6.03. Individual Rights of Trustee ........... 44
SECTION 6.04. Trustee's Disclaimer ................... 44
SECTION 6.05. Notice of Defaults ..................... 44
SECTION 6.06. Reports by Trustee to Holders .......... 44
SECTION 6.07. Compensation and Indemnity ............. 45
SECTION 6.08. Replacement of Trustee ................. 46
SECTION 6.09. Successor Trustee by Merger ............ 47
<PAGE>
Page
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SECTION 6.10. Eligibility; Disqualification .......... 47
SECTION 6.11. Preferential Collection of Claims
Against Company ...................... 48
ARTICLE 7
Discharge of Indenture; Defeasance
SECTION 7.01. Discharge of Liability on Securities;
Defeasance ........................... 48
SECTION 7.02. Conditions to Defeasance ............... 59
SECTION 7.03. Application of Trust Money ............. 50
SECTION 7.04. Repayment to Company ................... 50
SECTION 7.05. Indemnity for Government
Obligations .......................... 51
SECTION 7.06. Reinstatement .......................... 51
ARTICLE 8
Amendments
SECTION 8.01. Without Consent of Holders ............. 51
SECTION 8.02. With Consent of Holders ................ 52
SECTION 8.03. Compliance with Trust Indenture Act .... 53
SECTION 8.04. Revocation and Effect of Consents
and Waivers .......................... 54
SECTION 8.05. Notation on or Exchange of
Securities ........................... 54
SECTION 8.06. Trustee To Sign Amendments ............. 54
SECTION 8.07. Payment for Consent .................... 55
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Page
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ARTICLE 9
Subordination
SECTION 9.01. Agreement To Subordinate ............... 55
SECTION 9.02. Liquidation, Dissolution,
Bankruptcy ........................... 56
SECTION 9.03. Default on Senior Indebtedness ......... 56
SECTION 9.04. Acceleration of Payment of
Securities ........................... 58
SECTION 9.05. When Distribution Must Be Paid Over .... 58
SECTION 9.06. Subrogation ............................ 58
SECTION 9.07. Relative Rights ........................ 58
SECTION 9.08. Subordination May Not Be Impaired
by Company ........................... 58
SECTION 9.09. Rights of Trustee and Paying Agent ..... 59
SECTION 9.10. Distribution or Notice to
Representative ....................... 59
SECTION 9.11. Article 9 Not To Prevent Events of
Default of Limit Right To
Accelerate ........................... 59
SECTION 9.12. Trust Moneys Not Subordinated .......... 59
SECTION 9.13. Trustee Entitled To Rely ............... 60
SECTION 9.14. Trustee To Effectuate Subordination .... 60
SECTION 9.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness ............... 61
SECTION 9.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions ........................... 61
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls ........... 61
SECTION 10.02. Notices ................................ 62
SECTION 10.03. Communication by Holders with Other
Holders ............................. 62
SECTION 10.04. Certificate and Opinion as to
Conditions Precedent ................ 63
SECTION 10.05. Statements Required in Certificate
or Opinion .......................... 63
SECTION 10.06. Rules by Trustee, Paying Agent and
Registrar ........................... 63
SECTION 10.07. Legal Holidays ......................... 64
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Page
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SECTION 10.08. Governing Law .......................... 64
SECTION 10.09. No Recourse Against Others ............. 64
SECTION 10.10. Successors ............................. 64
SECTION 10.11. Multiple Originals ..................... 64
SECTION 10.12. Table of Contents; Headings ............ 64
SECTION 10.13. Severability ........................... 64
Appendix A - Provisions Relating to Initial Securities and
Exchange Securities
Exhibit 1 to
Appendix A - Form of Initial Security
Exhibit A - Form of Exchange Security
<PAGE>
INDENTURE dated as of June 15, 1996, between
LENFEST COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), and THE BANK OF NEW YORK, a New York
banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
10-1/2% Senior Subordinated Notes Due 2006 (the "Initial Securities") and, if
and when issued pursuant to a registered exchange for Initial Securities, the
Company's 10-1/2% Senior Subordinated Notes Due 2006 (the "Exchange Securities",
together with the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Affiliate" of any specified Person means (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person who
is a director or officer (a) of such specified Person, (b) of any Subsidiary of
such specified Person or (c) of any Person described in clause (i) above. For
the purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of Section 3.07 only, "Affiliate"
shall also mean any beneficial owner of shares representing 10% or more of the
total voting power of the Capital Stock (on a fully diluted basis) of the
Company or of rights or warrants to purchase such Capital Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Annualized Pro Forma EBITDA" means, with respect to any
Person, the product of such Person's Pro Forma EBITDA for the latest fiscal
quarter for which financial statements are available multiplied by four.
<PAGE>
"Asset Sale" means the sale, transfer or other disposition
(other than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions of (a) any Capital Stock of or
other equity interest in any Restricted Subsidiary, (b) all or substantially all
of the assets of the Company or of any Restricted Subsidiary or (c) all or
substantially all of the assets of (1) a Company System or part thereof serving
at least 50,000 basic subscribers, (2) a division, (3) a line of business or (4)
a comparable business segment of the Company or any Restricted Subsidiary.
"Attributable Indebtedness" means Indebtedness deemed to be
incurred in respect of a Sale and Leaseback Transaction and shall be, at the
date of determination, the present value (discounted at the actual rate of
interest implicit in such transaction, compounded annually), of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Leaseback Transaction (including any period for
which such lease has been extended).
"Bank Credit Facility" means the Senior Credit Facility to be
dated June 27, 1996, by and among the Company, the lenders thereto and The
Toronto-Dominion Bank, NationsBank of Texas, N.A. and PNC Bank, National
Association, as the same may be amended, refinanced or replaced from time to
time by a lender or syndicate of lenders.
"Bank Indebtedness" means the Indebtedness and all other
monetary obligations under the Bank Credit Facility.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a duly adopted resolution of the
Board of Directors in full force and effect at the time of determination and
certified as such by the Secretary or an Assistant Secretary of the Company.
"Business Day" means each day which is not a Legal Holiday (as
defined in Section 10.07).
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of corporate stock, partnership
interests or any other
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participation, right, warrant, option or other interest in the nature of an
equity interest in such Person, but excluding any debt security convertible or
exchangeable into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash
Proceeds received by the Company from the issue or sale (other than to a
Subsidiary or an employee stock ownership plan or trust established by the
Company or any Subsidiary) by the Company of any class of its Capital Stock
(other than Redeemable Stock) after November 14, 1995.
"Capitalized Lease Obligations" means Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Change of Control" means such time as a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than one or more of the Permitted Holders and their Affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power required to elect or designate for election a
majority of the Company's Board of Directors and attaching to the then
outstanding voting Capital Stock of the Company.
"Change of Control Triggering Event" means, with respect to
the Securities, the occurrence of both a Change of Control and a Rating Decline
with respect to the Securities.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Company System" means any cable television system owned by
the Company or any Restricted Subsidiary.
"Consolidated Interest Expense" means, for any Person, for
any period, the amount of interest in respect of
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Indebtedness (including amortization of original issue discount, fees payable in
connection with financings, including commitment, availability and similar fees,
and amortization of debt issuance costs, non-cash interest payments on any
Indebtedness and the interest portion of any deferred payment obligation and
after taking into account the effect of elections made under, and the net costs
associated with, any Interest Rate Agreement, however denominated, with respect
to such Indebtedness), the amount of Redeemable Dividends, the amount of
Preferred Stock dividends in respect of all Preferred Stock of Restricted
Subsidiaries held by Persons other than the Company or a Restricted Subsidiary,
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, and the interest component of
rentals in respect of any Capitalized Lease Obligation or Sale and Leaseback
Transaction paid, accrued or scheduled to be paid or accrued by such Person
during such period, determined on a consolidated basis in accordance with GAAP.
For purposes of this definition, interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by such
Person to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP.
"Consolidated Net Income" means for any period, the net income
(loss) of the Company and its Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject to
the limitations contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iii) below) and (b) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income, (ii) any net income (loss) of any
Person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition, (iii) any net
income (loss) of any Restricted Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
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<PAGE>
making of distributions by such Restricted Subsidiary, directly or indirectly,
to the Company, except that (a) subject to the limitations contained in clause
(iv) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend (subject, in the case of a dividend to another
Restricted Subsidiary, to the limitation contained in this clause) and (b) the
Company's equity in a net loss of any such Restricted Subsidiary for such period
shall be included in determining such Consolidated Net Income, (iv) any gain
(but not loss) realized upon the sale or other disposition of any property,
plant or equipment of the Company or its consolidated Subsidiaries (including
pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any Capital Stock of any Person,
(v) any extraordinary gain or loss and (vi) the cumulative effect of a change in
accounting principles.
"Cumulative EBITDA" means at any date of determination the
cumulative EBITDA of the Company from and after September 30, 1995 to the end of
the fiscal quarter immediately preceding the date of determination or, if such
cumulative EBITDA for such period is negative, minus the amount by which such
cumulative EBITDA is less than zero.
"Cumulative Interest Expense" means at any date of
determination the aggregate amount of Consolidated Interest Expense paid,
accrued or scheduled to be paid or accrued by the Company from September 30,
1995 to the end of the fiscal quarter immediately preceding the date of
determination determined on a consolidated basis in accordance with GAAP.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default (as defined in Section 5.01).
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness, (ii) the Company's 8-3/8% Senior Notes due 2005 and (iii) any
other Senior Indebtedness of the
5
<PAGE>
Company which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $100 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture.
"Dollar Equivalent" means, with respect to any monetary amount
in a currency other than U.S. dollars, at any time for the determination
thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase
of U.S. dollars with the applicable foreign currency as quoted by Bankers Trust
Company (or its successor) in New York City at approximately 11:00 a.m. (New
York time) on the date two Business Days prior to such determination.
"EBITDA" means, for any Person, for any period, an amount
equal to (A) the sum of (i) Consolidated Net Income for such period, plus (ii)
the provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing consolidated net income and
any provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation
for such period on a consolidated basis, plus (v) amortization of intangibles
for such period on a consolidated basis, plus (vi) any other non-cash items
reducing consolidated net income for such period, minus (B) all non-cash items
increasing consolidated net income for such period, all for such Person and its
Subsidiaries determined in accordance with GAAP, except that with respect to the
Company each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and its Restricted Subsidiaries only.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Fair Market Value" means with respect to any Property, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value will
be determined, except as otherwise
6
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provided, (i) if such Property has a Fair Market Value of less than $5 million,
by any Officer of the Company or (ii) if such Property has a Fair Market Value
in excess of $5 million, by a majority of the Board of Directors and evidenced
by a resolution, dated within 30 days of the relevant transaction, of such Board
of Directors delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP consistently applied.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to
7
<PAGE>
be incurred by such Subsidiary at the time it becomes a Subsidiary. The terms
"incurred", "incurrence" and "incurring" shall each have a correlative meaning.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness, secured or unsecured, contingent or otherwise,
which is for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), or evidenced
by bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding any
balances that constitute subscriber advance payments and deposits, accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) Indebtedness of other Persons secured by a
Lien to which the property or assets owned or held by such Person is subject,
whether or not the obligation or obligations secured thereby shall have been
assumed (the amount of such Indebtedness being deemed to be the lesser of the
value of such property or assets or the amount of the Indebtedness so secured),
(iii) Guarantees of Indebtedness of other Persons, (iv) any Redeemable Stock,
(v) any Attributable Indebtedness, (vi) all obligations of such Person in
respect of letters of credit, bankers' acceptances or other similar instruments
or credit transactions (including reimbursement obligations with respect
thereto), other than obligations with respect to letters of credit securing
obligations (other than obligations described in this definition) entered into
in the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit, (vii)
in the case of the Company, Preferred Stock of its Restricted Subsidiaries and
(viii) obligations of any such Person under any Interest Rate Agreement
applicable to any of the foregoing. Notwithstanding the foregoing, Indebtedness
shall not include any interest or accrued interest until due and payable.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or
8
<PAGE>
amended by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof, including, for all purposes of this instrument
and any such supplemental indenture, the provisions of the TIA that are deemed
to be a part of and govern this instrument, and any such supplemental indenture,
respectively.
"Independent Appraiser" means an investment banking firm of
national standing with non-investment grade debt underwriting experience or any
third party appraiser of national standing; provided, however, that such firm or
appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement.
"Investment Grade Rating" means a rating equal to or higher
than Baa3 (or the equivalent) and BBB- (or the equivalent) by Moody's Investors
Service, Inc. (or any successor to the rating agency business thereof) and
Standard & Poor's Rating Services, a division of The McGraw Hill Companies, Inc.
(or any successor to the rating agency business thereof), respectively.
"Issue Date" means the date on which the Securities are
initially issued.
"Lenfest Family" means collectively H. F. Lenfest and members
of his immediate family, any of their respective spouses, estates, lineal
descendants, heirs, executors, personal representatives, administrators, trusts
for any of their benefit and charitable foundations to which shares of the
Company's Capital Stock beneficially owned by any of the foregoing have been
transferred.
"Leverage Ratio" means the ratio of (i) the outstanding
Indebtedness of a Person and its Subsidiaries (or in the case of the Company,
its Restricted Subsidiaries) divided by (ii) the Annualized Pro Forma EBITDA of
such Person.
"Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability),
9
<PAGE>
encumbrance, preference, priority, or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such Property
(including any Capitalized Lease Obligation, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing or any Sale and Leaseback Transaction).
"Net Cash Proceeds" with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale, net of
attorney's fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the President, the Treasurer, the Assistant
Secretary, or any Executive Vice President or Vice President of the Company.
"Officers' Certificate" means a certificate signed by two
Officers at least one of whom shall be the principal executive officer,
principal accounting officer or principal financial officer of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"pari passu", as applied to the ranking of any Indebtedness of
a Person in relation to other Indebtedness of such Person, means that each such
Indebtedness either (i) is not subordinate in right of payment to any
Indebtedness or (ii) is subordinate in right of payment to the same Indebtedness
as is the other, and is so subordinate to the same extent, and is not
subordinate in right of payment to each other or to any Indebtedness as to which
the other is not so subordinate.
"Permitted Holders" means the Lenfest Family and
Tele-Communications, Inc.
"Permitted Liens" means (i) Liens on the Property of the
Company or any Restricted Subsidiary existing on the Issue Date; (ii) Liens on
the Property of the Company or any Restricted Subsidiary to secure any
extension, renewal, refinancing, replacement or refunding (or successive
10
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extensions, renewals, refinancings, replacements or refundings), in whole or in
part, of any Indebtedness secured by Liens referred to in any of clauses (i),
(vi) or (ix); provided, however, that any such Lien will be limited to all or
part of the same Property that secured the original Lien (plus improvements on
such Property) and the aggregate principal amount of Indebtedness that is
secured by such Lien will not be increased to an amount greater than the sum of
(A) the outstanding principal amount, or, if greater, the committed amount, of
the Indebtedness described under clauses (i), (vi) and (ix) at the time the
original Lien became a Permitted Lien under this Indenture and (B) an amount
necessary to pay any premiums, fees and other expenses incurred by the Company
in connection with such refinancing, refunding, extension, renewal or
replacement; (iii) Liens for taxes, assessments or governmental charges or
levies on the Property of the Company or any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without penalty,
or are being contested in good faith and by appropriate proceedings; (iv) Liens
imposed by law, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens on the Property of the Company or any Restricted Subsidiary
arising in the ordinary course of business which secure payment of obligations
not more than 60 days past due or are being contested in good faith and by
appropriate proceedings; (v) Liens on the Property of the Company or any
Restricted Subsidiary in favor of issuers of performance bonds and surety or
appeal bonds; (vi) Liens on Property at the time the Company or any Restricted
Subsidiary acquired such Property, including any acquisition by means of a
merger or consolidation with or into the Company or such Restricted Subsidiary;
provided, however, that such Lien shall not have been incurred in anticipation
or in connection with such transaction or series of related transactions
pursuant to which such Property was acquired by the Company or such Restricted
Subsidiary; (vii) other Liens on the Property of the Company or any Restricted
Subsidiary incidental to the conduct of their respective businesses or the
ownership of their respective Properties which were not credited in connection
with the incurrence of Indebtedness or the obtaining of advances or credit and
which do not in the aggregate materially detract from the value of their
respective Properties or materially impair the use thereof in the operation of
their respective businesses; (viii) pledges or deposits by the Company or any
Restricted Subsidiary under workmen's compensation laws, unemployment insurance
laws or similar legislation, or good faith
11
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deposits in connection with bids, tenders, contracts (other than for the payment
of Indebtedness) or leases to which the Company or any Restricted Subsidiary is
a party, or deposits to secure public or statutory obligations of the Company or
any Restricted Subsidiary, or deposits for the payment of rent, in each case
incurred in the ordinary course of business, (ix) Liens on the Property of a
Person at the time such Person becomes a Restricted Subsidiary; provided,
however, that any such Lien may not extend to any other Property of the Company
or any Restricted Subsidiary; provided further, however, that any such Lien was
not incurred in anticipation of or in connection with the transaction or series
of related transactions pursuant to which such Person became a Restricted
Subsidiary or (xi) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character.
"Permitted Refinancing Indebtedness" means any renewals,
extensions, substitutions, refinancings or replacements of any Indebtedness,
including any successive extensions, renewals, substitutions, refinancings or
replacements so long as (i) the aggregate amount of Indebtedness represented
thereby is not increased by such renewal, extension, substitution, refinancing
or replacement, (ii) the average life and the date such Indebtedness is
scheduled to mature is not shortened and (iii) the new Indebtedness shall not be
senior in right of payment to the Indebtedness that is being extended, renewed,
substituted, refinanced or replaced.
"Person" means any individual, corporation, company (including
limited liability company), partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
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"Private Placement Note Agreements" means (i) the Note
Agreement dated as of September 14, 1988, as amended, among the Company, The
Equitable Life Assurance Society of the United States, The Mutual Life Insurance
Company of New York, The Mutual Benefit Life Insurance Company and The
Prudential Insurance Company of America; (ii) the Note Agreement dated as of May
22, 1989, as amended, between the Company and The Prudential Insurance Company
of America; and (iii) the Note Agreement dated as of September 27, 1991, as
amended, among the Company and Teachers Insurance and Annuity Association of
America, Jackson National Life Insurance Company, UNUM Life Insurance Company,
First UNUM Life Insurance Company, IDS Life Insurance Company of New York,
American Enterprise Life Insurance Company, New York Life Insurance Company and
SAFECO Life Insurance Company.
"Private Placement Notes" means (i) the 11.84% Senior Notes
due 2000; (ii) the 11.30% Senior Notes due 1998; and (iii) the 9.93% Senior
Notes due 2001, all as issued pursuant to the Private Placement Note Agreements.
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation in accordance
with Article 11 of Regulation S-X promulgated under the Securities Act (to the
extent applicable), as interpreted in good faith by the Board of Directors after
consultation with the independent certified public accountants of the Company,
or otherwise a calculation made in good faith by the Board of Directors after
consultation with the independent certified public accountants of the Company,
as the case may be.
"Pro Forma EBITDA" means for any Person, for any period, the
EBITDA of such Person as determined on a consolidated basis in accordance with
GAAP after giving effect to the following: (i) if, during or after such period,
such Person or any of its Subsidiaries shall have made any Asset Sale, Pro Forma
EBITDA of such Person and its Subsidiaries for such period shall be reduced by
an amount equal to the Pro Forma EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Sale for the period or increased
by an amount equal to the Pro Forma EBITDA (if negative) directly attributable
thereto for such period and (ii) if, during or after such period, such Person or
any of its Subsidiaries completes an acquisition of any Person or business which
immediately after such acquisition is a Subsidiary of such Person or whose
assets are held directly by such Person or a
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Subsidiary of such Person, Pro Forma EBITDA shall be computed so as to give pro
forma effect to the acquisition of such Person or business; provided, however,
that, with respect to the Company, all of the foregoing references to
"Subsidiary" or "Subsidiaries" shall be deemed to refer only to the "Restricted
Subsidiaries" of the Company.
"Property" means, with respect to any Person, any interest of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including Capital Stock in any other Person (but
excluding Capital Stock or other securities issued by such Person).
"Rating Agencies" mean Standard and Poor's Rating Services, a
division of The McGraw Hill Companies, Inc., and Moody's Investors Service, Inc.
or any successor to the respective rating agency businesses thereof.
"Rating Date" means the date which is 90 days prior to the
earlier of (i) a Change of Control and (ii) public notice of the occurrence of a
Change of Control or of the intention of the Company to effect a Change of
Control.
"Rating Decline" means, with respect to the Securities, the
occurrence of the following on, or within 90 days after, the date of public
notice of the occurrence of a Change of Control or of the intention by the
Company to effect a Change of Control (which period shall be extended so long as
the rating of such Securities is under publicly announced consideration for
possible downgrade by either of the Rating Agencies): (a) in the event the
Securities are assigned an Investment Grade Rating by either of the Rating
Agencies on the Rating Date, the rating of the Securities by both of the Rating
Agencies shall be below an Investment Grade Rating; or (b) in the event the
Securities are rated below an Investment Grade Rating by both of the Rating
Agencies on the Rating Date, the rating of the Securities by either of the
Rating Agencies shall be decreased by one or more gradations (including
gradations within rating categories as well as between rating categories).
"Redeemable Dividend" means, for any dividend with regard to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
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"Redeemable Stock" means, with respect to any Person, any
Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or otherwise (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii)
is redeemable at the option of the holder thereof, in whole or in part, or (iii)
is convertible or exchangeable for Indebtedness.
"Representative" means any trustee, agent or representative
(if any) for an issue of Senior Indebtedness of the Company.
"Restricted Payment" means (i) any dividend or distribution
(whether made in cash, property or securities) declared or paid on or with
respect to any shares of Capital Stock of the Company or Capital Stock of any
Restricted Subsidiary except for any dividend or distribution which is made
solely to the Company or a Restricted Subsidiary (and, if such Restricted
Subsidiary is not wholly owned, to the other shareholders of such Restricted
Subsidiary on a pro rata basis) or dividends or distributions payable solely in
shares of Capital Stock (other than Redeemable Stock) of the Company; (ii) a
payment made by the Company or any Restricted Subsidiary to purchase, redeem,
acquire or retire any Capital Stock of the Company or Capital Stock of any
Affiliate of the Company (other than a Restricted Subsidiary) or any warrants,
rights or options to directly or indirectly purchase or acquire any such Capital
Stock or any securities exchangeable for or convertible into any such Capital
Stock; or (iii) a payment made by the Company or any Restricted Subsidiary to
redeem, repurchase, defease or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled sinking fund or mandatory redemption payment
(other than the purchase, repurchase, or other acquisition of any Indebtedness
subordinate in right of payment to the Securities purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), Indebtedness of
the Company which is subordinate (whether pursuant to its terms or by operation
of law) in right of payment to the Securities.
"Restricted Subsidiary" means (a) Suburban Cable TV Co. Inc.,
LenComm, Inc., Lenfest West, Inc., Lenfest Atlantic, Inc., Lenfest South Jersey
Investments, Inc., South Jersey Cablevision Associates, Lenfest Newcastle
County, Lenfest Newcastle County, Inc. and CAH, Inc.;
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(b) any Subsidiary of the Company after the Issue Date unless such Subsidiary
shall have been designated an Unrestricted Subsidiary as permitted pursuant to
Section 3.08; and (c) an Unrestricted Subsidiary which is redesignated as a
Restricted Subsidiary as permitted pursuant to Section 3.08.
"Sale and Leaseback Transaction" means, with respect to any
Person, any direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933.
"Senior Indebtedness" means (i) Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter Incurred and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for Federal, state, local or
other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of the Company (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior
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in any respect to any other Indebtedness or other obligation of the Company or
(5) that portion of any Indebtedness which at the time of Incurrence is Incurred
in violation of this Indenture.
"Senior Subordinated Indebtedness" means the Securities and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Temporary Cash Investments" means any of the following: (i)
investments in U.S. Government Obligations maturing within 90 days of the date
of acquisition thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 90 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any State thereof or any foreign
country
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recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $500,000,000 (or the Dollar Equivalent thereof)
and whose long-term debt is rated "A" or higher according to Moody's Investors
Service, Inc. (or such equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)), (iii) repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above and (iv)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Rating Services, Inc., a division of The McGraw Hill Companies, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
"Trade Payables" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary course of
business of such Person in connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
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"Unrestricted Subsidiary" means (a) any Subsidiary in
existence on the Issue Date that is not a Restricted Subsidiary; (b) any
Subsidiary of an Unrestricted Subsidiary and (c) any Subsidiary of the Company
which is designated after the Issue Date as an Unrestricted Subsidiary as
permitted pursuant to Section 3.08 and not thereafter redesignated as a
Restricted Subsidiary as permitted pursuant thereto.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- ----------
"Affiliate Transaction" ................ 3.06
"Bankruptcy Law" ....................... 5.01
"Blockage Notice" ...................... 9.03
"Change of Control Offer" .............. 3.08
"Change of Control Payment Date" ....... 3.08
"Change of Control Purchase Price" ..... 3.08
"covenant defeasance option" ........... 7.01(b)
"Custodian" ............................ 5.01
"Defaulted Interest" ................... 2.10
"Event of Default" ..................... 5.01
"Global Securities...................... 2.01
"incorporated provision"................ 10.01
"incur"................................. 3.04
"legal defeasance option" .............. 7.01(b)
"Legal Holiday" ........................ 10.07
"pay the Securities" ................... 9.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 9.03
"Registrar"............................. 2.03
"Surviving Person" ..................... 4.01
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SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a
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balance sheet of the issuer dated such date prepared in accordance with
GAAP; and
(8) the principal amount of any Preferred Stock shall be the
greater of (i) the maximum liquidation value of such Preferred Stock or
(ii) the maximum mandatory redemption or mandatory repurchase price
with respect to such Preferred Stock.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities and the Exchange Securities are set forth in Appendix A,
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this
Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be con-
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clusive evidence that the Security has been authenticated under this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange.
The Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 6.07. The
Company or any of its domestically incorporated Restricted Subsidiaries may act
as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of
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Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. If the Company
or a Restricted Subsidiary acts as Paying Agent, it shall segregate the money
held by it as Paying Agent and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee
and to account for any funds disbursed by the Paying Agent. Upon complying with
this Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee or the Company. Such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company and
the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar
and any co-registrar from any loss which any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their expenses
in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.07. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be
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outstanding because the Company or an Affiliate of the Company holds
the Security.
If a Security is replaced pursuant to Section 2.06, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, then on and after that date such Securities (or portions thereof) cease
to be outstanding and interest on them ceases to accrue.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction or consent or any
amendment, modification or other change to the Indenture, Securities owned by
the Company or by an Affiliate of the Company shall be disregarded and treated
as if they were not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent or any amendment, modification or other change to the Indenture, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith shall not
be disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Securities and that the pledgee is
not the Company or an Affiliate of the Company.
SECTION 2.08. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.
SECTION 2.09. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the
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Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee shall cancel or destroy (subject to the record
retention requirements of the Exchange Act) all Securities surrendered for
registration of transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Company unless the Company directs the
Trustee to deliver canceled Securities to the Company. The Trustee shall in no
event be required to destroy Securities. The Company may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION 2.10. Defaulted Interest. Any interest on any Security
which is payable, but is not punctually paid or duly provided for, on the dates
and in the manner provided in the Securities and this Indenture (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant record date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities are registered at
the close of business on a special record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
special record date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such special record date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the special
record date therefor
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to be given to each Holder, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest
and the special record date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities are registered at the close of business on such special
record date.
(ii) The Company may make payment of any Defaulted Interest on
the Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.10, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 2.11. Record Date. The Company may set a record date
for purposes of determining the identity of Securityholders entitled to vote or
to consent to any action by vote of consent authorized or permitted by Sections
5.04, 5.05 and 9.06. Unless this Indenture provides otherwise, such record date
shall be the later of 30 days prior to the first solicitation of such consent or
the date of the most recent list of Holders furnished to the Trustee pursuant to
Section 2.05 prior to such solicitation.
ARTICLE 3
Covenants
SECTION 3.01 Certain Covenants Suspended. The covenants set
forth in this Article III will be applicable to the Company, except that during
any period of time that:
(i) the ratings assigned to the Securities by both of the
Rating Agencies are Investment Grade Ratings; and
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(ii) no Event of Default or Default has occurred and is
continuing,
the Company and its Restricted Subsidiaries will not be
subject to the provisions of this Indenture described in Section 3.04, Section
3.05, Section 3.06 and clause (iv) of Section 4.01 (collectively, the "Suspended
Covenants").
In the event that the Company and its Restricted Subsidiaries
are not subject to the Suspended Covenants with respect to the Securities for
any period of time as a result of the preceding sentence and, subsequently, one
or both Rating Agencies withdraws its ratings or downgrades the ratings assigned
to the Securities below the required Investment Grade Ratings, then the Company
and its Restricted Subsidiaries will thereafter again be subject to the
Suspended Covenants for the benefit of the Securities and compliance with the
Suspended Covenants with respect to Restricted Payments made after the time of
such withdrawal or downgrade will be calculated in accordance with the terms of
Section 3.05 as if such covenant had been in effect during the entire period of
time from the date of this Indenture.
SECTION 3.02. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 3.03. SEC Reports. The Company shall file with the
Trustee and provide Securityholders, within 15 days after it files them with the
SEC, copies of its annual report and the information, documents and other
reports which the Company is required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall continue to file with the SEC and provide
the Trustee and Securityholders with the
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annual reports and the information, documents and other reports which are
specified in Sections 13 and 15(d) of the Exchange Act at the times specified
for the filing of such information. The Company also shall comply with the other
provisions of TIA ss. 314(a).
SECTION 3.04. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, create or incur any Indebtedness unless, after giving effect to such
incurrence on a pro forma basis, the Company's Leverage Ratio would not exceed
8.00.
(b) Notwithstanding Section 3.04(a), the Company and its
Restricted Subsidiaries may incur the following Indebtedness: (i) the
Securities; (ii) Indebtedness outstanding on the Issue Date; (iii) Permitted
Refinancing Indebtedness incurred in respect of Indebtedness incurred pursuant
to Section 3.04(a) or clauses (i) and (ii) of this paragraph (b); (iv)
Indebtedness of the Company owing to and held by a Restricted Subsidiary and
Indebtedness of a Restricted Subsidiary owing to and held by the Company or any
other Restricted Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock or other event that results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
any such Indebtedness (except to the Company or a Restricted Subsidiary) shall
be deemed, in each case, to constitute the incurrence of such Indebtedness by
the issuer thereof; (v) Indebtedness under Interest Rate Agreements; provided,
however, such Interest Rate Agreements do not increase the Indebtedness of the
Company outstanding at any time other than as a result of fluctuations in
interest rates or by reason of customary fees, indemnities and compensation
payable thereunder and (vi) Indebtedness in connection with one or more standby
letters of credit or performance bonds issued in the ordinary course of business
or pursuant to self-insurance obligations.
SECTION 3.05. Limitation on Restricted Payments. (a) The
Company shall not make, and shall not permit any Restricted Subsidiary to make,
any Restricted Payment if at the time of, and after giving effect to, such
proposed Restricted Payment, (i) a Default shall have occurred and be
continuing, (ii) the aggregate amount of such Restricted Payment and all other
Restricted Payments made since November 14, 1995 (the amount of any Restricted
Payment, if other than cash, to be based upon Fair Market Value) would
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exceed an amount equal to the sum of (A) the excess of (I) Cumulative EBITDA
over (II) the product of 1.2 and Cumulative Interest Expense, (B) Capital Stock
Sale Proceeds, (C) the amount by which Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to November 14,
1995 of any Indebtedness of the Company or any Restricted Subsidiary convertible
or exchangeable for Capital Stock (other than Redeemable Stock) of the Company
(less the amount of any cash or other Property distributed by the Company or any
Restricted Subsidiary upon conversion or exchange) and (D) $100,000,000, or
(iii) the Company could not incur at least $1.00 of additional Indebtedness
pursuant to Section 3.04(a).
(b) Notwithstanding Section 3.05(a), the Company may (i) pay
dividends on its Capital Stock within 60 days of the declaration thereof if, on
the declaration date, such dividends could have been paid in compliance with
Section 3.05(a), (ii) redeem, repurchase, defease, acquire or retire for value,
any Indebtedness subordinate (whether pursuant to its terms or by operation of
law) in right of payment to the Securities with the proceeds of any Permitted
Refinancing Indebtedness or (iii) acquire, redeem or retire Capital Stock or
Indebtedness subordinate (whether pursuant to its terms or by operation of law)
in right of payment to the Securities in exchange for, or in connection with a
substantially concurrent issuance of, Capital Stock of the Company (other than
Redeemable Stock).
(c) Any payments made pursuant to clauses (ii) and (iii) of
Section 3.05(b) shall be excluded from the calculation of the aggregate amount
of Restricted Payments made after November 14, 1995; provided, however, that the
proceeds from the issuance of Capital Stock pursuant to Section 3.05(b)(iii)
shall not constitute Capital Stock Sale Proceeds for purposes of Section
3.05(a)(ii)(B).
SECTION 3.06. Limitation on Transactions with Affiliates. (a)
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, conduct any business or enter into or suffer to exist
any transaction or series of transactions (including the purchase, sale,
transfer, lease or exchange of any Property or the rendering of any service)
with, or for the benefit of, any Affiliate (an "Affiliate Transaction") unless
(i) the terms of such Affiliate Transaction are in writing,
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(ii) such Affiliate Transaction is in the best interest of the Company or such
Restricted Subsidiary, as the case may be, (iii) such Affiliate Transaction is
on terms as favorable to the Company or such Restricted Subsidiary, as the case
may be, as those that could be obtained at the time of such Affiliate
Transaction for a similar transaction in arms'-length dealings with a Person who
is not such an Affiliate and (iv) with respect to each Affiliate Transaction
involving aggregate payments in excess of $50 million, the Company delivers to
the Trustee an opinion letter from an Independent Appraiser to the effect that
such Affiliate Transaction is fair to the Company or such Restricted Subsidiary,
as the case may be, from a financial point of view and an Officers' Certificate
certifying that such Affiliate Transaction was approved by a majority of the
Board of Directors of the Company and that such Affiliate Transaction complies
with clauses (ii) and (iii) of this Section 3.06
(b) Notwithstanding Section 3.06(a), the Company may enter
into or suffer to exist the following: (i) any transaction pursuant to any
contract in existence on the Issue Date, including contracts for the acquisition
of cable television programming and renewals, extensions and replacements
thereof on terms no less favorable to the Company and its Restricted
Subsidiaries than those contained in such contracts on the Issue Date; (ii) any
Restricted Payment permitted to be made pursuant to Section 3.05; (iii) any
transaction or series of transactions between the Company and one or more of its
Restricted Subsidiaries or between two or more of its Restricted Subsidiaries
(provided that no more than 5% of the equity interest in any of its Restricted
Subsidiaries is owned by an Affiliate); and (iv) the payment of compensation
(including amounts paid pursuant to employee benefit plans) for the personal
services of officers, directors and employees of the Company or any of its
Restricted Subsidiaries, so long as the Board of Directors in good faith shall
have approved the terms thereof and deemed the services theretofore or
thereafter to be performed for such compensation or fees to be fair
consideration therefor.
SECTION 3.07. Designation of Restricted and Unrestricted
Subsidiaries. The Board of Directors of the Company may designate an
Unrestricted Subsidiary as a Restricted Subsidiary or designate a Restricted
Subsidiary as an Unrestricted Subsidiary at any time; provided, however, that
immediately after giving effect to such
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designation on a pro forma basis, (i) the Company's Leverage Ratio would not
exceed 8.00, (ii) the Company and its Restricted Subsidiaries are in compliance
with Section 3.09 and 3.10 and (iii) an Officers' Certificate with respect to
such designation is delivered to the Trustee within 75 days after the end of the
fiscal quarter of the Company in which such designation is made (or, in the case
of a designation made during the last fiscal quarter of the Company's fiscal
year, within 120 days after the end of such fiscal year), which Officers'
Certificate shall state the effective date of such designation.
SECTION 3.08. Change of Control Offer. (a) Within 30 days of
the occurrence of a Change of Control Triggering Event with respect to the
Securities, the Company shall notify the Trustee in writing of such occurrence
and shall make an offer to purchase (the "Change of Control Offer") the
Securities at a purchase price equal to 101% of the principal amount thereof
plus any accrued and unpaid interest thereon to the Change of Control Payment
Date (as hereinafter defined) (the "Change of Control Purchase Price") in
accordance with the procedures set forth in this Section 3.08. In the event that
at the time of such Change of Control Triggering Event the terms of the Senior
Indebtedness of the Company restrict or prohibit the repurchase of Securities
pursuant to this Section, then prior to the mailing of the notice to Holders
provided for in Section 3.08(b) below but in any event within 30 days following
any Change of Control Triggering Event, the Company shall (i) repay in full all
such Senior Indebtedness or offer to repay in full all such Senior Indebtedness
and repay such Senior Indebtedness of each lender who has accepted such offer or
(ii) obtain the requisite consent under the agreements governing such Senior
Indebtedness to permit the repurchase of the Securities as provided for in
Section 3.08(b).
(b) Within 50 days of the occurrence of a Change of Control
Triggering Event with respect to the Securities, the Company also shall (i)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States and
(ii) send by first-class mail, postage prepaid, to the Trustee and to each
Holder of the
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Securities, at his address appearing in the register of the Securities
maintained by the Registrar, a notice stating:
(1) that the Change of Control Offer is being made
pursuant to this Section 3.08 and that all such
Securities tendered will be accepted for payment,
provided that a Change of Control Triggering Event
has occurred and otherwise subject to the terms and
conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day no earlier than
30 days and no later than 60 days after the date on
which such notice is mailed) (the "Change of Control
Payment Date");
(3) that any such Security not tendered will
continue to accrue interest;
(4) that, unless the Company defaults in the payment of
the Change of Control Purchase Price, any such
Securities accepted for payment pursuant to the
Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their
Securities purchased pursuant to a Change of Control
Offer will be required to surrender such Securities
to the Paying Agent at the address specified in the
notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later
than the close of business on the third Business Day
preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the
name of the Holder, the principal amount of such
Securities delivered for purchase, and a statement
that such Holder is withdrawing his election to have
such Securities purchased;
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(7) that Holders whose Securities are being purchased
only in part will be issued new Securities equal in
principal amount to the unpurchased portion of the
Securities surrendered, provided that each Security
purchased and each such new Security issued shall be
in a principal amount in denominations of $1,000 and
integral multiples thereof; and
(8) any other procedures that a holder must follow to
accept a Change of Control Offer or effect withdrawal
of such acceptance.
(c) On the Change of Control Payment Date, the Company shall
(a) accept for payment the Securities or portions thereof tendered pursuant to
the Change of Control Offer, (b) deposit with the Paying Agent money sufficient
to pay the purchase price of all Securities or portions thereof so tendered and
(c) deliver or cause to be delivered to the Trustee the Securities so accepted
together with an Officers' Certificate indicating the Securities or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
holder of Securities so accepted payment in an amount equal to the purchase
price for such Securities, and the Trustee shall promptly authenticate and mail
to such holder a new Security equal in principal amount to any unpurchased
portion of the Securities surrendered; provided that each such new Security
shall be issued in an original principal amount in denominations of $1,000 and
integral multiples thereof.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 3.08. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 3.08 by
virtue thereof.
SECTION 3.09. Limitation on Layered Indebtedness. The Company
shall not, directly or indirectly, incur any Indebtedness that is subordinate or
junior in ranking in right of payment to any other Indebtedness of the Company
unless such Indebtedness is Senior Subordinated Indebtedness
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or is expressly subordinated in right of payment to Senior Subordinated
Indebtedness.
SECTION 3.10. Limitation on Subordinated Liens. The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, incur or suffer to exist any Lien (other than Permitted Liens) on or
with respect to any of its property or assets (including Capital Stock), whether
owned on the Issue Date or thereafter acquired, or any interest therein or any
income or profits therefrom securing any obligation or Indebtedness that is
subordinate or junior in ranking to, or ranks pari passi with, the Securities,
unless contemporaneously therewith effective provision is made to secure the
Securities equally and ratably with (or prior to) such obligation or
Indebtedness for so long as such obligation is so secured.
SECTION 3.11. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each fiscal year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section 314(a)(4).
ARTICLE 4
Successor Company
SECTION 4.01. When Company May Merge or Transfer Assets. (a)
The Company shall not consolidate with or merge with or into, or convey, sell,
transfer, lease or otherwise dispose of all or substantially all of its assets
(as an entirety or substantially as an entirety in one transaction or a series
of related transactions), to any Person unless: (i) the Company shall be the
surviving Person (the "Surviving Person"), or the Surviving Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or to which the assets of the Company are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) the Surviving Person (if other
than the Company) shall expressly assume, by
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supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company under the
Securities and the Indenture, and the obligations under this Indenture shall
remain in full force and effect; (iii) immediately before and immediately after
giving effect to such transaction, no Default shall have occurred and be
continuing; and (iv) immediately after giving effect to such transaction on a
pro forma basis (including any Indebtedness incurred or anticipated to be
incurred in connection with such transaction or series of transactions), the
Surviving Person would be able to incur at least $1.00 of additional
Indebtedness pursuant to Section 3.04(a).
In connection with any consolidation, merger or transfer
contemplated by this Section 4.01, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this Section 4.01 and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
ARTICLE 5
Defaults and Remedies
SECTION 5.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company fails to make any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 9, and such failure continues
for a period of 30 days;
(2) the Company (i) fails to make the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, whether or
not such payment shall be prohibited by Article 9, or (ii) fails to
purchase Securities when required pursuant to this Indenture or the
Securities, whether or not such redemption or purchase shall be
prohibited by Article 9;
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(3) the Company fails to comply with Section 4.01;
(4) the Company fails to comply with Section 3.01, 3.03, 3.04,
3.05, 3.06, 3.07, 3.08, 3.09 or 3.10 (other than a failure to purchase
Securities when required under Section 3.08) and such failure continues
for 30 days after the notice specified below, or the Company fails to
give the notice specified below;
(5) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other than those referred to in (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below or the Company fails to give the notice
specified below;
(6) the principal of, any premium or accrued and unpaid
interest on Indebtedness of the Company or any Restricted Subsidiary is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof, the total amount of such
Indebtedness unpaid or accelerated exceeds $10,000,000 or its Dollar
Equivalent at the time and such default or acceleration continues for
10 days after the notice specified below;
(7) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of
it or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
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(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Restricted Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess
of $10,000,000 or its Dollar Equivalent at the time is entered against
the Company or any Restricted Subsidiary and is not discharged and
either (A) an enforcement proceeding has been commenced by any creditor
upon such judgment or decree or (B) there is a period of 30 days
following the entry of such judgment or decree during which such
judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of (A) or (B), such default continues for 10
days after the notice specified below.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9) is not an Event of
Default until the Trustee or the Holders of at least 25% in principal amount of
the Securities notify the Company of the Default and the Company does not cure
such Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that
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it be remedied and state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event which with the giving of notice and the lapse of time would become
an Event of Default under clause (4), (5), (6) or (9), its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 5.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued interest on
all the Securities to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 5.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 5.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquies-
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cence in the Event of Default. No remedy is exclusive of any other remedy.
All available remedies are cumulative.
SECTION 5.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 8.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 5.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 6.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 5.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
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(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 5.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 5.08. Collection Suit by Trustee. If an Event of
Default in payment of interest or principal specified in Section 5.01(1) or
(2) occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid (together with interest on such unpaid
interest to the extent lawful) and the amounts provided for in Section 6.07.
SECTION 5.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
6.07.
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SECTION 5.10. Priorities. If the Trustee collects any money
or property pursuant to this Article 5, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 6.07;
SECOND: to holders of Senior Indebtedness of the Company to
the extent required by Article 9;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 5.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.07
or a suit by Holders of more than 10% in principal amount of the Securities.
SECTION 5.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully refrain from doing so) shall not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly
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waives all benefit or advantage of any such law, and shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE 6
Trustee
SECTION 6.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default: (1)
the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and (2) in the absence of
bad faith on its part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, in the case of any such certificates or
opinions which are required by this Indenture to be delivered to the Trustee,
the Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that: (1) this paragraph does not limit the effect of paragraph (b) of
this Section; (2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be
liable with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.05.
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(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 6.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
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(e) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
SECTION 6.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 6.10 and 6.11.
SECTION 6.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 6.06. Reports by Trustee to Holders. As promptly as
practicable after each August 15 beginning with the August 15 following the date
of this Indenture, and in any event prior to October 15 in each year, the
Trustee shall mail to each Securityholder a brief report dated as of August 15
that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each
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stock exchange (if any) on which the Securities are listed. The Company agrees
to notify promptly the Trustee whenever the Securities become listed on any
stock exchange and of any delisting thereof.
SECTION 6.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time such compensation as the Company and the
Trustee shall agree in writing for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Company shall indemnify
each of the Trustee and any predecessor Trustee against any and all loss,
liability, damage, claim or expense (including reasonable attorneys' fees and
expenses) incurred by it in connection with the acceptance of the administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
may have separate counsel and the Company shall pay the fees and expenses of
such counsel. The Trustee shall not settle any such claim without the written
consent (which shall not be unreasonably withheld) of the Company, provided that
the giving of such consent does not conflict with the provisions of this
Indenture or the TIA. The Company need not reimburse any expense or indemnify
against any loss, liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on Securities under Article 7 or otherwise.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 5.01(7) or (8) with
respect to
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the Company, the expenses are intended to constitute expenses of administration
under Bankruptcy Law.
SECTION 6.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 6.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 25% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10,
any Securityholder may petition any court of competent
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jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 6.07 shall continue for
the benefit of the retiring Trustee.
SECTION 6.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 6.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. No obligor upon the Securities
or Person directly controlling, controlled by, or under common control with such
obligor shall serve as Trustee upon the Securities. The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met.
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SECTION 6.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 7
Discharge of Indenture; Defeasance
SECTION 7.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.06) for
cancellation or (ii) all outstanding Securities have become due and payable and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
thereon (other than Securities replaced pursuant to Section 2.06), and if in
either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Sections 7.01(c) and 7.06, cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
(b) Subject to Sections 7.01(c), 7.02 and 7.06, the Company at
any time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
3.01, 3.03 (to the extent that failure to comply with such Section 3.03 shall
not violate the TIA), 3.04, 3.05, 3.06, 3.07, 3.09, 3.10 and 4.01(iv) and the
related operation of Section 5.01(4) and the operation of Sections 5.01(6),
5.01(7) (with respect to Restricted Subsidiaries), 5.01(8) (with respect to
Restricted Subsidiaries) and 5.01(9) ("covenant defeasance option"). The Company
may exercise its legal defeasance option notwithstanding its prior exercise of
its covenant defeasance option.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default
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specified in Sections 5.01(4), 5.01(6), 5.01(7) (with respect to Restricted
Subsidiaries), 5.01(8) (with respect to Restricted Subsidiaries) and 5.01(9)
(except to the extent covenants or agreements referenced in such Sections remain
applicable).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 6.07, 6.08, 7.04, 7.05 and 7.06
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 6.07, 7.04 and 7.05 shall survive.
SECTION 7.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal and
interest on the Securities to maturity or redemption, as the case may
be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case
may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 5.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from
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the deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance
had not occurred;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article 7 have been complied with.
SECTION 7.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 7. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 7.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
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Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed for
two years, and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors.
SECTION 7.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 7.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 7 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 7 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 7.
ARTICLE 8
Amendments
SECTION 8.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 4;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the
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uncertificated Securities are described in Section 163(f)(2)(B) of
the Code;
(4) to make any change in Article 9 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article 9;
(5) to add guarantees with respect to the Securities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(7) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the
rights of any Securityholder.
An amendment under this Section that makes any change that
adversely affects the rights under Article 9 of any holder of Senior
Indebtedness then outstanding shall not be effective as to such holder unless
such holder (or any group or representative thereof authorized to give a consent
on such holder's behalf) consents to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 8.02. With Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
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(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) make any Security payable in money other than that stated
in the Security;
(5) impair the right of any Securityholder to receive payment
of principal of and interest on such Securityholder's Securities on or
after the due dates therefor or to institute suit for the enforcement
of any payment on or with respect to such Securityholder's Securities;
(6) make any change in Article 9 that adversely affects the
rights of any Securityholder under Article 9; or
(7) make any change in Section 5.04 or 5.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section that makes any change that
adversely affects the rights under Article 9 of any holder of Senior
Indebtedness then outstanding shall not be effective as to such holder unless
such holder (or any group or representative thereof authorized to give a consent
on such holder's behalf) consents to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 8.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
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SECTION 8.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 8.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 8.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 8 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 6.01) shall be fully
protected in
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relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such (i) amendment is authorized or permitted by this Indenture and that all
conditions precedent to the execution, delivery and performance of such
amendment have been satisfied; (ii) the Company has all necessary corporate
power and authority to execute and deliver the amendment and that the execution,
delivery and performance of such amendment has been duly authorized by all
necessary corporate action; (iii) the execution, delivery and performance of the
amendment do not conflict with, or result in the breach of or constitute a
default under any of the terms, conditions or provisions of (a) the Indenture,
(b) the Certificate of Incorporation or By-Laws of the Company, (c) any law or
regulation applicable to the Company, (d) any material order, writ, injunction
or decree of any court or governmental instrumentality applicable to the Company
or (e) any material agreement or instrument to which the Company is subject;
(iv) such amendment has been duly and validly executed and delivered by the
Company, and the Indenture together with such amendment constitutes a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles; and (v) the
Indenture together with such amendment complies with the TIA.
SECTION 8.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 9
Subordination
SECTION 9.01. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the
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extent and in the manner provided in this Article 9, to the prior payment in
cash of all Senior Indebtedness and that the subordination is for the benefit of
and enforceable by the holders of such Senior Indebtedness. The Securities shall
in all respects rank pari passu with all other Senior Subordinated Indebtedness
of the Company and only Indebtedness which is Senior Indebtedness shall rank
senior to the Securities in accordance with the provisions set forth herein. All
provisions of this Article 9 shall be subject to Section 9.12.
SECTION 9.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full of such Senior Indebtedness in cash before
Securityholders shall be entitled to receive any payment of principal
of or interest on the Securities; and
(2) until such Senior Indebtedness is paid in full, any
distribution to which Securityholders would be entitled but for this
Article 9 shall be made to holders of such Senior Indebtedness as their
interests may appear, except that Securityholders may receive shares of
stock and any debt securities that are subordinated to such Senior
Indebtedness to at least the same extent as the Securities.
SECTION 9.03. Default on Senior Indebtedness. The Company may
not pay the principal of or interest on the Securities or make any deposit
pursuant to Section 7.01 and may not repurchase, redeem or otherwise retire any
Securities (collectively, "pay the Securities") if (i) any Designated Senior
Indebtedness is not paid when due or (ii) any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Designated Senior Indebtedness has been paid in full; provided, however,
that the Company may pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
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Representative of such Designated Senior Indebtedness. During the continuance of
any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Securities for a period (a "Payment Blockage Period") commencing upon the
receipt by the Company and the Trustee of written notice (a "Blockage Notice")
of such default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) by repayment in full of such Designated Senior
Indebtedness or (iii) because the default giving rise to such Blockage Notice is
no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than the Bank Indebtedness), the Representative of the Bank Indebtedness
may give another Blockage Notice within such period; provided further, however,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360-
consecutive-day period. For purposes of this Section, no default or event of
default which existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of
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default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 9.04. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall within three business days of acceleration notify
in writing the holders of the Designated Senior Indebtedness (or their
Representatives) of the acceleration.
SECTION 9.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 9 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them pro rata as their interests may appear.
SECTION 9.06. Subrogation. After all Senior Indebtedness is
paid in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article 10 to holders of such Senior Indebtedness which otherwise would
have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.
SECTION 9.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
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SECTION 9.08. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior Indebtedness. No right of any present
or future holders of any Senior Indebtedness to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms of this Indenture, regardless of any knowledge thereof with which
any such holder may have or be otherwise charged.
SECTION 9.09. Rights of Trustee and Paying Agent. The Company
shall give prompt written notice to the Trustee of any fact known to the Company
that would prohibit the making of any payment to or by the Trustee in respect of
the Securities. Notwithstanding Section 9.03, the Trustee or Paying Agent may
continue to make payments on the Securities and shall not be charged with
knowledge of the existence of facts that would prohibit the making of any such
payments unless, not less than two Business Days prior to the date of such
payment, a Trust Officer of the Trustee receives notice satisfactory to it that
payments may not be made under this Article 9. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice; provided, however, that, if an issue of Senior
Indebtedness has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 9 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 9 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.07.
SECTION 9.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
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SECTION 9.11. Article 9 Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article 9 shall not be construed
as preventing the occurrence of a Default. Nothing in this Article 9 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 9.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 7 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 9, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness or any other creditor of the Company.
SECTION 9.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 9, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 9.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of such Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 9. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 9, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 9, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the
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right of such Person to receive such payment. The provisions of Sections 6.01
and 6.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 9.
SECTION 9.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee to
execute and deliver documents and on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination between
the Securityholders and the holders of Senior Indebtedness as provided in this
Article 9 and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 9.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall negligently pay over or distribute to Securityholders or the Company or
any other Person, money or assets to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article 9 or otherwise; provided that the
Trustee shall be liable for any such payment or distribution made through its
gross negligence or willful misconduct. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this Article 9 and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.
SECTION 9.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
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ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the TIA, such imposed duties or incorporated provision shall control.
SECTION 10.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Lenfest Communications, Inc.
c/o The Lenfest Group
200 Cresson Boulevard
P.O. Box 289
Oaks, PA 19456-0989
Phone: (610) 650-3000
Fax: (610) 650-3001
Attention of each of the President and
the General Counsel
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, N.Y. 10286
Phone: (212) 815-5741
Fax: (212) 815-5915
Attention of Corporate Trust Trustee
Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears
on the registration books
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<PAGE>
of the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 10.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 10.06. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 10.07. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 10.08. GOVERNING LAW. THIS INDENTURE AND
THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.09. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 10.10. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 10.11. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each
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<PAGE>
signed copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 10.12. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
SECTION 10.13. Severability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
LENFEST COMMUNICATIONS, INC.
by
------------------------
Name:
Title:
THE BANK OF NEW YORK, as
Trustee
by
------------------------
Name:
Title:
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APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
INRULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN
PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON
REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES
-----------------------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions
-----------
1.1 Definitions
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 10 1/2% Senior Subordinated
Notes Due 2006 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Agreement.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc,
Toronto Dominion Securities (USA) Inc., CIBC Wood Gundy
Securities Corp. and NationsBanc Capital Markets, Inc.
"Initial Securities" means the 10 1/2% Senior Subordinated
Notes Due 2006, issued under this Indenture on or about the date hereof.
"Purchase Agreement" means the Purchase Agreement dated June
20, 1996, between the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
<PAGE>
"Registration Agreement" means the Registration Agreement
dated June 20, 1996, among the Company, and the Initial Purchasers.
"Securities" means the Initial Securities and the
Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933,
as amended.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company in connection with the offer and sale of Initial
Securities pursuant to the Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities
and Securities that bear or are required to bear the legend set forth in Section
2.3(d)hereto.
1.2 Other Definitions
------------------
Defined in
----------
Term Section:
---- -------
"Agent Members".........................................................2.1(b)
"Global Security"......................................... .............2.1(a)
"Regulation S"..........................................................2.1(a)
"Rule 144A".............................................................2.1(a)
2. The Securities
--------------
2.1 Form and Dating
---------------
The Initial Securities are being offered and sold by the
Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to
a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
<PAGE>
as provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global Securities in definitive, fully registered form
without interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as provided in the
Indenture. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Company, authenticate
and deliver initially one or more Global Securities that (a) shall be registered
in the name of the Depository for such Global Security or Global Securities or
the nominee of such Depository and (b) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions or held by the Trustee
as custodian for the Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as the
custodian of the Depository or under such Global Security, and the Depository
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
<PAGE>
(c) Definitive Securities. Except as provided in this Section
2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAI's and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Definitive Securities; provided, however, that upon transfer of such Definitive
Securities to a QIB, such Definitive Securities will, unless the Global Security
has previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$300,000,000 and (2) Exchange Securities for issue only in a Registered Exchange
Offer pursuant to the Registration Agreement, for a like principal amount of
Initial Securities, upon a written order of the Company signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
the Company. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding at
any time may not exceed $300,000,000, except as provided in Section 2.07 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive
Securities; or
(y) to exchange such Definitive Securities for an
equal principal amount of Definitive Securities of other
authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
<PAGE>
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse of
the Security); or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that effect (in
the form set forth on the reverse of the Security); or
(C) if such Definitive Securities are being
transferred pursuant to an exemption from registration in
accordance with Rule 144, (i) a certification to that effect
(in the form set forth on the reverse of the Security) and
(ii) if the Company or Registrar so requests, an opinion of
counsel or other evidence reasonably satisfactory to them as
to the compliance with the restrictions set forth in the
legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
<PAGE>
(ii) written instructions directing the Trustee to make,
or to direct the Securities Custodian to make, an adjustment on its
books and records with respect to such Global Security to reflect an
increase in the aggregate principal amount of the Securities
represented by the Global Security, such instructions to contain
information regarding the Depositary account to be credited with such
increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so cancelled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor. A transferor of a beneficial interest in a Global
Security shall deliver to the Registrar a written order given in accordance with
the Depositary's procedures containing information regarding the participant
account of the Depositary to credited with a beneficial interest in the Global
Security. The Registrar shall, in accordance with such instructions instruct the
Depositary to credit to the account of the Person specified in such instructions
a beneficial interest in the Global Security and to debit the account of the
Person making the transfer the beneficial interest in the Global Security being
transferred.
(ii) Notwithstanding any other provisions of this Appendix A
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
<PAGE>
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 prior
to the consummation of a Registered Exchange Offer or the effectiveness
of a Shelf Registration Statement with respect to such Securities, such
Securities may be exchanged only in accordance with such procedures as
are substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse of
the Initial Securities intended to ensure that such transfers comply
with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE)OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
<PAGE>
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV)
ABOVE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
Each Definitive Security will also bear the following
additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a Definitive Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
that is represented by a Global Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Definitive Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security,
in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).
(iii) After a transfer of any Initial Securities during the
period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Securities, all requirements pertaining to
legends on such Initial Security will cease to apply, the requirements
requiring any such Initial Security issued to certain Holders be issued
<PAGE>
in global form will cease to apply, and an Initial Security in
certificated or global form without legends will be available to the
transferee of the Holder of such Initial Securities upon exchange of
such transferring Holder's certificated Initial Security. Upon the
occurrence of any of the circumstances described in this paragraph, the
Company will deliver an Officers' Certificate to the Trustee
instructing the Trustee to issue Securities without legends.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of
such Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will cease to apply and certificated Initial Securities
with the restricted securities legend set forth in Exhibit 1 hereto
will be available to Holders of such Initial Securities that do not
exchange their Initial Securities, and Exchange Securities in
certificated or global form will be available to Holders that exchange
such Initial Securities in such Registered Exchange Offer. Upon the
occurrence of any of the circumstances described in this paragraph, the
Company will deliver an Officers' Certificate to the Trustee
instructing the Trustee to issue Securities without legends.
(e) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
such Global Security shall be returned to the Depository for cancellation or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
<PAGE>
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Section 3.08.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period
beginning 15 Business Days before the mailing of a notice of an offer
to repurchase Securities or 15 Business Days before an interest payment
date.
(iv) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and interest on
such Security and for all other purposes whatsoever, whether or not
such Security is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by
notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership interest
<PAGE>
in the Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the Depository) of
any notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made
to Holders under the Securities shall be given or made only to or upon
the order of the registered Holders (which shall be the Depository or
its nominee in the case of a Global Security). The rights of beneficial
owners in any Global Security shall be exercised only through the
Depository subject to the applicable rules and procedures of the
Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to
its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4 Certificated Securities
-----------------------
(a) A Global Security deposited with the Depository or with
the Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
<PAGE>
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee located in the Borough of Manhattan, The City of New
York, to be so transferred, in whole or from time to time in part, without
charge, and the Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Security, an equal aggregate principal amount of
certificated Initial Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(d), bear the
restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.
<PAGE>
EXHIBIT 1
to
APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.](1)
- --------
(1) Include if a Definitive Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a),(1),(2),(3) or (7) under the Securities
Act).
<PAGE>
CUSIP No.
$
No.
% Senior Subordinated Notes Due 2006
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promises
to pay to , or registered assigns, the principal sum of
Dollars on June 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1996.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
LENFEST COMMUNICATIONS, INC.
by
-----------------------
President
-----------------------
Secretary
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated:
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
% Senior Subordinated Note Due 2006
1. Interest
Lenfest Communications, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the Issue Date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Special Interest
The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of June , 1996, among the Company and the
Initial Purchasers (the "Registration Agreement").
In the event that either (i) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 45th day following
the Issue Date, (ii) the Exchange Offer Registration Statement is not declared
effective prior to the 120th day following the Issue Date or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement with respect to the
Securities is not declared effective on or prior to the 150th day following the
Issue Date, interest will accrue (in addition to stated interest on the Notes)
from and including the next day following each of (a) such 45-day period in the
case of clause (i) above and (b) such 120-day period in the case of clause (ii)
above and (c) such 150-day period in the case of clause (iii) above. In each
case such additional interest (the "Special Interest") will be payable in cash
<PAGE>
semiannually in arrears each June 15 and December 15 commencing December 15,
1996, at a rate per annum equal to 0.50% of the principal amount of the
Securities. The aggregate amount of Special Interest payable pursuant to the
above provisions will in no event exceed 1.50% per annum of the principal amount
of the Securities. Upon (x) the filing of the Exchange Offer Registration
Statement after the 45-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 120-day
period described in clause (ii) above or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, after the 150-day period described in clause (iii) above, the Special
Interest payable on the Securities from the date of such filing, effectiveness
or consummation, as the case may be, will cease to accrue and all accrued and
unpaid Special Interest as of the occurrence of (x), (y) or (z) shall be paid to
the holderrs of the Securities promptly thereafter. Following the occurrence of
(x), (y) or (z) above, the terms of the Securities shall revert to the original
terms set forth above.
In the event that a Shelf Registration Statement is declared
effective pursuant to the immediately preceding paragraph, if the Company fails
to keep such Registration Statement continuously effective for the period
required by the Registration Agreement, then from such time as the Shelf
Registration Statement is no longer effective until the earlier of (i) the date
that the Shelf Registration Statement is again deemed effective, (ii) the date
that is the third anniversary of the Closing or (iii) the date as of which all
of the Securities are sold pursuant to the Shelf Registration Statement, Special
Interest shall accrue at a rate per annum equal to 0.50% of the principal amount
of the Securities (1.00% thereof if the Shelf Registration Statement is no
longer effective for 30 days or more) and shall be payable in cash semiannually
in arrears each June 15 and December 15, commencing December 15, 1996.
3. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the June 1 or December 1 immediately preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
<PAGE>
Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
4. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
5. Indenture
The Company issued the Securities under an Indenture dated as
of June 15, 1996 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the
Company limited to $300,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the Company
and the Restricted Subsidiaries, including the incurrence of Indebtedness and
Liens, the payment of dividends on and retirements of the Capital Stock of the
Company and the Restricted Subsidiaries, the sale of assets and transactions
with Affiliates. In addition, the Indenture limits the ability of the Company
and its Restricted Subsidiaries to restrict distributions and dividends from
Restricted Subsidiaries.
6. Put Provisions
Upon a Change of Control Triggering Event, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
7. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
<PAGE>
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $100,000)and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Securities for a period of 15
Business Days before the mailing of a notice of an offer to repurchase
Securities or 15 Business Days before an interest payment date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
<PAGE>
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon acceleration or otherwise, or
failure by the Company to purchase Securities when required; (iii) failure by
the Company or the Guarantor to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount accelerated
(or so unpaid) exceeds $10,000,000 and continues for 10 days after the required
notice to the Company; (v) certain events of bankruptcy or insolvency with
respect to the Company and any Restricted Subsidiary; and (vi) certain judgments
or decrees for the payment of money in excess of $10,000,000. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. Holders' Compliance with Registration Agreement
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
<PAGE>
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
- -------------------------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) |_| inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that purchases for
its own account or for the account of a qualified
institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(4) |_| outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) |_| pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
<PAGE>
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:
- ---------------------------- ------------------------------
Signature must be guaranteed Signature
- ------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
<PAGE>
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
------------------------ ---------------------------------------
NOTICE: To be executed by
an executive officer
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount Signature of
Exchange in Principal in Principal of this Global authorized
Amount of this Amount of this Security following signatory of
Global Security Global Security such decrease or Trustee or
increase Securities
Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by
the Company pursuant to Section 3.08 of the Indenture, check the
box:
/ /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.08 of the Indenture, state the
amount in principal amount: $
Date: Your Signature:
------------------------- ----------------------------
(Sign exactly as your name
appears on the other side
of this Security.)
Signature Guarantee:
-----------------------------------
(Signature must be guaranteed)
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY]
[*/]
CUSIP No.
No. $
% Senior Subordinated Notes Due 2006
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promises to pay to
, or registered assigns, the principal sum of
Dollars on June 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing December 15, 1996.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the other side of this
Security.
LENFEST COMMUNICATIONS, INC.,
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated:
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
- ------------
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
% Senior Subordinated Note Due 2006
1. Interest
--------
Lenfest Communications, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from , 1996. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Method of Payment
-----------------
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the June 1 or December 1 immediately preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. The Company will make all
payments in respect of a certificated Security (including principal, premium and
interest), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
<PAGE>
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
---------
The Company issued the Securities under an Indenture dated as
of June 15, 1996 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the
Company limited to $300,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the Company
and the Restricted Subsidiaries, including the incurrence of Indebtedness and
Liens, the payment of dividends on and retirements of the Capital Stock of the
Company and the Restricted Subsidiaries, the sale of assets and transactions
with Affiliates. In addition, the Indenture limits the ability of the Company
and its Restricted Subsidiaries to restrict distributions and dividends from
Restricted Subsidiaries.
<PAGE>
5. Put Provisions
--------------
Upon a Change of Control Triggering Event, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
6. Subordination
-------------
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
7. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Securities for a period of 15 Business Days before the mailing of a notice of an
offer to repurchase Securities or 15 Business Days before an interest payment
date.
8. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the
owner of it for all purposes.
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
<PAGE>
10. Discharge and Defeasance
------------------------
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
12. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon acceleration or otherwise, or
failure by the Company to purchase Securities when required; (iii) failure by
the Company or the Guarantor to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount accelerated
<PAGE>
(or so unpaid) exceeds $10,000,000 and continues for 10 days after the required
notice to the Company; (v) certain events of bankruptcy or insolvency with
respect to the Company and any Restricted Subsidiary; and (vi) certain judgments
or decrees for the payment of money in excess of $10,000,000. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
13. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
14. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
<PAGE>
15. Authentication
--------------
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
18. Holders' Compliance with Registration Agreement
-----------------------------------------------
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Agreement, including, without
limita-tion, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
19. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type. Requests may be made to:
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date: Your Signature:
--------------------- ------------------------------------
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 3.08 of the Indenture, check the box:
----
/ /
----
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.08 of the Indenture, state the
amount:
$
Date: Your Signature:
------------------- ---------------------------------------
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:
-----------------------------------------------------------
<PAGE>
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
<PAGE>
CUSIP No. 526055AC2
$1,000,000
No. C-01
10-1/2% Senior Subordinated Notes Due 2006
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promises
to pay to SALOMON BROTHERS INC, or registered assigns, the principal sum of ONE
MILLION Dollars on June 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1996.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
LENFEST COMMUNICATIONS, INC.
by
-----------------------------
Executive Vice President
-----------------------------
Vice President
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated:
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
2
<PAGE>
10-1/2% Senior Subordinated Note Due 2006
1. Interest
Lenfest Communications, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the Issue Date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Special Interest
The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of June 20, 1996, among the Company and the
Initial Purchasers (the "Registration Agreement").
In the event that either (i) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 45th day following
the Issue Date, (ii) the Exchange Offer Registration Statement is not declared
effective prior to the 120th day following the Issue Date or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement with respect to the
Securities is not declared effective on or prior to the 150th day following the
Issue Date, interest will accrue (in addition to stated interest on the Notes)
from and including the next day following each of (a) such 45-day period in the
case of clause (i) above and (b) such 120-day period in the case of clause (ii)
above and (c) such 150-day period in the case of clause (iii) above. In each
case such additional interest (the "Special Interest") will be payable in cash
3
<PAGE>
semiannually in arrears each June 15 and December 15 commencing December 15,
1996, at a rate per annum equal to 0.50% of the principal amount of the
Securities. The aggregate amount of Special Interest payable pursuant to the
above provisions will in no event exceed 1.50% per annum of the principal amount
of the Securities. Upon (x) the filing of the Exchange Offer Registration
Statement after the 45-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 120-day
period described in clause (ii) above or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, after the 150-day period described in clause (iii) above, the Special
Interest payable on the Securities from the date of such filing, effectiveness
or consummation, as the case may be, will cease to accrue and all accrued and
unpaid Special Interest as of the occurrence of (x), (y) or (z) shall be paid to
the holders of the Securities promptly thereafter. Following the occurrence of
(x), (y) or (z) above, the terms of the Securities shall revert to the original
terms set forth above.
In the event that a Shelf Registration Statement is declared
effective pursuant to the immediately preceding paragraph, if the Company fails
to keep such Registration Statement continuously effective for the period
required by the Registration Agreement, then from such time as the Shelf
Registration Statement is no longer effective until the earlier of (i) the date
that the Shelf Registration Statement is again deemed effective, (ii) the date
that is the third anniversary of the Closing or (iii) the date as of which all
of the Securities are sold pursuant to the Shelf Registration Statement, Special
Interest shall accrue at a rate per annum equal to 0.50% of the principal amount
of the Securities (1.00% thereof if the Shelf Registration Statement is no
longer effective for 30 days or more) and shall be payable in cash semiannually
in arrears each June 15 and December 15, commencing December 15, 1996.
3. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the June 1 or December 1 immediately preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date.
4
<PAGE>
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
4. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
5. Indenture
The Company issued the Securities under an Indenture dated as
of June 15, 1996 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
5
<PAGE>
The Securities are general unsecured obligations of the
Company limited to $300,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the Company
and the Restricted Subsidiaries, including the incurrence of Indebtedness and
Liens, the payment of dividends on and retirements of the Capital Stock of the
Company and the Restricted Subsidiaries, the sale of assets and transactions
with Affiliates. In addition, the Indenture limits the ability of the Company
and its Restricted Subsidiaries to restrict distributions and dividends from
Restricted Subsidiaries.
6. Put Provisions
Upon a Change of Control Triggering Event, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
7. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $100,000)and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer
6
<PAGE>
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Securities for a period of 15 Business Days before the mailing of a notice of an
offer to repurchase Securities or 15 Business Days before an interest payment
date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to
7
<PAGE>
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to add
additional covenants or surrender rights and powers conferred on the Company, or
to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon acceleration or otherwise, or
failure by the Company to purchase Securities when required; (iii) failure by
the Company or the Guarantor to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount accelerated
(or so unpaid) exceeds $10,000,000 and continues for 10 days after the required
notice to the Company; (v) certain events of bankruptcy or insolvency with
respect to the Company and any Restricted Subsidiary; and (vi) certain judgments
or decrees for the payment of money in excess of $10,000,000. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it
8
<PAGE>
determines that withholding notice is in the interest of the
Holders.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. Holders' Compliance with Registration Agreement
Each Holder of a Security, by acceptance hereof,
acknowledges and agrees to the provisions of the
9
<PAGE>
Registration Agreement, including, without limitation, the obligations of the
Holders with respect to a registration and the indemnification of the Company to
the extent provided therein.
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type.
10
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The
agent may substitute another to act for him.
- -------------------------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) / / inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
11
<PAGE>
under the Securities Act of 1933) that purchases for
its own account or for the account of a qualified
institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(4) / / outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) / / pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
--------------------------
Signature
Signature Guarantee:
- ----------------------------- --------------------------
Signature must be guaranteed Signature
- -----------------------------------------------------------------------------
12
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security
purchased by the Company pursuant to Section 3.08 of the
Indenture, check the box:
/ /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.08 of the Indenture, state the
amount in principal amount: $
Date: ______________________ Your Signature:
_____________________________
(Sign exactly as your
name appears on the other
side of this Security.)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
14
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
<PAGE>
CUSIP No. 526055AB4
$296,700,000
No. C-05
10-1/2% Senior Subordinated Notes Due 2006
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promises
to pay to CEDE & CO., or registered assigns, the principal sum of TWO HUNDRED
NINETY-SIX MILLION SEVEN HUNDRED THOUSAND Dollars on June 15, 2006.
Interest Payment Dates: June 15 and December 15, commencing
December 15, 1996.
Record Dates: June 1 and December 1.
Additional provisions of this Security are set forth on the
other side of this Security.
LENFEST COMMUNICATIONS, INC.
by
-----------------------------
Executive Vice President
-----------------------------
Vice President
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated:
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
2
<PAGE>
10-1/2% Senior Subordinated Note Due 2006
1. Interest
Lenfest Communications, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 15 and December 15 of each year. Interest
on the Securities will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the Issue Date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal at the rate borne by the Securities plus
1% per annum, and it shall pay interest on overdue installments of interest at
the same rate to the extent lawful.
2. Special Interest
The holder of this Security is entitled to the benefits of a
Registration Agreement, dated as of June 20, 1996, among the Company and the
Initial Purchasers (the "Registration Agreement").
In the event that either (i) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 45th day following
the Issue Date, (ii) the Exchange Offer Registration Statement is not declared
effective prior to the 120th day following the Issue Date or (iii) the Exchange
Offer is not consummated or a Shelf Registration Statement with respect to the
Securities is not declared effective on or prior to the 150th day following the
Issue Date, interest will accrue (in addition to stated interest on the Notes)
from and including the next day following each of (a) such 45-day period in the
case of clause (i) above and (b) such 120-day period in the case of clause (ii)
above and (c) such 150-day period in the case of clause (iii) above. In each
case such additional interest (the "Special Interest") will be payable in cash
3
<PAGE>
semiannually in arrears each June 15 and December 15 commencing December 15,
1996, at a rate per annum equal to 0.50% of the principal amount of the
Securities. The aggregate amount of Special Interest payable pursuant to the
above provisions will in no event exceed 1.50% per annum of the principal amount
of the Securities. Upon (x) the filing of the Exchange Offer Registration
Statement after the 45-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 120-day
period described in clause (ii) above or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, after the 150-day period described in clause (iii) above, the Special
Interest payable on the Securities from the date of such filing, effectiveness
or consummation, as the case may be, will cease to accrue and all accrued and
unpaid Special Interest as of the occurrence of (x), (y) or (z) shall be paid to
the holders of the Securities promptly thereafter. Following the occurrence of
(x), (y) or (z) above, the terms of the Securities shall revert to the original
terms set forth above.
In the event that a Shelf Registration Statement is declared
effective pursuant to the immediately preceding paragraph, if the Company fails
to keep such Registration Statement continuously effective for the period
required by the Registration Agreement, then from such time as the Shelf
Registration Statement is no longer effective until the earlier of (i) the date
that the Shelf Registration Statement is again deemed effective, (ii) the date
that is the third anniversary of the Closing or (iii) the date as of which all
of the Securities are sold pursuant to the Shelf Registration Statement, Special
Interest shall accrue at a rate per annum equal to 0.50% of the principal amount
of the Securities (1.00% thereof if the Shelf Registration Statement is no
longer effective for 30 days or more) and shall be payable in cash semiannually
in arrears each June 15 and December 15, commencing December 15, 1996.
3. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of Securities at
the close of business on the June 1 or December 1 immediately preceding the
interest payment date even if Securities are canceled after the record date and
on or before the interest payment date.
4
<PAGE>
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
4. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
5. Indenture
The Company issued the Securities under an Indenture dated as
of June 15, 1996 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
5
<PAGE>
The Securities are general unsecured obligations of the
Company limited to $300,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the Company
and the Restricted Subsidiaries, including the incurrence of Indebtedness and
Liens, the payment of dividends on and retirements of the Capital Stock of the
Company and the Restricted Subsidiaries, the sale of assets and transactions
with Affiliates. In addition, the Indenture limits the ability of the Company
and its Restricted Subsidiaries to restrict distributions and dividends from
Restricted Subsidiaries.
6. Put Provisions
Upon a Change of Control Triggering Event, any Holder of
Securities will have the right to cause the Company to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase.
7. Subordination
The Securities are subordinated to Senior Indebtedness of the
Company, as defined in the Indenture. To the extent provided in the Indenture,
Senior Indebtedness of the Company must be paid before the Securities may be
paid. The Company agrees, and each Securityholder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purpose.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $100,000)and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer
6
<PAGE>
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange of any
Securities for a period of 15 Business Days before the mailing of a notice of an
offer to repurchase Securities or 15 Business Days before an interest payment
date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to
7
<PAGE>
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to add
additional covenants or surrender rights and powers conferred on the Company, or
to comply with any request of the SEC in connection with qualifying the
Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon acceleration or otherwise, or
failure by the Company to purchase Securities when required; (iii) failure by
the Company or the Guarantor to comply with other agreements in the Indenture or
the Securities, in certain cases subject to notice and lapse of time; (iv)
certain accelerations (including failure to pay within any grace period after
final maturity) of other Indebtedness of the Company if the amount accelerated
(or so unpaid) exceeds $10,000,000 and continues for 10 days after the required
notice to the Company; (v) certain events of bankruptcy or insolvency with
respect to the Company and any Restricted Subsidiary; and (vi) certain judgments
or decrees for the payment of money in excess of $10,000,000. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it
8
<PAGE>
determines that withholding notice is in the interest of the
Holders.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. Holders' Compliance with Registration Agreement
Each Holder of a Security, by acceptance hereof,
acknowledges and agrees to the provisions of the
9
<PAGE>
Registration Agreement, including, without limitation, the obligations of the
Holders with respect to a registration and the indemnification of the Company to
the extent provided therein.
19. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type.
10
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The
agent may substitute another to act for him.
- --------------------------------------------------------------------
Date: ____________________ Your Signature: _________________________
- ---------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) / / inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
11
<PAGE>
under the Securities Act of 1933) that purchases for
its own account or for the account of a qualified
institutional buyer to whom notice is given that such
transfer is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with Rule
144A under the Securities Act of 1933; or
(4) / / outside the United States in an offshore
transaction within the meaning of Regulation S under
the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) / / pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
__________________________
Signature
Signature Guarantee:
_____________________________ __________________________
Signature must be guaranteed Signature
- ---------------------------------------------------------------------------
12
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ___________________ ______________________________
NOTICE: To be executed by
an executive officer
13
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Amount of increase in Principal amount Signature of authorized
Exchange Principal Amount of this Principal Amount of this of this Global signatory of Trustee or
Global Security Global Security Security following Securities Custodian
such decrease or
increase)
</TABLE>
14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by
the Company pursuant to Section 3.08 of the Indenture, check the
box:
/ /
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.08 of the Indenture, state the
amount in principal amount: $
Date: _______________ Your Signature: ___________________________
(Sign exactly as your name
appears on the other side
of this Security.)
Signature Guarantee: _________________________________________________________
(Signature must be guaranteed)
15
<PAGE>
EXECUTION COPY
LENFEST COMMUNICATIONS, INC.
10.50% Senior Subordinated Notes due 2006
REGISTRATION AGREEMENT
New York, New York
June 20, 1996
To: SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES (USA) INC.
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Lenfest Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to certain purchasers (the "Purchasers"),
upon the terms set forth in a purchase agreement of even date herewith (the
"Purchase Agreement"), its 10.50% Senior Subordinated Notes due 2006 (the
"Securities") (the "Initial Placement"). As an inducement to the Purchasers to
enter into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Company agrees with you, (i) for your benefit and
the benefit of the other Purchasers and (ii) for the benefit of the holders from
time to time of the Securities (including you and the other Purchasers) (each of
the foregoing a "Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
<PAGE>
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" has the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange
Commission.
"Company" has the meaning set forth in the
preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the one year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers or their affiliates) which is a broker-dealer, electing to exchange
Securities acquired for its own account as a result of market-making activities
or other trading activities, for New Securities.
2
<PAGE>
"Final Memorandum" has the meaning set forth
thereto in the Purchase Agreement.
"Holder" has the meaning set forth in the preamble
hereto.
"Indenture" means the Indenture relating to the Securities and
the New Securities dated as of June 15, 1996, between the Company and The Bank
of New York, as trustee, as the same may be amended from time to time in
accordance with the terms thereof.
"Initial Placement" has the meaning set forth in
the preamble hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering.
"New Securities" means debt securities of the Company
identical in all material respects to the Securities (except that the interest
rate step-up provisions set forth in Section 3 of the Securities and the
transfer restrictions will be modified or eliminated, as appropriate), to be
issued under the Indenture./1/
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in
the preamble hereto.
- --------
/1/ It is intended that the interest rate step-up provisions be included in the
form of security and not in this Agreement.
3
<PAGE>
"Purchasers" has the meaning set forth in the
preamble hereto.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like principal amount of the New Securities.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Securities" has the meaning set forth in the
preamble hereto.
"Shelf Registration" means a registration effected
pursuant to Section 3 hereof.
"Shelf Registration Period" has the meaning set
forth in Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities or New Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" means the trustee with respect to the Securities and
the New Securities under the Indenture.
"underwriter" means any underwriter of Securities in
connection with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not
later than 45 days following the Closing Date, shall file with the Commission
4
<PAGE>
the Exchange Offer Registration Statement with respect to the Registered
Exchange Offer. The Company shall cause such Exchange Offer Registration
Statement to become effective under the Act within 120 days of the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an affiliate of the Company within the meaning of the Act, acquires the New
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the several states of
the United States.
(c) In connection with the Registered Exchange
Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than
30 days and not more than 45 days after the date notice thereof is
mailed to the Holders (or longer if required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all applicable
laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
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(ii) deliver to the Trustee for cancellation all
Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder of Securities New Securities equal in principal amount to
the Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Company acknowledge that, pursuant
to interpretations by the Commission's staff of Section 5 of the Act, and in the
absence of an applicable exemption therefrom, each Exchanging Dealer is required
to deliver a Prospectus in connection with a sale of any New Securities received
by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange
for Securities acquired for its own account as a result of market-making
activities or other trading activities. Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, and in Annex C
hereto in the underwriting or plan of distribution section of the
Prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery by Exchanging Dealers
in connection with sales of New Securities received pursuant to the
Registered Exchange Offer, as contemplated by Section 4(h) below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company shall issue and deliver to such Purchaser
or the party purchasing New Securities registered under a Shelf Registration
Statement as contemplated by Section 3 hereof from such Purchaser, in exchange
for such Securities, a like principal amount of New
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Securities. The Company shall seek to cause the CUSIP Service Bureau to issue
the same CUSIP number for such New Securities as for New Securities issued
pursuant to the Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof, (ii) for any
other reason the Exchange Offer Registration Statement is not declared effective
within 120 days following the Closing Date, (iii) any Purchaser so requests with
respect to Securities held by it following consummation of the Registered
Exchange Offer, (iv) any Holder (other than a Purchaser) is not eligible to
participate in the Registered Exchange Offer or (v) in the case of any Purchaser
that participates in the Registered Exchange Offer or acquires New Securities
pursuant to Section 2(f) hereof, such Purchaser does not receive freely
tradeable New Securities in exchange for Securities constituting any portion of
an unsold allotment (it being understood that, for purposes of this Section 3,
(x) the requirement that a Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the Act in
connection with sales of New Securities acquired in exchange for such Securities
shall result in such New Securities being not "freely tradeable" but (y) the
requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of New Securities acquired in the Registered Exchange Offer in exchange
for Securities acquired as a result of market-making activities or other trading
activities shall not result in such New Securities being not "freely
tradeable"), the following provisions shall apply:
(a) The Company shall as promptly as practicable (but in no
event more than 30 days after so required or requested pursuant to this Section
3), file with the Commission and thereafter shall cause to be declared effective
under the Act by the 150th day after the Closing Date a Shelf Registration
Statement relating to the offer and sale of the Securities or the New
Securities, as applicable, by the Holders from time to time in accordance with
the methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement; provided, however, that with respect to New Securities
received by a Purchaser in exchange for Securities constituting any
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<PAGE>
portion of an unsold allotment, the Company may, if permitted by current
interpretations by the Commission's staff, file a post-effective amendment to
the Exchange Offer Registration Statement containing the information required by
Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its
obligations under this paragraph (a) with respect thereto, and any such Exchange
Offer Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.
(b) The Company shall keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of three years from the date the Shelf
Registration Statement is declared effective by the Commission or such shorter
period that will terminate when all the Securities or New Securities, as
applicable, covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement (in any such case, such period being called
the "Shelf Registration Period"). The Company shall be deemed not to have used
its best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in Holders
of securities covered thereby not being able to offer and sell such securities
in accordance with the Act during that period, unless (i) such action is
required by applicable law, or (ii) such action is taken by the Company in good
faith and for valid business reasons (not including avoidance of the Company's
obligations hereunder), including the acquisition or divestiture of assets, so
long as the Company promptly thereafter complies with the requirements of
Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you and to each Holder, prior
to the filing thereof with the Commission, a copy of any Shelf
Registration Statement and any Exchange Offer Registration Statement,
and each amendment thereof and each amendment or supplement, if any, to
the Prospectus included therein and shall use its best efforts to
reflect in each such document, when so filed with the Commission, such
comments as you or any Holder reasonably may propose.
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<PAGE>
(b) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain 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 not misleading and
(iii) any Prospectus forming part of any Registration Statement, and
any amendment or supplement to such Prospectus, does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus
included therein or for additional information.
(2) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of securities covered thereby, and,
in the case of an Exchange Offer Registration Statement, any Exchanging
Dealer which has provided in writing to the Company a telephone or
facsimile number and address for notices, and, if requested by you or
any such Holder or Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any
stop order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose;
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<PAGE>
(ii) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or
the initiation or threatening of any proceeding for such
purpose; and
(iii) of the happening of any event that requires the
making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein
are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes
have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities
included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the
selling Holders of securities in connection with the offering and sale
of the securities covered by the Prospectus or any amendment or
supplement thereto.
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(g) The Company shall furnish to each Exchanging Dealer which
so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, any documents
incorporated by reference therein, and, if the Exchanging Dealer so
requests in writing, all exhibits (including those incorporated by
reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such
Exchanging Dealer in connection with a sale of New Securities received
by it pursuant to the Registered Exchange Offer; and the Company
consents to the use of the Prospectus or any amendment or supplement
thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the
Company shall, at its own expense, register or qualify such securities
for offer and sale under the securities or blue sky laws of such
jurisdictions as any Holders of securities included therein and their
respective counsel reasonably request in writing and do any and all
other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the securities covered by such
Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject
it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of Securities
to facilitate the timely preparation and delivery of certificates
representing Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as Holders may request prior to sales of
securities pursuant to such Registration Statement.
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<PAGE>
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement
to the related Prospectus or file any other required document so that,
as thereafter delivered to purchasers of the securities included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the applicable trustee with printed
certificates for such Securities or New Securities, in a form eligible
for deposit with The Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable
after the effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Act.
(n) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner.
(o) The Company may require each Holder of securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the holder and the distribution of
such securities as the Company may from time to time reasonably require
for inclusion in such Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as
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<PAGE>
soon as notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite
or facilitate the registration or the disposition of the Securities,
and in connection therewith, if an underwriting agreement is entered
into, cause the same to contain indemnification provisions and
procedures no less favorable than those set forth in Section 6 (or such
other provisions and procedures acceptable to the Majority Holders and
the Managing Underwriters, if any, with respect to all parties to be
indemnified pursuant to Section 6 from Holders of Securities to the
Company).
(r) In the case of any Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by
the Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in primary underwritten offerings and covering such matters as are
customarily
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<PAGE>
covered in representations and warranties requested in primary
underwritten offerings; (iv) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing
Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters as are customarily covered
in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and underwriters; (v)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each selling Holder of
securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten
offerings; and (vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with
Section 4(k) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this Section 4(r) shall be performed at (A) the effectiveness of such
Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to
the extent required thereunder.
(s) In the case of any Exchange Offer Registration Statement,
the Company shall (i) make reasonably available for inspection by such
Purchaser and any attorney, accountant or other agent retained by such
Purchaser, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply
all relevant information reasonably requested by any Purchaser or any
such attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information that is
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<PAGE>
designated in writing by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by
such Purchaser or any such attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to such
Purchaser, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings and covering
such matters as are customarily covered in representations and
warranties requested in primary underwritten offerings; (iv) obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to such Purchaser and its counsel, addressed to such
Purchaser, covering such matters as are customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such Purchaser or its counsel; (v) obtain "cold
comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Registration Statement), addressed to such Purchaser, in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with primary underwritten offerings, or
if requested by such Purchaser or its counsel in lieu of a "cold
comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 35, as amended or superseded by Statements on
Auditing Standards promulgated by the Auditing Standards Board after
the date hereof, covering matters requested by such Purchaser or its
counsel; and (vi) deliver such documents and certificates as may be
reasonably requested by such Purchaser or its counsel, including those
to evidence compliance with Section 4(k) and with conditions
customarily contained in underwriting agreements. The foregoing actions
set forth in clauses (iii), (iv), (v), and (vi) of this Section 4(s)
shall be performed at the close of the Registered Exchange
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Offer and the effective date of any post-effective amendment to the
Exchange Offer Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Purchaser for the reasonable fees and
disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of securities covered thereby (including each Purchaser and, with
respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any amendment thereof, or
in any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon 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, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such Holder specifically for inclusion therein.
This indemnity
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<PAGE>
agreement will be in addition to any liability which the
Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses
of, as provided in Section 6(d), any underwriters of Securities registered under
a Shelf Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Purchasers and the selling Holders provided in this
Section 6(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration
Statement severally agrees to indemnify and hold harmless (i) the Company, (ii)
each of its directors, (iii) each of its officers who signs such Registration
Statement and (iv) each person who controls the Company within the meaning of
either the Act or the Exchange Act to the same extent as the foregoing indemnity
from the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by
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the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from
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the Initial Placement and the Registration Statement which resulted in such
Losses; provided, however, that in no case shall any Purchaser or any subsequent
Holder of any Security or New Security be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such
Security, or in the case of a New Security, applicable to the Security which was
exchangeable into such New Security, as set forth on the cover page of the Final
Memorandum, nor shall any underwriter be responsible for any amount in excess of
the underwriting discount or commission applicable to the securities purchased
by such underwriter under the Registration Statement which resulted in such
Losses. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the sum of (x) the principal amount of the New Securities
issued at the Closing Date and (y) the total amount of additional interest which
the Company was not required to pay as a result of registering the securities
covered by the Registration Statement which resulted in such Losses. Benefits
received by the Purchasers and any other Holders shall be deemed to be equal to
the value of receiving Securities or New Securities, as applicable, registered
under the Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus forming a part of the Registration Statement which
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section
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6, each person who controls a Holder within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Act or the Exchange Act,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount of
Securities (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of New Securities); provided that,
with respect to any matter that directly or indirectly affects the
rights of any Purchaser hereunder, the Company shall obtain the written
consent of each such Purchaser against which such amendment,
qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver
or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect the rights
20
<PAGE>
of other Holders may be given by the Majority Holders, determined on
the basis of securities being sold rather than registered under such
Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a Holder, at the most current address given
by such holder to the Company in accordance with the
provisions of this Section 7(c), which address initially is,
with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy
in like manner to Salomon Brothers Inc;
(2) if to you, at the address as set forth in
the Purchase Agreement; and
(3) if to the Company, at the address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given when received.
The Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including, without the need for an express assignment or
any consent by the Company thereto, subsequent Holders of Securities
and/or New Securities. The Company hereby agrees to extend the benefits
of this Agreement to any Holder of Securities and/or New Securities and
any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of
21
<PAGE>
which taken together shall constitute one and the same
agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other
than subsequent Holders of Securities or New Securities if such
subsequent Holders are deemed to be Affiliates solely by reason of
their holdings of such Securities or New Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage.
22
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
LENFEST COMMUNICATIONS, INC.
By:____________________________
Name: Harry F. Brooks
Title: Executive Vice
President
Accepted in New York, New York
June 20, 1996
SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES (USA) INC.
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
By: SALOMON BROTHERS INC
By:___________________________
Name:
Title:
23
<PAGE>
ANNEX A
Annex A
Each broker-dealer that receives New Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Securities received in exchange for broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, ending on the close of business on the 180th day following the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Annex B
Each broker-dealer that receives New Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
Plan of Distribution
Each broker-dealer that receives New Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business on the 180th day following the Expiration Date,
it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 199 , all dealers effecting transactions in the New Securities may
be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such New Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Securities) other than commissions or concessions
<PAGE>
of any brokers or dealers and will indemnify the holders of the Securities
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
[If applicable, add information required by
Regulation S-K Items 507 and/or 508.]
2
<PAGE>
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:__________________________________________
Address: ______________________________________
______________________________________
Rider B
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Securities. If the undersigned is a broker-dealer that will
receive New Securities for its own account in exchange for Securities, it
represents that the Securities to be exchanged for New Securities were acquired
by it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 10.36
[THE LENFEST GROUP LETTERHEAD]
June 11, 1996
TO THE PERSONS ON THE ATTACHED DISTRIBUTION LIST:
Lenfest Communications, Inc. intends to offer and sell $300 million of
its senior subordinated notes ("Senior Subordinated Notes"). The Company will
use the proceeds of the offering to repay amounts outstanding under the
Company's current bank facility.
Under the terms of the Note Agreements, each dated as of September 14,
1988, between the Company and each of you, the Company may incur Subordinated
Debt if:
(a) the sum of all Funded Debt of the Company and its
Restricted Subsidiaries does not exceed 900% of the
Annualized Cash Flow of the Company and its Restricted
Subsidiaries on a pro forma basis giving effect to the
application of the proceeds of such Funded Debt for the
most recent three-month period immediately proceeding the
incurrence of such Funded Debt; and
(b) the Subordinated Debt is expressly and validly
subordinated to the Notes under conditions and pursuant to
terms and provisions approved by the Required Holders in
writing.
The issuance of the Senior Subordinated Notes will reduce the Senior
Funded Debt leverage ratio and will not increase the Funded Debt leverage ratio.
Assuming a June 24, 1996 closing on the Senior Subordinated Notes, the sum of
all Funded Debt of the Company and its Restricted Subsidiaries on a pro forma
basis giving effect to the application of the proceeds of such Funded Debt for
the most recent three-month period immediately proceeding the incurrence of such
Funded Debt will be 678% of the Annualized Cash Flow of the Company and its
Restricted Subsidiaries.
In addition, enclosed is a draft of the proposed Indenture which
contains the subordination provisions governing the Senior Subordinated Notes.
The Company hereby requests your approval of the subordination
provisions contained in the enclosed Indenture.
<PAGE>
June 11, 1996
Page -2-
Please signify your approval by signing the enclosed extra copy of this
letter and returning it to the undersigned at the address set forth above. If
you have any questions concerning the foregoing, please telephone our counsel,
Thomas K. Pasch at 215-972-7188.
You should be aware that the underwriters of the offering have
indicated that the offering will close on June 24, 1996. Your response in
advance of that date would be appreciated.
Capitalized terms not defined in this letter have the meanings given to
them in the Note Agreements.
Very truly yours,
Lenfest Communications, Inc.
By:
-------------------------------
Harry F. Brooks,
Executive Vice President
The undersigned hereby approves the terms and provisions of subordination
contained in the Indenture governing the Senior Subordinated Debt.
MBL LIFE ASSURANCE CORPORATION
By:
------------------------------------
Name:
-------------------------
Title:
------------------------
Date:
-------------------------
Enclosure
cc: Thomas K. Pasch, Esquire (w/o enclosure)
<PAGE>
DISTRIBUTION LIST
-----------------
Prudential Insurance Company
c/o Prudential Capital Group
One Gateway Center, 11th Floor
7-45 Raymond Boulevard West
Newark, NJ 07102-5311
Attn.: Kevin Kraska
MBL Life Assurance Corporation
520 Broad Street
Newark, NY 07102-3184
Attn: David James
Full & Company
c/o State Street Bank and Trust
225 Franklin Street
Concourse Level
Boston, MA 02110
Attn: Debbie Gorman
AUSA Life Insurance Company, Inc.
c/o The Mutual Life Insurance Co. of New York
1740 Broadway
New York, NY 10019
Attn.: Peter Oliver
Equitable Life Assurance Society
c/o Alliance Capital Management
1345 Avenue of the Americas
137th Floor
New York, NY 10105
Attn.: Basil Livanos
<PAGE>
Exhibit 10.37
ThePrudential [LOGO] Prudential Capital Group
One Gateway Center, 11th Floor
7-43 Raymond Boulevard West
Newark, NJ 07102 5311
Fax: 201 802-3200
June 20, 1996
The Lenfest Group
200 Cresson Boulevard
P.O. Box 989
Oaks, Pennsylvania 19456-0989
RE: The Note Agreement dated as of September 14, 1988 and the Note
Agreement dated May 22, 1989, each between Lenfest Communications,
Inc. (the "Company") and the purchasers named therein
-------------------------------------------------------------------
Ladies and Gentlemen:
We are in receipt of your letter dated June 11, 1996 regarding the
issuance by the Company of $300 million of senior subordinated notes. The
undersigned consents to the issuance of the senior subordinated notes on the
terms of the draft indenture dated June 3, 1996, provided that the
yield-maintenance premium and other liabilities of the Company to the
noteholders under the respective note agreements are treated as "Senior
Indebtedness" and that the note agreements shall be and are hereby deemed to be
amended to provide that any redemptions, repurchases, prepayments or defeasance
of any of the senior subordinated notes by the Company or any of its affiliates
shall be included in the definition of "Restricted Payments" under the note
agreements and must comply with paragraph 6C of each of the note agreements. It
is understood that a formal amendment to the note agreements memorializing this
change will be executed by the Company as soon as practicable.
Vert truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Yvonne Guejardo
------------------------------
Vice President
<PAGE>
CREDIT AGREEMENT
AMONG
LENFEST COMMUNICATIONS, INC.,
AS BORROWER,
THE TORONTO-DOMINION BANK,
PNC BANK, NATIONAL ASSOCIATION
AND NATIONSBANK OF TEXAS, N.A.,
AS ARRANGING AGENTS,
PNC BANK, NATIONAL ASSOCIATION,
AS DOCUMENTATION AGENT,
NATIONSBANK OF TEXAS, N.A.,
AS SYNDICATION AGENT,
THE LENDERS PARTY HERETO
AND
TORONTO DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT
<PAGE>
<TABLE>
<CAPTION>
INDEX
Page
----
<S> <C> <C>
ARTICLE 1 Definitions.............................................................................. 1
ARTICLE 2 Loans.................................................................................... 21
2.1 The Loans................................................................................ 21
2.2 Manner of Borrowing and Disbursement..................................................... 22
2.3 Interest................................................................................. 25
2.4 Fees..................................................................................... 28
2.5 Commitment Reduction..................................................................... 28
2.6 Prepayment............................................................................... 30
2.7 Repayment................................................................................ 31
2.8 Notes; Loan Accounts..................................................................... 32
2.9 Manner of Payment........................................................................ 32
2.10 Reimbursement............................................................................ 34
2.11 Pro Rata Treatment....................................................................... 35
2.12 Capital Adequacy......................................................................... 36
2.13 Letters of Credit........................................................................ 36
2.14 Addition of New Lenders and Increases in
Revolving Loan Commitment During the
Syndication Period....................................................................... 41
ARTICLE 3 Conditions Precedent..................................................................... 42
3.1 Conditions Precedent to Initial Advance. ................................................ 42
3.2 Conditions Precedent to Each Advance..................................................... 44
3.3 Conditions Precedent to Issuance of each Letter
of Credit................................................................................ 45
ARTICLE 4 Representations and Warranties........................................................... 46
4.1 Representations and Warranties........................................................... 46
4.2 Survival of Representations and Warranties,
etc...................................................................................... 55
ARTICLE 5 General Covenants........................................................................ 56
5.1 Preservation of Existence and Similar Matters............................................ 56
5.2 Business; Compliance with Applicable Law................................................. 56
5.3 Maintenance of Properties................................................................ 56
5.4 Accounting Methods and Financial Records................................................. 56
5.5 Insurance................................................................................ 57
5.6 Payment of Taxes and Claims.............................................................. 57
5.7 Visits and Inspections................................................................... 58
5.8 Payment of Indebtedness; Loans........................................................... 58
5.9 Use of Proceeds.......................................................................... 58
5.10 Indemnity................................................................................ 58
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.11 Interest Rate Hedging.................................................................... 59
5.12 Payment of Wages......................................................................... 59
ARTICLE 6 Information Covenants.................................................................... 59
6.1 Quarterly Financial Statements........................................................... 60
6.2 Annual Financial Statements.............................................................. 60
6.3 Monthly Operating Reports................................................................ 61
6.4 Performance Certificates................................................................. 61
6.5 Copies of Other Reports.................................................................. 62
6.6 Notice of Litigation and Other Matters................................................... 63
ARTICLE 7 Negative Covenants....................................................................... 64
7.1 Indebtedness of the Borrower and the Restricted
Subsidiaries............................................................................. 64
7.2 Limitation on Liens...................................................................... 65
7.3 Amendment and Waiver..................................................................... 66
7.4 Liquidation, Change in Ownership, Disposition
or Acquisition of Assets; Change in Business............................................. 66
7.5 Limitation on Guaranties................................................................. 68
7.6 Investments.............................................................................. 68
7.7 Restricted Payments and Purchases........................................................ 69
7.8 Senior Leverage Ratio.................................................................... 70
7.9 Operating Cash Flow to Total Interest Expense
Ratio.................................................................................... 70
7.10 Operating Cash Flow Plus Cash on Hand to Fixed
Charges Ratio............................................................................ 71
7.11 Annualized Operating Cash Flow to Pro Forma
Debt Service Ratio....................................................................... 71
7.12 Affiliate Transactions................................................................... 72
7.13 Limitation on Leases; Sale/Leasebacks.................................................... 72
7.14 ERISA Liabilities........................................................................ 72
7.15 Restrictions on Upstream Dividends by
Subsidiaries............................................................................. 72
7.16 Capital Expenditures..................................................................... 73
ARTICLE 8 Default.................................................................................. 74
8.1 Events of Default........................................................................ 74
8.2 Remedies................................................................................. 77
ARTICLE 9 The Agents............................................................................... 78
9.1 Appointment and Authorization............................................................ 78
9.2 Interest Holders......................................................................... 79
9.3 Consultation with Counsel................................................................ 79
9.4 Documents................................................................................ 79
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.5 Administrative Agent and Affiliates...................................................... 79
9.6 Responsibility of the Administrative Agent............................................... 79
9.7 Action by Administrative Agent........................................................... 80
9.8 Notice of Default or Event of Default.................................................... 80
9.9 Responsibility Disclaimed................................................................ 81
9.10 Indemnification.......................................................................... 81
9.11 Credit Decision.......................................................................... 82
9.12 Successor Agents......................................................................... 82
9.13 Arranging Agents......................................................................... 82
ARTICLE 10 Change in Circumstances Affecting Advances............................................... 83
10.1 LIBOR Basis Determination Inadequate or Unfair........................................... 83
10.2 Illegality............................................................................... 83
10.3 Increased Costs.......................................................................... 84
10.4 Effects on Other Advances................................................................ 85
ARTICLE 11 Miscellaneous............................................................................ 85
11.1 Notices.................................................................................. 85
11.2 Expenses................................................................................. 89
11.3 Waivers.................................................................................. 90
11.4 Set-Off.................................................................................. 91
11.5 Assignment............................................................................... 91
11.6 Accounting Principles.................................................................... 94
11.7 Counterparts............................................................................. 94
11.8 Governing Law............................................................................ 94
11.9 Severability............................................................................. 95
11.10 Interest................................................................................. 95
11.11 Headings................................................................................. 95
11.12 Amendment and Waiver..................................................................... 95
11.13 Entire Agreement......................................................................... 96
11.14 Consent to Jurisdiction.................................................................. 96
11.15 Confidentiality.......................................................................... 96
ARTICLE 12 Waiver of Jury Trial..................................................................... 97
12.1 Waiver of Jury Trial..................................................................... 97
</TABLE>
-iii-
<PAGE>
EXHIBITS
Exhibit A - Form of Certificate of Financial Condition
Exhibit B - Form of Request for Advance
Exhibit C - Form of Revolving Loan Note
Exhibit D - Form of Term Loan Note
Exhibit E - Form of Use of Proceeds Letter
Exhibit F - Form of Borrower Loan Certificate
Exhibit G - Form of Quarterly Capital Expenditure Report
Exhibit H - Form of Assignment and Assumption Agreement
Exhibit I - Form of Performance Certificate
SCHEDULES
Schedule 1 - Outstanding Letters of Credit
Schedule 2 - Licenses
Schedule 3 - Liens as of the Agreement Date
Schedule 4 - Pole Agreements
Schedule 5 - Subsidiaries
Schedule 6 - Overbuilding
Schedule 7 - Real Property
Schedule 8 - Litigation
Schedule 9 - Agreements with Affiliates
Schedule 10 - Collective Bargaining
Schedule 11 - Ownership of Borrower
Schedule 12 - Existing Indebtedness
Schedule 13 - Existing Investments
Schedule 14 - Additional Permitted Investments
-iv-
<PAGE>
CREDIT AGREEMENT
LENFEST COMMUNICATIONS, INC.,
AS BORROWER,
THE TORONTO-DOMINION BANK,
PNC BANK, NATIONAL ASSOCIATION
AND NATIONSBANK OF TEXAS, N.A.,
AS ARRANGING AGENTS,
PNC BANK, NATIONAL ASSOCIATION,
AS DOCUMENTATION AGENT,
NATIONSBANK OF TEXAS, N.A.,
AS SYNDICATION AGENT,
THE LENDERS PARTY HERETO
AND
TORONTO DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT
hereby agree as
follows as of the 27th day of June, 1996:
ARTICLE 1
Definitions
For the purposes of this Agreement:
"Administrative Agent" shall mean Toronto Dominion (Texas), Inc., a
Delaware corporation, acting as administrative agent for the Lenders and the
Arranging Agents.
"Administrative Agent's Office" shall mean the office of the
Administrative Agent located at Toronto Dominion (Texas), Inc., 909 Fannin
Street, Suite 1700, Houston, Texas 77010, or such other office as may be
designated pursuant to the provisions of Section 11.1 of this Agreement.
"Advance" or "Advances" shall mean amounts advanced by the Lenders to
the Borrower pursuant to Article 2 hereof on the occasion of any borrowing.
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under common control with, the Borrower. For purposes of this
definition, "control" when used with respect to any Person includes, without
limitation, the
<PAGE>
direct or indirect beneficial ownership of more than five percent (5%) of the
voting securities or voting equity of such Person or the power to direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise, including, without limitation, the power to elect a
majority of the directors or trustees of a corporation or trust, as the case may
be.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
"Agreement Date" shall mean the date as of which this
Agreement is dated.
"AML Movie Studio Guaranty Liability" shall mean the aggregate amount
of all indemnification obligations of the Borrower or any Restricted Subsidiary
to H.F. Lenfest in respect of those certain personal guaranties, each dated
November 19, 1994, relating to certain television cable and satellite operations
in Australia, plus the aggregate face amount of any Letters of Credit issued in
respect thereof or in connection therewith.
"Annual Excess Cash Flow" shall mean, as of the end of any fiscal year
of the Borrower, as determined based upon the audited annual financial
statements for such year required to be provided under Section 6.2 hereof, the
remainder of (a) Operating Cash Flow for such year, minus (b) the sum of the
following items for the Borrower and the Restricted Subsidiaries on a
consolidated basis for such year: (i) Total Interest Expense; (ii) Capital
Expenditures made (net of any proceeds realized in respect of damaged or
destroyed capital assets or from the disposition of obsolete or retired capital
assets); (iii) payments of principal of Total Debt scheduled to be made pursuant
to the documents, instruments or agreements evidencing such Total Debt; (iv)
income taxes (without duplication) paid or payable in cash during or with
respect to such year; and (v) the lesser of (A) cash or Cash Equivalents then
held by the Borrower and the Restricted Subsidiaries on a consolidated basis or
(B) $5,000,000.
"Annualized Operating Cash Flow" shall mean an amount equal to
Operating Cash Flow for the calendar quarter specified, multiplied by four (4).
"Applicable Law" shall mean, in respect of any Person, all provisions
of constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person, including, without limiting
the foregoing, the Licenses, the Federal Communications Act of 1934, as amended,
and Title 47 of the United States Code, and all orders and decrees of
-2-
<PAGE>
all courts and arbitrators in proceedings or actions to which the Person in
question is a party or by which it is bound.
"Applicable Margin" shall mean the interest rate margin applicable to
Base Rate Advances and LIBOR Advances, as the case may be, in each case
determined in accordance with Section 2.3(f) hereof.
"Arranging Agents" shall mean The Toronto-Dominion Bank, PNC Bank,
National Association, and NationsBank of Texas, N.A.; and "Arranging Agent"
shall mean any one of the foregoing Arranging Agents.
"Australis Media Credit Facility" shall mean the credit facility
between Australis Media Limited and Toronto Dominion Australia Limited, as the
same may hereafter be amended from time
to time.
"Australis Media Indebtedness" shall mean the Indebtedness
for Money Borrowed incurred under the Australis Media Credit
Facility.
"Australis Media Limited" shall mean Australis Media Limited, a
corporation organized under the laws of Australia.
"Authorized Officer" shall mean any officer of the Borrower or any
Restricted Subsidiary holding the office of Vice President or above.
"Authorized Signatory" shall mean such senior personnel of the Borrower
as may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower.
"Available Revolving Loan Commitment" shall mean, at any time, the
difference between (a) the Revolving Loan Commitment, and (b) the aggregate
outstanding face amount of all Letters of Credit issued hereunder.
"Base Rate" shall mean, at any time, the greater of (a) the rate of
interest adopted by The Toronto-Dominion Bank, New York Branch, as its reference
rate for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by The Toronto-Dominion Bank, New
York Branch, as its "prime rate," and (b) the sum of (i) the Federal Funds Rate,
plus (ii) five-eighths of one percent (5/8%). The Base Rate is not necessarily
the lowest rate of interest charged to borrowers of The Toronto-Dominion Bank,
New York Branch.
-3-
<PAGE>
"Base Rate Advance" shall mean an Advance which the Borrower requests
to be made as a Base Rate Advance or is reborrowed as a Base Rate Advance in
accordance with the provisions of Section 2.2 hereof, and which shall be in a
principal amount of at least $5,000,000 and in integral multiples of $1,000,000
in excess thereof, except for a Base Rate Advance which is in an amount equal to
the unused amount of the Revolving Loan Commitment or the unpaid portion of the
Term Loan, or which is made under the Letter of Credit Commitment, as
applicable, which Advance may be in such amount.
"Base Rate Basis" shall mean a simple interest rate equal to the sum of
(a) the Base Rate and (b) the Applicable Margin. The Base Rate Basis shall be
adjusted automatically as of the opening of business on the effective date of
each change in the Base Rate and the Applicable Margin to account for such
changes.
"Basic Subscriber" shall mean a dwelling unit, including an apartment
which is separately billed for cable television services within an apartment
building, in respect of which the Borrower or any of its Restricted Subsidiaries
has in effect an agreement to provide one or more of the basic cable television
subscription services offered by the Borrower or any of its Restricted
Subsidiaries and for which the Borrower or any of its Restricted Subsidiaries
has received at least one full month's payment at the rate customarily charged
by such Person within the applicable franchise area, except for those dwelling
units for which payment is more than sixty (60) days past due, or for which
notices of termination of service have been sent by the Borrower or any of its
Restricted Subsidiaries or by the customer. As to bulk subscribers, such as
hotels, motels, and apartments, billed on a bulk basis, the number of Basic
Subscribers of the Borrower and its Restricted Subsidiaries shall be computed by
dividing the monthly basic cable revenues received by the Borrower and its
Restricted Subsidiaries from any such bulk subscribers by the average monthly
subscription price received by the Borrower and its Restricted Subsidiaries from
other Basic Subscribers within the portion of the System serving such bulk
subscriber.
"Borrower" shall mean Lenfest Communications, Inc., a
Delaware corporation.
"Business Day" shall mean a day on which banks and foreign exchange
markets are open for the transaction of business required for this Agreement in
London, England, Houston, Texas and New York, New York, as relevant to the
determination to be made or the action to be taken.
"Capital Expenditures" shall mean, in respect of any Person,
expenditures for the purchase, repair, replacement or
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<PAGE>
construction of fixed assets, plant and equipment which are capitalized in
accordance with GAAP.
"Capitalized Lease Obligation" shall mean that portion of any
obligation of a Person as lessee under a lease which at the time would be
required to be capitalized on the balance sheet of such lessee in accordance
with GAAP.
"Cash Equivalents" shall mean investments of the type described in
Sections 7.6(a), (b) and (c) hereof.
"Certificate of Financial Condition" shall mean a certificate of
financial condition of the Borrower substantially in the form of Exhibit A
attached hereto, and signed by an Authorized Signatory.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commission" shall mean the Federal Communications
Commission or any successor thereto.
"Commitment Ratios" shall mean the percentages in which the Lenders are
severally bound to satisfy the Commitments to make Advances to the Borrower, as
set forth below as of the Agreement Date:
<TABLE>
<CAPTION>
Portion of Commitment Ratio Dollar Commitment Total
Revolving Loan for Revolving Amount of Ratio for Total Commitment
Lenders Commitment Loan Commitment Term Loan Term Loan Commitment Ratios
------- ---------- --------------- --------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
The Toronto-Dominion Bank $21,388,888.52 8.148148008% $21,666,666.50 14.444444333% $43,055,555.02 10.437710307%
PNC Bank, National $21,388,889.08 8.148148221% $21,666,666.75 14.444444500% $43,055,555.83 10.437710504%
Association
NationsBank of Texas, N.A. $21,388,889.08 8.148148221% $21,666,666.75 14.444444500% $43,055,555.83 10.437710504%
The Bank of Nova Scotia $20,416,666.67 7.777777779% $8,750,000.00 5.833333333% $29,166,666.67 7.070707071%
Banque Nationale de Paris $20,416,666.67 7.777777779% $8,750,000.00 5.833333333% $29,166,666.67 7.070707071%
CIBC Inc. $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
CoreStates Bank, N.A. $11,666,666.67 4.444444446% $5,000,000.00 3.333333333% $16,666,666.67 4.040404041%
The First National Bank of $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
Maryland
LTCB Trust Company $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
Dresdner Bank AG, New York $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
and Grand Cayman Branches
Royal Bank of Canada $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
Bank of Montreal, Chicago $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
Branch
Union Bank of California, $11,666,666.67 4.444444446% $5,000,000.00 3.333333333% $16,666,666.67 4.040404041%
N.A.
Merita Bank Ltd, Grand $8,750,000.00 3.333333333% $3,750,000.00 2.500000000% $12,500,000.00 3.030303030%
Cayman Branch
First Hawaiian Bank $8,750,000.00 3.333333333% $3,750,000.00 2.500000000% $12,500,000.00 3.030303030%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Portion of Commitment Ratio Dollar Commitment Total
Revolving Loan for Revolving Amount of Ratio for Total Commitment
Lenders Commitment Loan Commitment Term Loan Term Loan Commitment Ratios
------- ---------------- --------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Sumitomo Bank, Ltd. $8,750,000.00 3.333333333% $3,750,000.00 2.500000000% $12,500,000.00 3.030303030%
Van Kampen American Capital $14,583,333.33 5.555555554% $6,250,000.00 4.166666667% $20,833,333.33 5.050505049%
Prime Rate Income Trust
MeesPierson N.V. $5,833,333.33 2.222222221% $2,500,000.00 1.666666667% $8,333,333.33 2.020202019%
======================================================================================================
Total $262,500,000.00 100.00% $150,000,000.00 100.00% $412,500,000.00 100.00%
</TABLE>
"Contiguous Areas" shall mean those geographical areas which are
geographically contiguous to any geographical boundary of the System.
"Default" shall mean any Event of Default, and any of the events
specified in Section 8.1 hereof regardless of whether there shall have occurred
any passage of time or giving of notice or both that would be necessary for such
event to be an Event of Default.
"Default Rate" shall mean a simple per annum interest rate equal to the
sum of (a) the otherwise applicable Interest Rate Basis, plus (b) two percent
(2%). In the event there is no otherwise applicable Interest Rate Basis, the
Default Rate shall mean a simple per annum interest rate equal to the sum of the
Base Rate Basis, plus two percent (2%).
"Dollar" or "$" shall mean (except where specifically designated
otherwise) lawful money of the United States of America.
"Environmental Laws" shall mean any and all applicable federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any governmental authority regulating,
relating to or imposing liability or standards of conduct concerning
environmental protection matters, including without limitation, Hazardous
Materials, as now or may at any time hereafter be in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as in effect on the Agreement Date and as amended thereafter from time to time.
"ERISA Affiliate" shall mean any Person whose employees, together with
employees of the Borrower or any Restricted Subsidiary, are treated as employed
by a single employer for purposes of Section 414 of the Code.
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<PAGE>
"Event of Default" shall mean any of the events specified in Section
8.1 hereof, provided that any requirement for notice or lapse of time has been
satisfied.
"Federal Funds Rate" shall mean, as of any date, the weighted average
of the rates on overnight federal funds transactions with the members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three (3) federal
funds brokers of recognized standing selected by the Administrative Agent.
"Fixed Charges" shall mean, with respect to the Borrower and the
Restricted Subsidiaries on a consolidated basis for the most recently completed
twelve (12) calendar month period, the sum of (a) Total Interest Expense for
such period, (b) Capital Expenditures made during such period, (c) payments of
principal of Total Debt scheduled to be made during such period pursuant to the
documents, instruments or agreements evidencing such Total Debt, excluding any
payments of principal made pursuant to Section 2.5(b)(ii) and Section 2.7(b)
hereof, and (d) the portion of scheduled payments made with respect to
Capitalized Lease Obligations which constitute imputed principal for such
period, all as determined in accordance with GAAP.
"GAAP" shall mean, as in effect from time to time, generally accepted
accounting principles in the United States, consistently applied.
"Guaranty" or "Guaranteed," as applied to an obligation, shall mean and
include (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation or (b) any other agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of any part
or all of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to outstanding letters of credit, but
excluding guaranties by endorsement of negotiable instruments for collection or
deposit in the ordinary course of business.
"Hazardous Materials" shall mean any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances, petroleum
products (including crude oil or any fraction thereof), or friable asbestos
containing materials defined or regulated as such in or under any Environmental
Law.
-7-
<PAGE>
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person, except (i) accounts payable which by their terms are less than
sixty (60) days past due, (ii) items of partners' or shareholders' equity or
capital stock or surplus or (iii) items of general contingency or deferred tax
reserves, (b) all direct or indirect obligations secured by any Lien to which
any property or asset owned by such Person is subject, whether or not the
obligation secured thereby shall have been assumed, (c) all Capitalized Lease
Obligations of such Person and all obligations of such Person with respect to
leases constituting part of a sale and lease-back arrangement, (d) all
obligations, contingent or otherwise, arising under Guaranties issued by such
Person, (e) all reimbursement obligations with respect to outstanding letters of
credit, and (f) all obligations of such Person under Interest Rate Hedge
Agreements.
"Indebtedness for Money Borrowed" shall mean, with respect to any
Person, money borrowed and Indebtedness represented by notes payable and drafts
accepted representing extensions of credit, all obligations evidenced by bonds,
debentures, notes or other similar instruments, all Indebtedness upon which
interest charges are customarily paid, and all Indebtedness issued or assumed as
full or partial payment for property or services, whether or not any such notes,
drafts, obligations or Indebtedness represent Indebtedness for money borrowed.
For purposes of this definition, interest which is accrued but not paid on the
original due date for such interest shall be deemed Indebtedness for Money
Borrowed. Where obligations are evidenced by bonds, debentures, notes or other
similar instruments whose face amount exceeds the amount received by the
Borrower with respect thereto, only the amount received plus any debt discount
amortized as of the calculation date need be taken into account as Indebtedness
for money borrowed.
"Indemnitees" shall have the meaning assigned to such term in Section
5.10 hereof.
"Interest Period" shall mean, (a) in connection with any Base Rate
Advance, the period beginning on the date such Advance is made and ending on the
last day of the calendar quarter in which such Advance is made, provided,
however, that if a Base Rate Advance is made on the last day of any such
calendar quarter, it shall have an Interest Period ending on, and its Payment
Date shall be, the last day of the following such calendar quarter; and (b) in
connection with any LIBOR Advance, the term of such Advance selected by the
Borrower or otherwise determined in accordance with this Agreement.
Notwithstanding
-8-
<PAGE>
the foregoing, however, with respect to LIBOR Advances only, (i) any Interest
Period which would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (ii) any Interest Period which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end shall (subject to clause (i) above) end on the
last day of such calendar month, and (iii) no Interest Period shall extend
beyond the Maturity Date or such earlier date as would cause the Borrower to
incur reimbursement obligations under Section 2.10 hereof in light of the
Borrower's scheduled repayment obligations under Section 2.7 hereof. Interest
shall be due and payable with respect to any Advance as provided in Section 2.3
hereof.
"Interest Rate Basis" shall mean the Base Rate Basis or the LIBOR
Basis, as appropriate.
"Interest Rate Hedge Agreement" shall mean the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Lenders" shall mean those financial institutions whose names are set
forth on the signature pages hereof as "Lenders" and any assignees (but not
participants) thereof pursuant to and in accordance with Section 11.5 hereof;
and "Lender" shall mean any one of the foregoing Lenders.
"Lenfest Australia" shall mean Lenfest Australia, Inc., a
Delaware corporation.
"Lenfest Australia Loan" shall mean the term loan in the aggregate
principal amount of up to $18,720,350 made pursuant to the terms of that certain
Credit Agreement dated as of February 29, 1996, among Lenfest Australia, The
Toronto Dominion Bank, NationsBank of Texas, N.A. and Toronto Dominion (Texas),
Inc., as administrative agent.
"LCI Guaranty" shall mean that certain Guaranty issued by the Borrower
in respect of the Australis Media Credit Facility, pursuant to which the
Borrower has Guaranteed repayment of the
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<PAGE>
Australis Media Indebtedness in an aggregate amount of up to $75,000,000.
"LCI Guaranty Backup Facility" shall mean that certain Senior
Subordinated Credit Agreement, dated as of May 2, 1996, between the Borrower and
The Toronto-Dominion Bank, as the same may be amended from time to time,
pursuant to which the Borrower may obtain loans solely with respect to draws
under the LCI Guaranty.
"Letter of Credit Commitment" shall mean the several obligations of the
Lenders to fund Advances resulting from draws under the Letters of Credit
pursuant to the terms hereof, such Advances to be funded by the Lenders in
accordance with their respective Commitment Ratios.
"Letters of Credit" shall mean any and all letters of credit, in form
and substance acceptable to T-D Bank and the Arranging Agents and in an
aggregate face amount not to exceed $50,000,000, issued by T-D Bank pursuant to
Sections 2.1(c) and 2.13 hereof, for the account of the Borrower on its own
behalf or on behalf of any of the Restricted Subsidiaries and for the benefit of
such Persons as shall be designated by the Borrower to T-D Bank. As of the
Agreement Date, the outstanding Letters of Credit are listed on Schedule 1
attached hereto.
"LIBOR" shall mean, for any Interest Period, the average (rounded
upward to the nearest one-sixteenth (1/16th) of one percent) of the interest
rates per annum at which deposits in United States dollars for such Interest
Period are offered to The Toronto-Dominion Bank in the London interbank
borrowing market at approximately 11:00 a.m. (London time), two (2) Business
Days before the first day of such Interest Period, in an amount approximately
equal to the principal amount of, and for a length of time approximately equal
to the Interest Period for, the LIBOR Advance sought by the Borrower.
"LIBOR Advance" shall mean an Advance which the Borrower requests to be
made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance
with the provisions of Section 2.2 hereof, and which shall be in a principal
amount of at least $5,000,000 and in integral multiples of $1,000,000 in excess
thereof.
"LIBOR Basis" shall mean a simple per annum interest rate equal to the
sum of (a) the quotient of (i) LIBOR divided by (ii) one minus the LIBOR Reserve
Percentage, stated as a decimal, plus (b) the Applicable Margin. The LIBOR Basis
shall be rounded upwards to the nearest one-sixteenth (1/16th) of one percent
and shall apply to Interest Periods of one (1), two (2), three (3),
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<PAGE>
six (6) and, with the prior consent of each of the Lenders, nine (9) and twelve
(12) months, and, once determined, shall remain unchanged during the applicable
Interest Period, except for changes to reflect adjustments in the LIBOR Reserve
Percentage and the Applicable Margin.
"LIBOR Reserve Percentage" shall mean the percentage which is in effect
from time to time under Regulation D of the Board of Governors of the Federal
Reserve System, as such regulation may be amended from time to time, as the
maximum reserve requirement applicable with respect to Eurocurrency Liabilities
(as that term is defined in Regulation D), whether or not any Lender has any
Eurocurrency Liabilities subject to such reserve requirement at that time. The
LIBOR Basis for any LIBOR Advance shall be adjusted as of the effective date of
any change in the LIBOR Reserve Percentage.
"Licenses" shall mean any rights, whether based upon any agreement,
statute, ordinance or otherwise, granted by any governmental authority to the
Borrower or any Restricted Subsidiary to own and operate cable television
systems, described as of the Agreement Date on Schedule 2 attached hereto, and
any other such rights subsequently obtained by the Borrower or any Restricted
Subsidiary, together with any amendment, modification or replacement with
respect thereto.
"Lien" shall mean, with respect to any property, any mortgage, lien,
pledge, assignment, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any kind in
respect of such property, whether or not choate, vested or perfected, but
excluding any negative pledge with respect to such property. For purposes of
this Agreement, the Borrower and the Restricted Subsidiaries shall be deemed to
own subject to a Lien any assets which they have acquired or hold subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to any such assets.
"Loans" shall mean, collectively, the loans made by the Lenders to the
Borrower pursuant to Section 2.1 hereof and "Loan" shall mean any loan made
pursuant to Section 2.1 hereof.
"Loan Documents" shall mean, without limitation, this Agreement, the
Notes, all Requests for Advances, all Requests for Issuance of Letter of Credit,
all Use of Proceeds Letters, all applications for letters of credit and
reimbursement agreements relating thereto, and all other documents and
agreements executed or delivered in connection with or contemplated by this
Agreement other than Interest Rate Hedge Agreements.
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<PAGE>
"Materially Adverse Effect" shall mean any materially adverse effect
upon the business, assets, liabilities, condition (financial or otherwise), or
results of operations of the Borrower or any of the Restricted Subsidiaries, or
upon the ability of the Borrower or any of the Restricted Subsidiaries to
construct, operate and maintain the System, or to ensure performance under the
Licenses, this Agreement or any other Loan Document by the Borrower or any of
the Restricted Subsidiaries, resulting from any act, omission, situation,
status, event or undertaking, either singly or taken together.
"Maturity Date" shall mean September 30, 2003, or such earlier date as
payment of the Loans shall be due (whether by acceleration or otherwise).
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Necessary Authorizations" shall mean all approvals and licenses from,
and all filings and registrations with, any governmental or other regulatory
authority, including, without limiting the foregoing, the Licenses and all
approvals, licenses, filings and registrations under the Federal Communications
Act of 1934, as amended, necessary in order to enable the Borrower and the
Restricted Subsidiaries to acquire, construct, maintain and operate the System.
"Net Income" shall mean, as applied to any Person for any fiscal
period, the aggregate amount of net income (or net loss) of such Person, after
taxes, for such period as determined in accordance with GAAP.
"Net Proceeds" shall mean, with respect to any sale, lease, transfer,
or other disposition of the assets of the Borrower or the assets of or interests
in any of its Subsidiaries, the gross sales price for the assets being sold
(including, without limitation, any payments received for non-competition
covenants), net of (a) amounts reserved, if any, for taxes payable with respect
to the sale (after application of any available losses, credits or offsets), (b)
reasonable and customary transaction costs payable by the Borrower or such
Subsidiary in connection with such sale, lease, transfer or other disposition of
assets or interests, (c) reasonable contingencies with respect to such sale,
lease, transfer or other disposition appropriately reserved for by the Borrower
or such Subsidiary, and (d) until actually received by the Borrower or such
Subsidiary, any portion of the sales price held in escrow or paid in
installments or evidenced by a non-compete agreement or covenant for which
compensation is paid over time. Upon receipt by the Borrower or any of its
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<PAGE>
Subsidiaries of amounts referred to in clause (d) above, such amounts shall be
deemed to be "Net Proceeds." "Net Proceeds" of any sale, lease, transfer or
other disposition of assets of or interests in any Unrestricted Subsidiary which
is not a wholly-owned direct or indirect Subsidiary of the Borrower shall be
adjusted to reflect the aggregate percentage ownership of such Unrestricted
Subsidiary by the Borrower and the Restricted Subsidiaries.
"Notes" shall mean, collectively, the Revolving Loan Notes and the Term
Loan Notes, any other promissory notes issued pursuant to this Agreement, and
any extensions, renewals, amendments, replacements or substitutions to any of
the foregoing.
"Obligations" shall mean (a) all payment and performance obligations of
the Borrower to the Lenders, the Administrative Agent and the Arranging Agents,
or any of them, under this Agreement and the other Loan Documents, as the same
may be amended from time to time, or as a result of making the Loans, (b) all
payment and performance obligations of all obligors (other than the Borrower) to
the Lenders, the Arranging Agents and the Administrative Agent, or any of them,
under the Loan Documents, as the same may be amended from time to time, and (c)
the obligation to pay an amount equal to the amount of any and all damage which
the Lenders, the Arranging Agents, and the Administrative Agent, or any of them,
may suffer by reason of a breach by the Borrower or any other obligor of any
obligation, covenant or undertaking with respect to this Agreement or any other
Loan Document.
"Operating Cash Flow" shall mean, for the Borrower and the Restricted
Subsidiaries on a consolidated basis in respect of any period, without
duplication, the remainder of (a) the sum of (i) Net Income (excluding any gain
on the sale of any assets or properties of the Borrower or any of the Restricted
Subsidiaries and any non-cash income of the Borrower or any of the Restricted
Subsidiaries), plus (ii) to the extent deducted from Net Income, (A) Total
Interest Expense, (B) depreciation, (C) amortization, (D) deferred income taxes
and (E) other non-cash charges, minus (b) to the extent included in Net Income,
extraordinary income, all as determined in accordance with GAAP. Operating Cash
Flow shall be calculated for the Borrower and the Restricted Subsidiaries on a
consolidated basis after giving effect to any acquisitions and dispositions of
assets occurring during such period as if such transactions had occurred on the
first day of such period.
"Payment Date" shall mean the last day of any Interest Period.
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"Permitted Liens" shall mean, as applied to any Person:
(a) any Lien in favor of the Administrative Agent, the
Lenders and the Arranging Agents (or the Administrative Agent on
behalf of such Persons) given to secure the Obligations;
(b) (i) Liens on real estate for real estate taxes not yet
delinquent and (ii) Liens for taxes, assessments, judgments, governmental
charges or levies or claims the non-payment of which is being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves have been set aside on such Person's books, but only so long as no
foreclosure, distraint, sale or similar proceedings have been commenced with
respect thereto and remain unstayed for a period of thirty (30) days after their
commencement;
(c) Liens of carriers, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business for sums not yet due or
being diligently contested in good faith, if such reserve or appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business
in connection with worker's compensation and unemployment
insurance;
(e) Restrictions on the transfer of assets imposed by
any of the Licenses as presently in effect or by the Federal
Communications Act of 1934, as amended, and any regulations
thereunder;
(f) Liens created under Pole Agreements on cables and
other property affixed to transmission poles;
(g) Easements, rights-of-way, restrictions and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person, or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness or other extensions of
credit and which do not in the aggregate materially detract from the value of
such properties or materially impair their use in the operation of the business
of such Person;
(h) Purchase money security interests which are perfected by
operation of law only for a period not in excess of ten (10) days after the
inception thereof and limited to Liens on assets so purchased;
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<PAGE>
(i) Liens securing Indebtedness permitted under Section 7.1(g)
hereof to the extent incurred in connection with the acquisition of any property
or assets by the Borrower or any of the Restricted Subsidiaries, and Liens
securing Capitalized Lease Obligations permitted under Section 7.1(g) hereof;
provided, that
(1) such Lien shall attach only to the property or asset
acquired in such transaction and shall not extend to or cover any other
assets or properties of the Borrower or any of the Restricted
Subsidiaries; and
(2) the Indebtedness secured or covered by such Lien shall not
exceed the cost of the asset or property acquired and shall not be
renewed or extended by the Borrower or any of the Restricted
Subsidiaries;
(j) Liens arising under operating leases for leased
equipment; and
(k) Liens existing as of the Agreement Date as
described on Schedule 3 attached hereto.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a government or any
agency or political subdivision thereof or, for the purpose of the definition of
"ERISA Affiliate," any trade or business.
"Plan" shall mean an employee benefit plan within the meaning of
Section 3(3) of ERISA maintained for employees of any Person or any affiliate of
such Person.
"Pole Agreements" shall mean the agreements between the Borrower or any
of the Restricted Subsidiaries and the parties referred to in Schedule 4 to this
Agreement, as more particularly described therein, and any other agreement
subsequently entered into by the Borrower or any of the Restricted Subsidiaries
permitting the Borrower or any of the Restricted Subsidiaries to make use of the
transmission poles or conduits of such parties in distributing its cable
television signals.
"Pro Forma Debt Service" shall mean, with respect to the Borrower and
the Restricted Subsidiaries on a consolidated basis for the twelve (12) complete
calendar months immediately following the date of calculation, the sum of (a)
interest scheduled to accrue in respect of Total Debt, plus (b) payments of
principal scheduled to be paid on Total Debt, all in accordance with the
documents, instruments and agreements evidencing such Total Debt. For purposes
of calculating Pro
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Forma Debt Service (i) where any item of interest on any Total Debt varies or
depends upon a variable rate of interest (including, without limitation, the
Base Rate or the LIBOR Rate), such rate shall be assumed to equal the rate in
effect on the date of calculation thereof and (ii) the principal amount
outstanding under any revolving or line of credit facility shall be assumed to
be the outstanding principal balance thereunder on the last day of the fiscal
quarter immediately preceding the period in respect of which the calculation of
Pro Forma Debt Service is being determined or, if less, the aggregate commitment
under such revolving or line of credit facility as of the date of calculation,
in each case adjusted to give effect to any mandatory commitment reductions
which are scheduled to occur during such period in respect of which the
calculation of Pro Forma Debt Service is being determined.
"Public Senior Debt Indenture" shall mean that certain Lenfest
Communications, Inc. 8-3/8% Senior Notes Due 2005 Indenture dated as of November
1, 1995 with The Bank of New York serving as Trustee.
"Reportable Event" shall have the meaning set forth in
Title IV of ERISA.
"Request for Advance" shall mean any certificate signed by an
Authorized Signatory of the Borrower requesting an Advance hereunder which will
increase the aggregate amount of the Loans outstanding hereunder, which
certificate shall be denominated a "Request for Advance," and shall be in
substantially the form of Exhibit B attached hereto. Each Request for Advance
shall, among other things, (a) specify the date of the Advance, which shall be a
Business Day, the amount of the Advance, whether such Advance is to be made
under the Term Loan or the Revolving Loan Commitment, the type of Advance and,
with respect to LIBOR Advances, the Interest Period selected by the Borrower,
and (b) state that there shall not exist, on the date of the requested Advance
and after giving effect thereto, a Default.
"Request for Issuance of Letter of Credit" shall mean any certificate
signed by an Authorized Signatory of the Borrower, which certificate will be
denominated a "Request for Issuance of Letter of Credit" and shall be in form
and substance satisfactory to the Managing Agents. Each Request for Issuance of
Letter of Credit shall, among other things, (i) specify the beneficiary of the
proposed Letter of Credit, the date of issuance of the Letter of Credit, which
shall be a Business Day, and the documents which must be presented to draw under
such Letter of Credit (including, without limitation, any documents which T-D
Bank may require), and (ii) state that there shall not exist, on the date of the
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proposed issuance of the Letter of Credit and after giving effect
thereto, a Default.
"Required Lenders" shall mean, at any time, (a) if there are no Loans
outstanding, Lenders the total of whose Commitment Ratios equals or exceeds
sixty-six and two-thirds percent (66- 2/3%), or (b) if there are Loans
outstanding, Lenders the total of whose Loans outstanding equals or exceeds
sixty-six and two-thirds percent (66-2/3%) of the total principal amount of the
Loans outstanding hereunder.
"Restricted Payment" shall mean (a) any direct or indirect
distribution, dividend or other payment to any Person (i) on account of any
capital stock (whether common or preferred) of, general or limited partnership
interest in, or other equity securities of or other ownership interests in, the
Borrower or any of the Restricted Subsidiaries (or of any warrants, options or
other rights to acquire the same) or (ii) in connection with any tax sharing
agreement; (b) any management, consulting or other similar fees, or any interest
thereon, payable by the Borrower to any Affiliate, or to any other Person; and
(c) any payment of principal, interest, premium, fees or other amounts payable
in respect of Subordinated Debt other than scheduled payments of interest in
respect of Subordinated Debt.
"Restricted Purchase" shall mean any payment on account of the
purchase, redemption, defeasance or other acquisition or retirement of any
capital stock of, general or limited partnership interest in, or other equity
securities of, or other ownership interest in, the Borrower or any Restricted
Subsidiary (or of any warrants, options or other rights to acquire the same) or
any Subordinated Debt of the Borrower or any Restricted Subsidiary.
"Restricted Subsidiaries" shall mean Suburban Cable TV Co. Inc., a
Pennsylvania corporation, LenComm, Inc., a California corporation, Lenfest West,
Inc., a California corporation, South Jersey Cablevision Associates, a New
Jersey partnership, Lenfest Atlantic, Inc., a New Jersey corporation; Lenfest
South Jersey Investments, Inc., a New Jersey corporation; Lenfest Newcastle
County Partnership, a Delaware general partnership, Lenfest Newcastle County,
Inc., a Delaware corporation, and CAH, Inc., a Pennsylvania corporation; any
other wholly-owned Subsidiaries of the Borrower which are solely engaged in
businesses directly related to the cable television business in the United
States and which are acquired by the Borrower or another Restricted Subsidiary
in accordance with the terms of this Agreement; and such other Subsidiaries of
the Borrower as may be designated by the Borrower as "Restricted Subsidiaries"
with the prior written consent of the Required Lenders.
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<PAGE>
"Revolving Loan Commitment" shall mean the several obligations of the
Lenders to advance the sum of up to $250,000,000 at any one time outstanding to
the Borrower pursuant to the terms hereof in accordance with their respective
Commitment Ratios, as such obligations may be reduced or, in accordance with
Section 2.14 hereof, increased from time to time pursuant to the terms hereof,
and shall include the several obligations of the Lenders under the Letter of
Credit Commitment.
"Revolving Loan Notes" shall mean those certain revolving promissory
notes in the aggregate principal amount equal to the Revolving Loan Commitment
as in effect from time to time, one such note issued to each of the Lenders by
the Borrower, each one substantially in the form of Exhibit C attached hereto,
and any extensions, renewals, amendments, replacements or substitutions to any
of the foregoing.
"Senior Debt" shall mean, with respect to the Borrower and the
Restricted Subsidiaries on a consolidated basis as of any calculation date, the
sum, without duplication, of (a) Indebtedness for Money Borrowed other than
Subordinated Debt, plus (b) the principal portion of Capitalized Lease
Obligations, plus (c) the aggregate face amount of all Letters of Credit
outstanding hereunder, plus (d) the AML Movie Studio Guaranty Liability, all as
determined in accordance with GAAP.
"Senior Leverage Ratio" shall mean for any period, the ratio of Senior
Debt as of the end of such period to Annualized Operating Cash Flow for such
period.
"Senior Subordinated Debt" shall mean the unsecured, 10-1/2% Senior
Subordinated Notes to be issued by the Borrower pursuant to the Senior
Subordinated Debt Indenture.
"Senior Subordinated Debt Indenture" shall mean that certain Indenture
dated as of June 15, 1996 between the Borrower and The Bank of New York, as
trustee, with respect to the Borrower's 10-1/2 Senior Subordinated Notes due
2006.
"Shareholders' Agreements" shall mean (i) that certain letter agreement
dated as of December 18, 1991 among H. F. (Gerry) Lenfest, Liberty Media
Corporation, Marguerite B. Lenfest, Diane A. Lenfest, H. Chase Lenfest, Brook J.
Lenfest and the Lenfest Foundation, (ii) that certain Supplemental Agreement
dated as of December 15, 1981 among TCI Growth, Inc., a Nevada corporation, H.
F. and Marguerite B. Lenfest, and Lenfest Communications, Inc. and that certain
Joinder Agreement executed by LMC Lenfest, Inc., (iii) that certain Amendment to
Supplemental Agreement dated May 4, 1984 between Lenfest Communications, Inc.
and TCI Growth, Inc., (iv) that certain
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Agreement dated July 1, 1990 between H.F. Lenfest, Marguerite B. Lenfest, Diane
A. Lenfest, H. Chase Lenfest, Brook J. Lenfest and the Lenfest Foundation,
Telecommunications, Inc. and Liberty Media Corporation, (v) that certain
Agreement and Consent dated as of November 1, 1990 by and among TCI Development
Corporation, TCI Holdings, Inc., TCI Liberty, Inc., Liberty Cable, Inc., H. F.
Lenfest, Marguerite B. Lenfest, H. Chase Lenfest, Brook J. Lenfest, Diane A.
Lenfest and Lenfest Communications, Inc., (vi) those certain Irrevocable Proxies
dated March 30, 1990 by Harold Chase Lenfest, Diane A. Lenfest and Brook J.
Lenfest, respectively, in favor of H. F. Lenfest, and (vii) that certain
Assignment and Assumption Agreement dated as of November 4, 1993 among Liberty
Cable, Inc., a Wyoming corporation, Liberty Media Corporation, a Delaware
corporation, and LMC Lenfest, Inc., a Colorado corporation.
"Solvent" shall mean, with respect to any Person on a particular date,
that on such date (i) the fair value of the property (tangible or intangible) of
such Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (ii) the amount that will be
required to pay the probable liabilities of such Person on its debts as they
become absolute and matured will not be greater than the fair salable value of
the assets of such Person at such time if sold pursuant to an orderly sale,
(iii) such Person is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (iv) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, and (v) to the best of such Person's
knowledge (after due inquiry), and in its good faith reasonable judgment, such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to prevailing
practices in the industry in which such Person is engaged. In computing the
amount of any contingent liability at any time, it is intended that such
liability will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that might reasonably
be expected to become an actual or matured liability.
"Subordinated Debt" shall mean, for the Borrower and the Restricted
Subsidiaries on a consolidated basis as of any calculation date, all
Indebtedness for Money Borrowed which is expressly subordinated by its terms to
the Obligations pursuant to subordination terms satisfactory to the Required
Lenders, including, without limitation, the Senior Subordinated Debt and
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Indebtedness for Money Borrowed arising under the LCI Guaranty Backup
Facility.
"Subsidiary" shall mean, as applied to any Person, (a) any corporation
of which fifty percent (50%) or more of the outstanding stock (other than
directors' qualifying shares) having ordinary voting power to elect a majority
of its board of directors, regardless of the existence at the time of a right of
the holders of any class or classes of securities of such corporation to
exercise such voting power by reason of the happening of any contingency, or any
partnership of which fifty percent (50%) or more of the outstanding partnership
interests, is at the time owned by such Person, or by one or more Subsidiaries
of such Person, or by such Person and one or more Subsidiaries of such Person,
and (b) any other entity which is controlled or susceptible to being controlled
by such Person, or by one or more Subsidiaries of such Person, or by such Person
and one or more Subsidiaries of such Person, whether by contract or otherwise.
"Syndication Period" shall mean the period from the Agreement Date
until the sixtieth (60th) day thereafter.
"System" shall mean, collectively, the cable television systems owned
by the Borrower and the Restricted Subsidiaries on the Agreement Date or
hereafter acquired by the Borrower or any of the Restricted Subsidiaries in
accordance with the terms and conditions of this Agreement.
"Term Loan" shall mean the several obligations of the Lenders to
advance the sum of up to $150,000,000 to the Borrower pursuant to the terms
hereof in accordance with their respective Commitment Ratios, as such
obligations may be reduced from time to time pursuant to the terms hereof.
"Term Loan Notes" shall mean those certain term promissory notes in the
aggregate principal amount of $150,000,000, one such note issued to each of the
Lenders by the Borrower, each one substantially in the form of Exhibit D
attached hereto, and any extensions, renewals, amendments, replacements or
substitutions to any of the foregoing.
"T-D Bank" shall mean The Toronto-Dominion Bank, as issuer of Letters
of Credit hereunder.
"Total Debt" shall mean, with respect to the Borrower and the
Restricted Subsidiaries on a consolidated basis as of any calculation date,
without duplication, the sum of (a) Senior Debt, plus (b) Subordinated Debt,
plus (c) the principal amount
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outstanding under the Guaranties, including, without limitation, the LCI
Guaranty and the AML Movie Studio Guaranty Liability.
"Total Interest Expense" shall mean, for any period with respect to the
Borrower and the Restricted Subsidiaries on a consolidated basis, the aggregate
amount of all interest accrued in respect of Total Debt and the portion of
payments under Capitalized Lease Obligations which constitutes imputed interest,
all as determined in accordance with GAAP.
"Total Leverage Ratio" shall mean, for any period, the ratio of Total
Debt as of the end of such period to Annualized Operating Cash Flow for such
period.
"Unrestricted Subsidiaries" shall mean all Subsidiaries of
the Borrower which are not Restricted Subsidiaries.
"Use of Proceeds Letters" shall mean those certain Use of Proceeds
Letters, substantially in the form of Exhibit E attached hereto and in form and
substance satisfactory to the Lenders, to be delivered to the Lenders pursuant
to Sections 3.2 and 3.3 hereof.
Each definition of an agreement in this Article 1 shall include such
agreement as amended from time to time with the prior written consent of the
Required Lenders, except as provided in Section 11.12 hereof.
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ARTICLE 2
Loans
Section 2.1 The Loans.
(a) Revolving Loans. The Lenders hereby agree, severally in accordance
with their respective Commitment Ratios and not jointly, upon the terms and
subject to the conditions of this Agreement, to lend and relend to the Borrower
amounts which in the aggregate at any one time outstanding do not exceed the
amount of the Available Revolving Loan Commitment as in effect from time to time
hereunder. Notwithstanding the foregoing, however, so long as the Lenfest
Australia Loan, or any portion thereof, or any payment obligations of Lenfest
Australia (whether for interest, fees or otherwise) in respect thereof, remain
outstanding, the aggregate principal amount of Advances under the Revolving Loan
Commitment shall not exceed at any time outstanding (i) the Revolving Loan
Commitment, as then in effect, minus (ii) $20,000,000 minus (ii) the aggregate
face amount of all Letters of Credit outstanding hereunder. Subject to the
terms hereof, Advances under the Revolving Loan Commitment may be repaid and
then reborrowed as provided in Sections 2.2(b)(ii) and 2.2(c)(ii) hereof.
(b) Term Loan. The Lenders hereby further agree, severally in
accordance with their respective Commitment Ratios and not jointly, upon the
terms and subject to the conditions of this Agreement, to lend to the Borrower
on the Agreement Date an amount not to exceed, in the aggregate, the amount of
the Term Loan. Advances under the Term Loan may be repaid and reborrowed as
provided in Sections 2.2(b)(ii) and 2.2(c)(ii) hereof in order to effect changes
to the Interest Rate Bases applicable to Advances under the Term Loan, provided,
however, that there shall be no net increase in the aggregate principal amount
outstanding under the Term Loan at any time following the making of the initial
Advance or Advances under the Term Loan on the Agreement Date.
(c) Letters of Credit. T-D Bank agrees, upon the terms and subject to
the conditions of this Agreement, to issue from time to time for the account of
the Borrower or any of the Restricted Subsidiaries, in the ordinary course of
business of the Borrower and the Restricted Subsidiaries, Letters of Credit to
such beneficiaries as shall be designated in writing by the Borrower to T-D
Bank. The amount available for Advances under the Revolving Loan Commitment
shall be reduced by the aggregate face amount of all outstanding Letters of
Credit.
Section 2.2 Manner of Borrowing and Disbursement.
------------------------------------
(a) Choice of Interest Rate, Etc. Any Advance (except for
Advances under the Letter of Credit Commitment) shall, at the option of the
Borrower as provided in this Section 2.2, be made as a Base Rate Advance or a
LIBOR Advance; provided, however, that the Borrower may not receive a LIBOR
Advance pursuant to a reborrowing of an Advance under Section 2.2(b)(ii) or
2.2(c)(ii) hereof or otherwise after the occurrence and during the continuance
of an Event of Default hereunder. LIBOR Advances shall in all cases be subject
to Section 2.3(e) and Article 10 hereof. Any notice given to the Administrative
Agent in connection with a requested Advance hereunder shall be given to the
Administrative Agent prior to 10:00 a.m. (Houston, Texas time) in order for such
Business Day to count toward the minimum number of Business Days required.
(b) Base Rate Advances.
(i) Advances. The Borrower shall give the
Administrative Agent in the case of Base Rate Advances at
least one (1) Business Day's irrevocable prior written
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notice (which notice shall be in the form of a Request for Advance in
the case of any Advance which would increase the aggregate principal
amount of the Loans outstanding), or telecopied notice followed
immediately by written notice (which notice shall be in the form of an
original Request for Advance in the case of any Advance which would
increase the aggregate principal amount of the Loans outstanding);
provided, however, that the Borrower's failure to confirm any
telecopied notice with written notice (whether in the form of an
original Request for Advance or otherwise) shall not invalidate any
notice so given.
(ii) Repayments and Reborrowings. Subject to the
provisions of Section 2.3(e) hereof, the Borrower may repay or prepay a
Base Rate Advance without regard to its Payment Date and (i) upon at
least one (1) Business Day's irrevocable prior written notice to the
Administrative Agent, reborrow all or a portion of the principal amount
thereof as one or more Base Rate Advances, or (ii) upon at least three
(3) Business Days' irrevocable prior written notice to the
Administrative Agent, reborrow all or a portion of the principal
thereof as one or more LIBOR Advances, or (iii) upon prior notice to
the Administrative Agent, not reborrow all or any portion of such Base
Rate Advance. On the date indicated by the Borrower, such Base Rate
Advance shall be so repaid and, as applicable, reborrowed.
(c) LIBOR Advances.
(i) Advances. Upon request, the Administrative Agent,
whose determination shall be conclusive, shall determine the available
LIBOR Bases and shall notify the Borrower of such LIBOR Bases. The
Borrower shall give the Administrative Agent in the case of LIBOR
Advances at least three (3) Business Days' irrevocable prior written
notice (which notice shall be in the form of a Request for Advance in
the case of any Advance which would increase the aggregate principal
amount of the Loans outstanding), or telecopied notice followed
immediately by written notice (which notice shall be in the form of an
original Request for Advance in the case of any Advance which would
increase the aggregate principal amount of the Loans outstanding);
provided, however, that the Borrower's failure to confirm any
telecopied notice with written notice (whether in the form of an
original Request for Advance or otherwise) shall not invalidate any
notice so given.
(ii) Repayments and Reborrowings. The Borrower
shall give the Administrative Agent at least three (3)
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Business Days' prior written notice if all or a portion of any LIBOR
Advance outstanding on its Payment Date (i) is to be repaid and then
reborrowed in whole or in part as a LIBOR Advance, or (ii) is to be
repaid and not reborrowed. The Borrower shall give the Administrative
Agent at least one (1) Business Day's prior written notice if all or a
portion of any LIBOR Advance outstanding on its Payment Date is to be
repaid and then reborrowed as a Base Rate Advance. Upon such Payment
Date such LIBOR Advance will, subject to the provisions hereof, be so
repaid and, as applicable, reborrowed.
(d) Notification of Lenders. Upon receipt of a Request for
Advance, or a notice from the Borrower with respect to any outstanding Advance
prior to the Payment Date for such Advance, the Administrative Agent shall
promptly notify each Lender by telephone or telecopy of the contents thereof and
the amount of such Lender's portion of the Advance. Each Lender shall, not later
than 12:00 noon (Houston, Texas time) on the date specified in such notice, make
available to the Administrative Agent at the Administrative Agent's Office, or
at such account as the Administrative Agent shall designate, the amount of its
portion of any such Advance which would increase the aggregate principal amount
of the Loans outstanding in immediately available funds.
(e) Disbursement. Prior to 1:00 p.m. (Houston, Texas time) on
the date of an Advance hereunder, the Administrative Agent shall, subject to the
satisfaction of the conditions set forth in Article 3, disburse the amounts made
available to the Administrative Agent by the Lenders (or as otherwise provided
below) in like funds by transferring the amounts so made available (or as
otherwise provided below) by wire transfer pursuant to the Borrower's
instructions. Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such borrowing and
the Administrative Agent may, in its sole discretion and in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent such Lender shall not have so made such ratable portion
available to the Administrative Agent, such Lender agrees to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at the Federal Funds Rate for three (3) Business Days and thereafter at the Base
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Rate. If such Lender shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Lender's Loan as part of
such borrowing for purposes of this Agreement. If such Lender does not repay
such corresponding amount immediately upon the Administrative Agent's demand
therefor, the Administrative Agent shall notify the Borrower and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. In
the event that any Lender fails to notify the Administrative Agent prior to the
date of any borrowing that such Lender will not make available to the
Administrative Agent such Lender's pro rata portion of any borrowing, such
Lender (and not the Borrower) shall be responsible to reimburse the
Administrative Agent for any losses or out-of-pocket expenses of the type
described in Section 2.10 hereof incurred by the Administrative Agent in
conjunction with the Borrower's repayment of amounts disbursed hereunder
pursuant to the immediately preceding sentence. The failure of any Lender to
make the Loan to be made by it as part of any borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Loan on the date
of such borrowing, but no Lender shall be responsible for any such failure of
any other Lender. In the event that, at any time when the Borrower is not in
Default and the conditions to borrowing have been satisfied and the Required
Lenders have funded their respective portions of a requested Advance, a Lender
for any reason fails or refuses to fund its portion of such Advance, then, until
such time as such Lender has funded its portion of such Advance, or all other
Lenders have received payment from the Borrower (whether by repayment or
prepayment or otherwise) of principal and interest in an aggregate amount equal
to or greater than the amount of principal and interest due in respect of such
Advance, such non-funding Lender shall not have the right (A) to vote regarding
any issue on which voting is required or advisable under this Agreement or any
other Loan Document (and the amount of the Loans of such Lender shall not be
counted as outstanding for purposes of determining "Required Lenders" hereunder)
or (B) to receive payments of principal, interest or fees from the Borrower, the
Administrative Agent or the other Lenders in respect of its Loans.
Section 2.3 Interest.
(a) On Base Rate Advances. During periods in which the Base
Rate is calculated under clause (a) of the definition of "Base Rate," interest
on each Base Rate Advance shall be computed on the basis of a year of 365/366
days for the actual number of days elapsed. During periods in which the Base
Rate is calculated under clause (b) of the definition of "Base Rate," interest
on each Base Rate Advance shall be computed on the basis of a year of 360 days
for the actual number of days elapsed. In
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any event, interest on each Base Rate Advance shall be payable at the Base Rate
Basis for such Advance on the applicable Payment Date. Interest on Base Rate
Advances then outstanding shall also be due and payable on the Maturity Date.
(b) On LIBOR Advances. Interest on each LIBOR Advance shall be
computed on the basis of a 360-day year for the actual number of days elapsed
and shall be payable at the LIBOR Basis for such Advance in arrears on the
applicable Payment Date, and, in addition, if the Interest Period for a LIBOR
Advance exceeds three (3) months, interest on such LIBOR Advance shall also be
due and payable in arrears on each three-month anniversary of the date of such
LIBOR Advance during such Interest Period. Interest on LIBOR Advances then
outstanding shall also be due and payable on the Maturity Date.
(c) Interest if no Notice of Selection of Interest Rate Basis.
If the Borrower fails to give the Administrative Agent timely notice of its
selection of a LIBOR Basis, or if for any reason a determination of a LIBOR
Basis for any Advance is not timely concluded, the Base Rate Basis shall apply
to such Advance.
(d) Interest Upon Default. Immediately upon the occurrence and
during the continuance of an Event of Default, interest on the outstanding
principal balance of the Loans shall accrue at the Default Rate from the date of
such Event of Default. Such interest shall be payable on the earlier of demand
or the Maturity Date and shall accrue until the earlier of (i) waiver or cure
(to the satisfaction of the Required Lenders or of all Lenders, as applicable)
of the applicable Event of Default, (ii) agreement by the Required Lenders to
rescind the charging of interest at the Default Rate, or (iii) payment in full
of the Obligations. The Lenders shall not be required to (1) accelerate the
maturity of the Loans, (2) exercise any other rights or remedies under the Loan
Documents, or (3) give notice to the Borrower of the decision to charge interest
on the Loans at the Default Rate in accordance herewith, prior to or in
conjunction with the effective date of the decision to charge interest at the
Default Rate.
(e) LIBOR Contracts. At no time may the number of outstanding
LIBOR Advances exceed five (5).
(f) Applicable Margin. With respect to any Advance, the
Applicable Margin shall be as set forth in the table set forth below based upon
the Total Leverage Ratio as of the end of the most recently completed fiscal
quarter of the Borrower. Changes to the Applicable Margin shall be effective (i)
with respect to an increase in the Applicable Margin, as of the
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second (2nd) Business Day after the day on which the financial statements are
required to be delivered to the Administrative Agent and the Lenders pursuant to
Section 6.1 or Section 6.2 hereof, as the case may be, provided, that, if such
financial statements are not delivered to the Administrative Agent and the
Lenders on or before the date specified in such Section, such increase shall be
effective as of the date specified in such Section for delivery of the financial
statements; and (ii) with respect to a decrease in the Applicable Margin, as of
the later of (A) the second (2nd) Business Day after the day on which such
financial statements are required to be delivered pursuant to Section 6.1 or
Section 6.2 hereof, as the case may be, and (B) the date on which such financial
statements are actually delivered to the Administrative Agent and the Lenders.
<TABLE>
<CAPTION>
the Applicable the Applicable
Margin for Margin for
If the Total Base Rate Advances LIBOR Advances
Leverage Ratio is: then shall be and shall be
- ------------------- ------------------ ----------------
<S> <C> <C>
Greater than or equal 1.375% 2.375%
to 7.25:1, but less
than 7.50:1
Greater than or equal 1.125% 2.125%
to 6.75:1, but less
than 7.25:1
Greater than or equal 0.625% 1.625%
to 6.50:1, but less
than 6.75:1
Greater than or equal 0.500% 1.500%
to 6.00:1, but less
than 6.50:1
Greater than or equal 0.375% 1.375%
to 5.50:1, but less
than 6.00:1
Greater than or equal 0.125% 1.125%
to 5.00:1, but less
than 5.50:1
Greater than or equal 0.000% 0.875%
to 4.50:1, but less
than 5.00:1
Less than 4.50:1 0.000% 0.750%
</TABLE>
(g) All interest on the Loans shall accrue as of the
first day of each Advance hereunder through but excluding the
Payment Date for such Advance.
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Section 2.4 Fees.
(a) Commitment Fees. The Borrower agrees to pay to the
Lenders, in accordance with their respective Commitment Ratios, a commitment fee
on the aggregate unborrowed balance of the Available Revolving Loan Commitment
for each day from the Agreement Date until the payment and performance, in full,
of all Obligations, and the termination of the Revolving Loan Commitment, for
each day on which the Total Leverage Ratio is (1) greater than or equal to
5.00:1, at a rate of three-eighths of one percent (3/8%) per annum, or (2) less
than 5.00:1, at a rate of one-quarter of one percent (1/4%) per annum. Such
commitment fee shall be computed on the basis of a year of 360 days for the
actual number of days elapsed, shall be payable quarterly in arrears on the last
day of each calendar quarter, commencing on the first such date following the
Agreement Date and on the Maturity Date, and shall be fully earned when due and
non-refundable when paid.
(b) Letter of Credit Fees. The Borrower agrees to pay to the
Lenders, in accordance with their respective Commitment Ratios, a letter of
credit fee on the face amount of each Letter of Credit at a per annum rate equal
to the Applicable Margin for LIBOR Advances as in effect from time to time
during the term of such Letter of Credit (computed on the basis of a year of
365/366 days for the actual number of days elapsed). Such letter of credit fee
shall be due and payable quarterly in arrears on the last day of each calendar
quarter during which a Letter of Credit is outstanding, and, if then unpaid, on
the Maturity Date. Such letter of credit fee shall be fully earned when due and
non-refundable when paid. In the event of any inconsistency between the terms of
this Agreement and the terms of any letter of credit reimbursement agreements or
indemnification agreements between the Borrower and T-D Bank with respect to the
Letters of Credit, the terms of this Agreement shall control.
Section 2.5 Commitment Reduction.
(a) Optional. The Borrower may without penalty at any time
terminate or permanently reduce the Revolving Loan Commitment by giving the
Administrative Agent and the Lenders at least three (3) Business Days' notice
thereof; provided, however, that any reduction shall reduce the Revolving Loan
Commitment in a principal amount of at least $5,000,000 and an integral multiple
of $1,000,000. The Borrower shall make a repayment of the Loans outstanding
under the Commitment, plus accrued interest on such outstanding Loans, together
with any costs incurred on account of such repayment under Section 2.10, on or
before the effective date of the reduction of the Revolving Loan Commitment,
such that
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the principal amount of the Loans outstanding under the Revolving Loan
Commitment after such repayment does not exceed the Revolving Loan Commitment as
so reduced and as reduced pursuant to the issuance of Letters of Credit. The
Borrower shall not have any right to rescind any termination or reduction
pursuant to this Section 2.5(a).
(b) Mandatory Reductions in Revolving Loan Commitment.
(i) Scheduled Reductions. Commencing on March
31, 1999, the Revolving Loan Commitment (as then in effect)
shall be automatically and permanently reduced on the dates
and by the percentages set forth below:
Commitment
Reduction Percentage
Date Reduction
--------- ----------
March 31, 1999 4.375%
June 30, 1999 4.375%
September 30, 1999 and 4.375%
December 31, 1999 4.375%
March 31, 2000, 4.375%
June 30, 2000, 4.375%
September 30, 2000 and 4.375%
December 31, 2000 4.375%
March 31, 2001, 5.625%
June 30, 2001, 5.625%
September 30, 2001 and 5.625%
December 31, 2001 5.625%
March 31, 2002, 5.625%
June 30, 2002, 5.625%
September 30, 2002 and 5.625%
December 31, 2002 5.625%
March 31, 2003 6.666%
June 30, 2003 and 6.666%
September 30, 2003 6.668%
(ii) Reductions from Net Proceeds of Asset Sales. The
Revolving Loan Commitment shall also be automatically and permanently
reduced as and to the extent set forth in Section 2.7(b) hereof.
Reductions in the Revolving Loan Commitment under this subsection shall
be applied to the Revolving Loan Commitment on a weighted pro rata
basis to each mandatory reduction in the Revolving Loan Commitment
scheduled to occur thereafter.
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(iii) Letters of Credit. The Revolving Loan Commitment
shall be deemed to be reduced at all times by the aggregate outstanding
face amount of all Letters of Credit issued hereunder.
(iv) Payments Upon Commitment Reductions. The Borrower
shall make a repayment of the Loans outstanding under the Revolving
Loan Commitment, plus accrued interest on such outstanding Loans,
together with any costs incurred on account of such repayment under
Section 2.10, on or before the effective date of each reduction of the
Revolving Loan Commitment, such that the principal amount of the Loans
outstanding under the Revolving Loan Commitment after such repayment
does not exceed the Revolving Loan Commitment as so reduced and as
reduced pursuant to the issuance of Letters of Credit.
(v) Payments Upon Issuance of Subordinated Debt. In
the event that the Borrower issues more than $300,000,000 in Senior
Subordinated Debt pursuant to the Senior Subordinated Debt Indenture,
the Revolving Loan Commitment shall be automatically and permanently
reduced by the amount of such excess.
Section 2.6 Prepayment. The principal amount of any Base Rate Advance
may be prepaid in full or in part at any time, without penalty and without
regard to the Payment Date for such Advance upon prior notice to the
Administrative Agent. LIBOR Advances may be prepaid prior to the applicable
Payment Date, upon three (3) Business Days' prior written notice to the
Administrative Agent, provided that the Borrower shall reimburse the Lenders on
the earlier of demand or the Maturity Date, for any loss or out-of-pocket
expense incurred by the Lenders in connection with such prepayment, as set forth
in Section 2.10. Any notice of prepayment shall be irrevocable and all amounts
prepaid on the Loans shall be applied first to interest and fees and other
amounts due hereunder, and then to principal. Partial prepayments shall be in a
principal amount of at least $2,000,000 and integral multiples of $1,000,000.
Upon receipt of any notice of prepayment, the Administrative Agent shall
promptly notify each Lender of the contents thereof by telephone or telecopy and
of such Lender's portion of the prepayment.
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Section 2.7 Repayment.
(a) Scheduled Repayments of Term Loan. Commencing March 31, 1999, the
principal balance of the Loans outstanding under the Term Loan on such date
shall be amortized in consecutive quarterly installments on March 31, June 30,
September 30 and December 31 of each year until paid in full, in such
percentages as follows:
Percent of Principal
Due on Last Day
Payment Dates of Each Quarter
------------- --------------------
March 31, 1999, 4.375%
June 30, 1999,
September 30, 1999 and
December 31, 1999
March 31, 2000, 4.375%
June 30, 2000,
September 30, 2000 and
December 31, 2000
March 31, 2001, 5.625%
June 30, 2001,
September 30, 2001 and
December 31, 2001
March 31, 2002, 5.625%
June 30, 2002,
September 30, 2002 and
December 31, 2002
March 31, 2003 and 6.666%
June 30, 2003
September 30, 2003 6.668%
A final payment of all Obligations then outstanding shall be due and payable on
the Maturity Date.
(b) Repayments from Net Proceeds of Asset Sales. The Borrower shall
make a repayment of principal outstanding under the Term Loan in (or, if such
Loans have been paid in full, the Revolving Loan Commitment shall be
automatically and permanently reduced by) an amount equal to the Net Proceeds of
any sale, lease, transfer or other disposition of assets of the Borrower or any
of the Restricted Subsidiaries (other than sales or other dispositions of
obsolete equipment or other immaterial assets in
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the ordinary course of business having an aggregate sales price not to exceed
$500,000 in any fiscal year), which Net Proceeds are not reinvested in other
income-producing cable television related assets of the Borrower or any of the
Restricted Subsidiaries within a year of such sale, lease, transfer or other
disposition. Repayments under the Term Loan and reductions in the Revolving Loan
Commitment prescribed by this subsection (b) shall be effective on the first
anniversary of the applicable sale, lease, transfer or other disposition of
assets and shall be applied to each remaining payment of the Term Loan scheduled
to occur thereafter, on a weighted pro rata basis, and then to each mandatory
reduction in the Revolving Loan Commitment on a weighted pro rata basis.
(c) All Base Rate Advances which are made pursuant to draws under the
Letters of Credit shall be due and payable on the earlier of demand or the
Maturity Date.
Section 2.8 Notes; Loan Accounts.
(a) The Loans shall be repayable in accordance with the terms
and provisions set forth herein, and shall be evidenced by the Notes. One
Revolving Loan Note and one Term Loan Note shall be payable to the order of each
Lender in accordance with the respective Commitment Ratio of such Lender. One
Revolving Loan Note and one Term Loan Note shall be issued by the Borrower to
each Lender and each Note shall be duly executed and delivered by the Authorized
Signatories.
(b) Each Lender may open and maintain on its books in the name
of the Borrower a loan account with respect to the Loans and interest thereon.
The records of a Lender with respect to the loan account maintained by it shall
be prima facie evidence of the Loans and accrued interest thereon.
Section 2.9 Manner of Payment.
(a) Each payment (including any prepayment) by the Borrower on
account of the principal of or interest on the Loans, commitment fees, and any
other amount owed to the Lenders or the Administrative Agent under this
Agreement or the other Loan Documents shall be made not later than 10:00 a.m.
(Houston, Texas time) on the date specified for payment under this Agreement to
the Administrative Agent at the Administrative Agent's Office, for the account
of the Lenders and the Administrative Agent, or any of them, as the case may be,
in lawful money of the United States of America in immediately available funds.
Any payment received by the Administrative Agent after 10:00 a.m. (Houston,
Texas time) shall be deemed received on the next Business Day. Receipt by the
Administrative Agent of any payment intended for
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any Lender or the Administrative Agent hereunder prior to 10:00 a.m. (Houston,
Texas time) on any Business Day shall be deemed to constitute receipt by such
Lender or the Administrative Agent (as appropriate) on such Business Day. In the
case of a payment for the account of a Lender, the Administrative Agent will
promptly thereafter distribute the amount so received in like funds to such
Lender. If the Administrative Agent shall not have received any payment from the
Borrower as and when due, the Administrative Agent will promptly notify the
Lenders accordingly. If any payment under this Agreement or any of the Notes
shall be specified to be made on a day which is not a Business Day, such payment
shall be made on the next succeeding day which is a Business Day, and such
extension of time shall in such case be included in computing interest and fees,
if any, due and payable on such next succeeding Business Day.
(b) The Borrower agrees to pay principal, interest, fees and
all other amounts due hereunder or under the Notes or the other Loan Documents
without set-off or counterclaim or any deduction whatsoever.
(c) Prior to the acceleration of the Loans under Section 8.2
hereof, if some but less than all amounts due from the Borrower are received by
the Administrative Agent, the Administrative Agent shall distribute such amounts
in the following order of priority, all in accordance where applicable with the
Commitment Ratios: (i) to the costs and expenses, if any, incurred by the
Administrative Agent in the collection of such amounts under this Agreement;
(ii) to the payment of all fees then due and payable hereunder; (iii) to the
payment of interest then due and payable on the Loans; (iv) to the payment of
all other amounts not otherwise referred to in this Section 2.9(c) then due and
payable hereunder or under the Notes or the other Loan Documents; and (v) to the
payment of principal then due on the Loans outstanding under the Term Loan and
then under the Revolving Loan Commitment, which payment shall be applied against
outstanding Advances in the following order of priority: (A) Advances, the
Interest Period for which is expiring concurrently with such payment, (B) other
Base Rate Advances, and (C) other LIBOR Advances. Subsequent to the acceleration
of the Loans under Section 8.2 hereof, all amounts received from any source
whatsoever by the Administrative Agent or any of the Lenders with respect to the
Borrower shall be paid to and distributed by the Administrative Agent in the
manner provided in Section 2.11(c) hereof.
(d) Prior to the date on which any Person becomes a Lender
hereunder, and from time to time thereafter if required by law due to a change
in circumstances or if reasonably requested by the Borrower or the
Administrative Agent (unless such Lender
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is unable to do so by reasons of change in law or otherwise), each Lender
organized under the laws of a jurisdiction outside the United States shall
provide the Administrative Agent and the Borrower with an IRS Form 4224 or Form
1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Services certifying as to such Lender's entitlement to full
exemption from United States withholding tax with respect to all payments to be
made to such Lender hereunder and under any Note. The Borrower shall provide
evidence that such taxes of any nature whatsoever in respect of this Agreement,
any Loan or any Note shall have been paid to the appropriate taxing authorities
by delivery to the Lender on whose account such payment was made of the official
tax receipts or notarized copies of such receipts within thirty (30) days after
payment of such tax. If the Borrower fails to make any such payment when due,
the Borrower shall indemnify the Lenders for any incremental taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
Section 2.10 Reimbursement.
(a) Whenever any Lender shall sustain or incur any losses or
out-of-pocket expenses in connection with (i) failure by the Borrower to borrow
any LIBOR Advance after having given notice of its intention to borrow in
accordance with Section 2.2 hereof (whether by reason of the Borrower's election
not to proceed or the non-fulfillment of any of the conditions set forth in
Article 3 hereof), or (ii) prepayment or repayment of any LIBOR Advance in whole
or in part (including a prepayment pursuant to Sections 10.2 and 10.3(b) hereof)
prior to its Payment Date, the Borrower agrees to pay to such Lender, upon the
earlier of such Lender's demand or the Maturity Date, an amount sufficient to
compensate such Lender for all such losses and out-of-pocket expenses. Such
Lender's good faith determination of the amount of such losses or out-of-pocket
expenses, absent manifest error, shall be binding and conclusive. Upon the
request of the Borrower, any Lender seeking compensation hereunder shall provide
the Borrower with its calculation of such losses and out-of-pocket expenses.
(b) Loss subject to reimbursement hereunder shall be any loss
incurred by any Lender in connection with the re-employment of funds prepaid,
repaid, not borrowed, or paid, as the case may be, and the amount of such loss
shall be the excess, if any, of (i) interest or other costs to such Lender of
the deposit or other sources of funding used to make any such LIBOR Advance for
the remainder of its Interest Period over (ii) the interest which would be
earned by such Lender if the amount of such LIBOR Advance were redeployed in the
London interbank
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borrowing market for the remainder of its putative Interest Period.
Section 2.11 Pro Rata Treatment.
(a) Advances. Each Advance from the Lenders under this
Agreement shall be made pro rata on the basis of their respective Commitment
Ratios.
(b) Payments Prior to Declaration of Event of Default. Prior
to the acceleration of the Loans under Section 8.2 hereof, each payment and
prepayment of the Loans, and, except as provided in Section 2.2(e) and Article
10 hereof, each payment of interest on the Loans, shall be made to the Lenders
pro rata on the basis of their respective unpaid principal amounts outstanding
immediately prior to such payment or prepayment. If any Lender shall obtain any
payment (whether involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Loans made by it in excess of its ratable share of
the Loans under its Commitment Ratio, such Lender shall forthwith purchase from
the other Lenders such participations in the Loans made by them as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery. The Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
(c) Payments Subsequent to Declaration of Event of Default.
Subsequent to the acceleration of the Loans under Section 8.2 hereof, payments
and prepayments made to the Administrative Agent or the Lenders or otherwise
received by any of them (from realization on collateral for the Obligations or
otherwise) shall be distributed as follows: first, to the Administrative Agent's
costs and expenses, if any, incurred in connection with the collection of such
payment or prepayment, including, without limitation, any costs incurred in
connection with the sale or disposition of any collateral for the Obligations;
second, to the payment of fees then due and payable to the Lenders and any costs
and expenses, if any, incurred by any of the Lenders under Section 11.2(c)
hereof; third, to any unpaid interest which may have accrued on the Obligations;
fourth, to any unpaid principal of the Obligations; fifth, to damages incurred
by the Administrative Agent or any Lender by
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reason of any breach hereof or of any other Loan Document; and sixth, upon
satisfaction in full of all Obligations, to the Borrower or as otherwise
required by law.
Section 2.12 Capital Adequacy. If any Lender shall determine that the
adoption of any Applicable Law regarding the capital adequacy of banks or bank
holding companies, or any change in any Applicable Law 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 Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's capital as a consequence
of its commitment or its obligations to fund or maintain Advances hereunder to a
level below that which it could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that such Lender's capital was fully utilized prior to such adoption,
change or compliance) by an amount deemed by such Lender in good faith to be
material and such Lender has attempted in good faith, but without success, to
mitigate or eliminate such reduction in its rate of return by assigning its
Loans and its portion of the Commitments to an affiliate of such Lender if such
assignment would be reasonable under the circumstances as determined by such
Lender in good faith and would not be otherwise disadvantageous to such Lender,
then, upon the earlier of demand by such Lender or the Maturity Date, the
Borrower shall immediately pay to such Lender, such additional amounts as shall
be sufficient to compensate such Lender for such reduced return, together with
interest on such amount from the fourth (4th) day after the date of demand or
the Maturity Date, as applicable, until payment in full thereof at the Default
Rate. A certificate of such Lender setting forth the amount to be paid to such
Lender by the Borrower as a result of any event referred to in this paragraph
shall, absent manifest error, be conclusive, and, at the Borrower's request,
such Lender shall set forth the basis for such determination.
Section 2.13 Letters of Credit.
(a) Upon receipt by T-D Bank of at least three (3) Business
Days' written notice from the Borrower requesting the issuance of a Letter of
Credit in the form of a Request for Issuance of Letter of Credit, a Letter of
Credit shall be issued in the amount requested, provided that no Letter of
Credit shall be issued if, (i) a Default then exists or would be caused thereby,
(ii) after giving effect to the requested issuance, the
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aggregate face amount of all Letters of Credit outstanding hereunder would
exceed $50,000,000 or (iii) the issuance of the Letter of Credit would cause the
Available Revolving Loan Commitment as then in effect to be exceeded. No Letter
of Credit shall have a maturity extending beyond the earliest of (x) a term of
one (1) year from the date of issuance, or (y) the Maturity Date. Subject to the
maturity limitations provided herein and so long as no Default then exists or
would be caused thereby, Letters of Credit shall be renewable upon the request
of the Borrower and with the consent of T-D Bank, which consent shall not be
unreasonably withheld but shall be subject to compliance with the customary
letter of credit practices of T-D Bank in effect at the times of any proposed
renewal. Each notice from the Borrower requesting the issuance of a Letter of
Credit shall specify in reasonable detail the documents which must be presented
to draw under such Letter of Credit, which specification shall include all
documents which T-D Bank may require. T-D Bank shall promptly provide to any
Lender requesting same, copies of any Letters of Credit issued by T-D Bank
hereunder.
(b) If a Letter of Credit provides that it is automatically
renewable unless notice is given by T-D Bank that it will not be renewed, T-D
Bank shall not be bound to give a notice of non-renewal unless directed to by
the Required Lenders at least thirty (30) days prior to the then scheduled
expiration date of such Letter of Credit.
(c) Provided that no Default then exists or would be caused
thereby, each Lender irrevocably authorizes T-D Bank to issue, reconfirm,
reissue and extend each Letter of Credit in accordance with the terms of this
Agreement. T-D Bank hereby sells, and each other Lender hereby purchases, on a
continuing basis, a participation and an undivided interest in (A) the
obligations of T-D Bank to honor any draws under the Letters of Credit issued
pursuant to this Agreement and (B) the Indebtedness of the Borrower to T-D Bank
under this Agreement and any reimbursement or indemnification agreement relating
to each Letter of Credit, such participation being in the amount of such
Lender's pro rata share of such obligations and Indebtedness based on such
Lender's Commitment Ratio.
(d) Upon receipt of a draw certificate from the beneficiary of
a Letter of Credit, T-D Bank shall promptly notify the Borrower and each Lender,
by telephone or telecopy, of the amount of the requested draw and, in the case
of each Lender, such Lender's portion of such draw amount as calculated in
accordance with its Commitment Ratio.
(e) The Borrower hereby irrevocably requests and the
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Lenders hereby severally agree to make a Base Rate Advance to the Borrower on
each day on which a draw is made under any Letter of Credit and in the amount of
such draw, and each Lender (other than T-D Bank) shall fund such Lender's share
of such Base Rate Advance by payment to the Administrative Agent in accordance
with Section 2.2(d) hereof and its Commitment Ratio, without reduction for any
set-off or counterclaim of any nature whatsoever. The obligation of each Lender
to make payments to the Administrative Agent, for the account of T-D Bank, in
accordance with this Section 2.13 shall be absolute and unconditional and no
Lender shall be relieved of its obligations to make such payments by reason of
non-compliance by any other Person with the terms of the Letter of Credit or for
any other reason other than the gross negligence or willful misconduct of T-D
Bank, as determined by a final order of a court of competent jurisdiction. The
Administrative Agent shall promptly remit to T-D Bank the amounts so received
from the Lenders. The Administrative Agent shall give notice to the Borrower if
no Base Rate Advance will be made by the Lenders on the date of any draw under
any Letter of Credit within one (1) Business Day of such draw.
(f) The Borrower agrees to reimburse the Lenders for any
Advances made pursuant to draws under any Letter of Credit, and each payment by
the Borrower in respect of its obligation to reimburse the Lenders under this
Section 2.13 shall be made on the date of such Advance in lawful money of the
United States of America in immediately available funds. Any overdue amounts
payable under this Section 2.13 shall bear interest, payable on the earlier of
demand or the Maturity Date, for each day from and including the date payment
thereof was due to, but excluding, the date of actual payment, at the Default
Rate.
(g) The Borrower agrees that any action taken or omitted to be
taken by T-D Bank in connection with any Letter of Credit, except for such
actions or omissions as shall constitute gross negligence or willful misconduct
on the part of T-D Bank, as determined by a final order of a court of competent
jurisdiction, shall be binding on the Borrower as between the Borrower and T-D
Bank, and shall not result in any liability of T-D Bank to the Borrower. The
obligation of the Borrower to reimburse the Lenders for Advances under the
Letter of Credit Commitment shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances whatsoever, including, without limitation, the following
circumstances:
(i) Any lack of validity or enforceability of any
Loan Document;
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(ii) Any amendment or waiver of or consent to any
departure from any or all of the Loan Documents (other than the
reimbursement agreement relating to the Letter of Credit in question);
(iii) Any improper use which may be made of any
Letter of Credit or any improper acts or omissions of any beneficiary
or transferee of any Letter of Credit in connection therewith;
(iv) The existence of any claim, set-off, defense or
any right which the Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or Persons for
whom any such beneficiary or any such transferee may be acting) or any
Lender (other than the defense of payment to such Lender in accordance
with the terms of this Agreement) or any other Person, whether in
connection with any Letter of Credit, any transaction contemplated by
any Letter of Credit, this Agreement, any other Loan Document, or any
unrelated transaction;
(v) Any statement or any other documents presented
under any Letter of Credit proving to be insufficient, forged,
fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever, provided that such
payment shall not have constituted gross negligence or willful
misconduct of T-D Bank or any Lender as determined by a final order of
a court of competent jurisdiction;
(vi) The insolvency of any Person issuing any
documents in connection with any Letter of Credit;
(vii) Any breach of any agreement among the
Borrower or any of its Subsidiaries and any beneficiary or
transferee of any Letter of Credit;
(viii) Any irregularity in the transaction with
respect to which any Letter of Credit is issued, including any fraud by
the beneficiary or any transferee of such Letter of Credit;
(ix) Any errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail, cable, telegraph,
wireless or otherwise, whether or not they are in code;
(x) Any act, error, neglect or default, omission,
insolvency or failure of business of any of the
correspondents of T-D Bank;
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(xi) Any other circumstances arising from causes
beyond the control of T-D Bank;
(xii) Payment by T-D Bank under any Letter of Credit
against presentation of a sight draft or a certificate which does not
comply with the terms of such Letter of Credit, provided that such
payment shall not have constituted gross negligence or willful
misconduct of T-D Bank or any Lender, as determined by a final order of
a court of competent jurisdiction; and
(xiii) Any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, provided
that such other circumstances or happenings shall not have been the
result of gross negligence or willful misconduct of T-D Bank or any
Lender, as determined by a final order of a court of competent
jurisdiction.
(h) If any change in Applicable Law, any change in the
interpretation or administration thereof, or any change in compliance with
Applicable Law by T-D Bank or any other Lender as a result of any request or
directive of any governmental authority, central bank or comparable agency
(whether or not having the force of law) shall (i) impose, modify or deem
applicable any reserve (including, without limitation, any imposed by the Board
of Governors of the Federal Reserve System), special deposit, capital adequacy,
assessment or other requirements or conditions against letters of credit issued
by T-D Bank or against participations of any other Lender in letters of credit
or (ii) impose on T-D Bank or any other Lender any other condition regarding
this Agreement or any Letter of Credit or any participation therein, and the
result of any of the foregoing in the determination of T-D Bank or such Lender,
as the case may be, is to increase the cost to T-D Bank or such Lender of
issuing or maintaining any Letter of Credit or purchasing or maintaining any
participation therein, as the case may be, then, on the earlier of the Maturity
Date or a date not more than four (4) days after demand by T-D Bank or such
Lender, the Borrower agrees to pay T-D Bank or such Lender, as the case may be,
from time to time as specified by T-D Bank or such Lender, such additional
amount or amounts as T-D Bank or such Lender, as the case may be, determines
will compensate it for such increased costs, from the date such change or action
is effective, together with interest on each such amount from the Maturity Date
or the fourth (4th) day after the date demanded, as applicable, until payment in
full thereof at the Default Rate. A certificate as to such increased cost
incurred by T-D Bank or such Lender as a result of any event referred to in this
paragraph submitted by
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T-D Bank or such Lender to the Borrower shall be conclusive, absent manifest
error, as to the amount thereof.
(i) The Borrower and each of the Restricted Subsidiaries will,
jointly and severally, indemnify and hold harmless the Administrative Agent, T-D
Bank and each other Lender and each of their respective employees,
representatives, counsel, officers and directors from and against any and all
claims, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including reasonable attorneys' fees) which may be imposed on,
incurred by or asserted against the Administrative Agent, T-D Bank or any such
other Lender in any way relating to or arising out of the issuance of a Letter
of Credit, except that the Borrower shall not be liable to the Administrative
Agent, T-D Bank or any such Lender for any portion of such claims, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent, T-D Bank or such Lender, as the case may
be, as determined by a final order of a court of competent jurisdiction. This
Section 2.13(i) shall survive termination of this Agreement.
(j) Each Lender shall be responsible for its pro rata share
(based on such Lender's Commitment Ratio) of any and all reasonable
out-of-pocket costs, expenses (including reasonable legal fees) and
disbursements which may be incurred or made by T-D Bank in connection with the
collection of any amounts due under, the administration of, or the presentation
or enforcement of any rights conferred by any Letter of Credit, the Borrower's
or any guarantor's obligations to reimburse or otherwise. In the event the
Borrower shall fail to pay such expenses of T-D Bank within thirty (30) days of
demand for payment by T-D Bank, each Lender shall thereupon pay to T-D Bank its
pro rata share (based on such Lender's Commitment Ratio) of such expenses within
ten (10) days from the date of T-D Bank's notice to the Lenders of the
Borrower's failure to pay; provided, however, that if the Borrower or any
guarantor shall thereafter pay such expenses, T-D Bank will repay to each Lender
the amounts received from such Lender hereunder.
Section 2.14 Addition of New Lenders and Increases in Revolving Loan
Commitment During the Syndication Period. During the Syndication Period, other
banks and financial institutions may become "Lenders" hereunder pursuant to
documentation in form and substance satisfactory to the Administrative Agent and
the Borrower. In such event, the commitments of such new Lenders shall be
applied, first, to reduce the commitments of the Arranging Agents in respect of
the Term Loan and the Revolving
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Loan Commitment to an aggregate amount for each Arranging Agent of $43,055,555
(pro rata among the Arranging Agents) and, thereafter, to reduce the amount of
the Term Loan held by each Arranging Agent and to increase the amount of the
Revolving Loan Commitment held by each Arranging Agent by the same amount, and
to increase the amount of the Revolving Loan Commitment up to $350,000,000 on a
pro rata basis between the Term Loan and the Revolving Loan Commitment. Each
such new Lender shall commit to lend an equal percentage of the Term Loan and
under the Revolving Loan Commitment and, accordingly, shall purchase
participations from the existing Lenders to the extent necessary to cause such
to be the case. No increase in the Revolving Loan Commitment hereunder shall
effect an increase in the commitment of any Lender hereunder other than as a
result of an express written agreement between the Borrower and such Lender to
the contrary. Simultaneously with any new Lender becoming a party to this
Agreement pursuant to this Section, the respective Commitment Ratios of the
Lenders (including all new Lenders) shall be deemed to be automatically adjusted
as appropriate. Simultaneously with any new Lender becoming a party hereto
pursuant to this Section, whether in connection with an increase in the
Revolving Loan Commitment or otherwise, the Borrower shall execute and deliver
to each new Lender hereunder and, as appropriate, to each Arranging Agent, new
Notes in the original principal amount of such Lenders' commitment under the
Term Loan and the Revolving Loan Commitment.
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to Initial Advance. The obligation of
the Lenders to undertake the Revolving Loan Commitment and to make the initial
Advance under the Revolving Loan Commitment and the Term Loan is subject to the
prior fulfillment of each of the following conditions:
(a) The Administrative Agent or the Lenders, as appropriate,
shall have received each of the following, in form and substance satisfactory to
the Administrative Agent and the Lenders:
(i) duly executed Notes;
(ii) duly executed Joinder and Acknowledgement of
the Restricted Subsidiaries in form and substance
satisfactory to the Lenders;
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(iii) opinions of corporate and special FCC counsel to
the Borrower and the Restricted Subsidiaries, addressed to each Lender
and the Administrative Agent and satisfactory to the Administrative
Agent and the Lenders, dated the Agreement Date, and the Borrower
hereby instructs such counsel to deliver such opinions to the
Administrative Agent and the Lenders;
(iv) the loan certificate of the Borrower, in
substantially the form attached hereto as Exhibit F, including a
certificate of incumbency with respect to each Authorized Signatory,
together with appropriate attachments which shall include without
limitation, the following items: (A) a copy of the Certificate of
Incorporation of the Borrower, certified to be true, complete and
correct by the Delaware Secretary of State, (B) a true, complete and
correct copy of the By-Laws of the Borrower, as in effect on the date
hereof, (C) a true, complete and correct copy of the resolutions of the
Borrower authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is party,
(D) certificates of good standing from appropriate jurisdictions for
the Borrower, (E) a true and correct list of all Licenses granted to
the Borrower and the Restricted Subsidiaries, together with all
amendments thereto through the date hereof and certified to be in full
force and effect, (F) a true and correct list of all Pole Agreements
granted to the Borrower and the Restricted Subsidiaries, together with
all amendments thereto through the date hereof and certified to be in
full force and effect;
(v) An Acknowledgement and Agreement from H.F. Lenfest
with respect to certain undertakings by the Borrower relating to
Australis Media Limited;
(vi) financial projections with respect to the Borrower
and the Restricted Subsidiaries;
(vii) evidence satisfactory to the Administrative Agent
that the Borrower has issued not less than $300,000,000 in Senior
Subordinated Debt, together with copies of the final Offering
Memorandum, and the Senior Subordinated Debt Indenture relating
thereto;
(viii) a letter from New Jersey counsel to the Borrower
with respect to regulatory issues;
(ix) a duly executed Certificate of Financial Condition
of the Borrower;
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(x) copies of insurance binders or certificates
covering the assets of the Borrower and the Restricted Subsidiaries and
otherwise meeting the requirements of Section 5.5 hereof;
(xi) opinion of Powell, Goldstein, Frazer & Murphy,
special counsel to the Arranging Agents, addressed to the
Administrative Agent and the Lenders and in form and substance
satisfactory to the Administrative Agent and the Lenders, and the
Arranging Agents hereby instruct such counsel to deliver such opinion
to the Administrative Agent and the Lenders; and
(xii) all such other documents as the Administrative
Agent or any Lender may reasonably request, certified by an appropriate
governmental official or an Authorized Signatory if so requested.
(b) The Licenses shall be in form and substance satisfactory
to the Administrative Agent and the Lenders and the Lenders shall have received
evidence reasonably satisfactory to the Administrative Agent and the Lenders
that all Necessary Authorizations, including all necessary consents to the
closing of this Agreement from the grantors of the Licenses, have been obtained
or made, are in full force and effect and are not subject to any pending or
threatened reversal or cancellation, and the Administrative Agent and the
Lenders shall have received a certificate of an Authorized Signatory so stating.
(c) The Administrative Agent and the Lenders shall have
received such fees as are due and payable to them on the Agreement Date.
(d) There shall not have occurred any event which could have
or which has had a Materially Adverse Effect since December 31, 1995, except for
any such event affecting the cable television industry generally.
Section 3.2 Conditions Precedent to Each Advance. The obligation of the
Lenders to make each Advance, including the initial Advance, is subject to the
fulfillment of each of the following conditions immediately prior to or
contemporaneously with such Advance:
(a) With respect to Advances which, if funded, would increase
the aggregate amount of the Loans outstanding hereunder, all of the
representations and warranties of the Borrower under this Agreement, which,
pursuant to Section 4.2 hereof, are made at and as of the time of such Advance,
shall be true and correct at such time in all material respects, both before and
after
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giving effect to the making of the Advance and application of the proceeds of
the Advance, except to the extent they relate solely to an earlier date or time
period;
(b) The incumbency of the Authorized Signatories shall be as
stated in the certificate of incumbency contained in the Borrower's loan
certificate delivered pursuant to Section 3.1(a) hereof or as subsequently
modified and reflected in a certificate of incumbency delivered to the
Administrative Agent and the Lenders;
(c) With respect to Advances which, if funded, would increase
the aggregate amount of Loans outstanding hereunder, the Administrative Agent
and the Lenders shall have received a duly executed Use of Proceeds Letter and a
duly executed Request for Advance, which shall include calculations specifically
demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10, 7.11, 7.16
and 7.17 hereof, both before and after giving effect to the making of the
requested Advance; and
(d) With respect to Advances which, if funded, would increase
the aggregate amount of the Loans outstanding hereunder, there shall not exist,
on the date of the making of the Advance and after giving effect thereto, a
Default hereunder, and, since the date of the most recent audited annual
financial statements of the Borrower and the Restricted Subsidiaries referred to
in Section 4.1(k) or required to have been delivered to the Administrative Agent
and the Lenders pursuant to Section 6.2 hereof, there shall not have occurred
any event which could reasonably be expected to have or which has had a
Materially Adverse Effect, except for any such event affecting the cable
television industry generally.
Section 3.3 Conditions Precedent to Issuance of each Letter of Credit.
The obligation of T-D Bank to issue any Letter of Credit hereunder is subject to
the prior fulfillment of each of the following conditions:
(a) All of the representations and warranties of the Borrower
under this Agreement, which, pursuant to Section 4.2 hereof, are made at and as
of the time of the issuance of such Letter of Credit, shall be true and correct
at such time in all material respects, both before and after giving effect to
the issuance of such Letter of Credit, except to the extent they relate solely
to an earlier date or time period;
(b) The incumbency of the Authorized Signatories shall be as
stated in the certificate of incumbency contained in the Borrower's loan
certificate delivered pursuant to Section 3.1(a) hereof or as subsequently
modified and reflected in a certificate
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of incumbency delivered to the Administrative Agent and the Lenders;
(c) The Administrative Agent and the Lenders shall have
received a duly executed Use of Proceeds Letter not less than three (3) Business
Days prior to the date of the proposed issuance of such Letter of Credit;
(d) There shall not exist, on the date of the issuance of the
Letter of Credit and after giving effect thereto, a Default hereunder, and the
Administrative Agent shall have received a Request for Issuance of Letter of
Credit so stating, together with calculations specifically demonstrating the
Borrower's compliance with Sections 7.8, 7.9, 7.10, 7.11, 7.16 and 7.17 hereof,
both before and after giving effect to the issuance of such Letter of Credit;
(e) Since the date of the most recent audited annual financial
statements of the Borrower and the Restricted Subsidiaries referred to in
Section 4.1(k) or required to have been delivered to the Administrative Agent
and the Lenders pursuant to Section 6.2 hereof, there shall not have occurred
any event which could reasonably be expected to have or which has had a
Materially Adverse Effect, except for any such event affecting the cable
industry generally; and
(f) The Administrative Agent and the Lenders shall have
received all such other certificates, reports, statements, opinions of counsel
or other documents as any of them may reasonably request.
ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties. The Borrower hereby agrees,
represents and warrants to the Administrative Agent and the Lenders that:
(a) Organization; Ownership; Power; Qualification;
Capitalization. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Borrower has
the corporate power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted. The Borrower is
duly qualified, in good standing and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
businesses requires such qualification or authorization.
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(b) Authorization; Enforceability. The Borrower has the
corporate power and has taken all necessary corporate action to authorize it to
borrow hereunder, to execute, deliver and perform this Agreement and each of the
other Loan Documents to which it is a party in accordance with their respective
terms, and to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by the Borrower and is, and each
of the other Loan Documents to which the Borrower is party is, a legal, valid
and binding obligation of the Borrower enforceable in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity.
(c) Subsidiaries; Authorization. The Borrower has no
Subsidiaries other than as set forth on Schedule 5 hereto. Each of the
Restricted Subsidiaries is a corporation or partnership, as the case may be,
duly organized, validly existing, and in good standing under the laws of the
state of its organization, and has the power and authority, corporate,
partnership or otherwise, to own its properties and to carry on its business as
now being and hereafter proposed to be conducted. Each Restricted Subsidiary is
duly qualified, in good standing and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization. All of the issued and
outstanding capital stock or other ownership interests of the Restricted
Subsidiaries is fully paid and non-assessable and is owned or held beneficially
and of record as shown on Schedule 5 attached hereto. None of the Restricted
Subsidiaries has any stock or securities or other ownership interests
convertible into or exchangeable for any shares of its capital stock or other
ownership interests, nor are there any preemptive or similar rights to subscribe
for or to purchase, or any other rights to subscribe for or to purchase, or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments, or claims of any
character relating to, any such capital stock or other ownership interests, or
any stock or securities convertible into or exchangeable for any such capital
stock or other ownership interests. None of the Restricted Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or other ownership interests
or to register any shares of its capital stock or other ownership interests, and
there are no agreements restricting the transfer of any shares of such capital
stock or other ownership interests.
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(d) Compliance with Other Loan Documents and Contemplated
Transactions. The execution, delivery and performance, in accordance with their
respective terms, by the Borrower of this Agreement and the other Loan Documents
to which it is party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (i) require any consent or approval not
already obtained, (ii) violate any Applicable Law respecting the Borrower or any
of its Subsidiaries, (iii) conflict with, result in a breach of, or constitute a
default under any of the certificates or articles of incorporation or
partnership or by-laws or partnership agreements, as amended, of the Borrower or
of any of its Subsidiaries, under any License or under any indenture, agreement,
or other instrument to which the Borrower or any of its Subsidiaries is a party
or by which it or any of its properties may be bound, including, without
limitation, the Pole Agreements, or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower or any of the Restricted Subsidiaries except
Permitted Liens.
(e) Business. The Borrower is engaged solely in the business
of acting as a holding company for its Subsidiaries and of investing in other
cable television systems and investing in other activities directly relating to
the cable television business. The Restricted Subsidiaries are engaged
principally in the business of owning, operating and maintaining the System. Not
less than ninety percent (90%) of Annualized Operating Cash Flow as of any date
of determination is derived directly from the cable television business in the
United States.
(f) Licenses, etc. The Licenses have been duly authorized (to
the best of the Borrower's knowledge after due inquiry) by the grantors thereof
and are in full force and effect. The Borrower and the Restricted Subsidiaries
are in compliance in all material respects with all of the provisions thereof.
The Borrower has secured all Necessary Authorizations and all such Necessary
Authorizations are in full force and effect. Neither any License nor any
Necessary Authorization is the subject of any pending or, to the best of the
Borrower's knowledge after due inquiry, threatened revocation which, with
respect to any License or Licenses, if determined adversely, would constitute an
Event of Default under Section 8.1(l) hereof. Except as described on Schedule 6
attached hereto, there is no Person other than the Borrower or any of its
Restricted Subsidiaries which is currently providing cable, wireless or
satellite delivered television services in any territory within the System.
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(g) Compliance with Law. The Borrower and each of the
Restricted Subsidiaries are in compliance in all material respects with all
Applicable Laws.
(h) Title to Assets. Except for Permitted Liens, the Borrower
and the Restricted Subsidiaries have good, legal and marketable title to, or a
valid leasehold interest in, all of their respective assets. None of such
properties or assets is subject to any Liens, except for Permitted Liens. No
financing statement under the Uniform Commercial Code as in effect in any
jurisdiction and no other filing which names the Borrower or any Restricted
Subsidiary as debtor or which covers or purports to cover any of the assets of
the Borrower or any Restricted Subsidiary is on file in any state or other
jurisdiction, and neither the Borrower nor any Restricted Subsidiary has signed
any such financing statement or filing or any security agreement authorizing any
secured party thereunder to file any such financing statement or filing. Neither
the Borrower nor any Restricted Subsidiary owns any parcel of real estate with a
fair market value in excess of $500,000, except as set forth on Schedule 7
attached hereto.
(i) Litigation. Except as described on Schedule 8 attached
hereto and except for actions, suits, proceedings or investigations as to which
the Borrower is not required to notify the Lenders or has given appropriate
notice in accordance with Section 6.6 hereof, there is no action, suit,
proceeding or investigation pending against, or, to the best of the Borrower's
knowledge after due inquiry, threatened against or in any other manner relating
adversely to, the Borrower or any Restricted Subsidiary or any of its respective
properties, including, without limitation, the Licenses, in any court or before
any arbitrator of any kind or before or by any governmental body, and no such
action, suit, proceeding or investigation (i) calls into question the validity
of this Agreement or any other Loan Document, or (ii) could, if determined
adversely to the Borrower or any Restricted Subsidiary, have a Materially
Adverse Effect, except to the extent such action, suit, proceeding or
investigation affects the cable television industry generally.
(j) Taxes. All federal, state and other tax returns of the
Borrower and the Restricted Subsidiaries required by law to be filed have been
duly filed and all federal, state and other taxes, including, without
limitation, withholding taxes, assessments and other governmental charges or
levies required to be paid by the Borrower or any Restricted Subsidiary or
imposed upon the Borrower or any Restricted Subsidiary or any of its respective
properties, income, profits or assets, which are due and payable, have been
paid, except any such (x) the payment of which the Borrower or the applicable
Restricted Subsidiary is
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diligently contesting in good faith by appropriate proceedings, (y) for which
adequate reserves have been provided on the books of the Borrower or the
applicable Restricted Subsidiary, and (z) as to which no Lien other than a
Permitted Lien has attached and no foreclosure, distraint, sale or similar
proceedings have been commenced. The charges, accruals and reserves on the books
of the Borrower and the Restricted Subsidiaries in respect of taxes are, in the
judgment of the Borrower, adequate. All pro forma financial information provided
to the Lenders in connection with this Agreement have been based upon reasonable
assumptions and prepared in good faith.
(k) Financial Statements. The Borrower has furnished to the
Administrative Agent and the Lenders audited financial statements and unaudited
financial statements for the Borrower and the Restricted Subsidiaries on a
consolidated basis which are complete and correct in all material respects and
present fairly, in accordance with GAAP, the financial position of such Persons
as of December 31, 1995 and March 31, 1996, respectively, and the results of
operations for the periods then ended. The Borrower and the Restricted
Subsidiaries have no material liabilities, contingent or otherwise, other than
as disclosed in the financial statements referred to in the preceding sentence
or in the financial statements delivered to the Administrative Agent and the
Lenders pursuant to Sections 6.1 and 6.2 hereof, and there are no material
unrealized losses of the Borrower and the Restricted Subsidiaries and no
material anticipated losses of the Borrower other than those which have been
previously disclosed in writing to the Administrative Agent and the Lenders and
identified to the Administrative Agent and the Lenders as such. The financial
projections delivered to the Lenders prior to the Agreement Date have been
prepared by the Borrower in good faith and based on reasonable assumptions.
(l) ERISA. The Borrower, each Restricted Subsidiary, each
ERISA Affiliate and each of their Plans are in compliance with ERISA and the
Code. Neither the Borrower, nor any Restricted Subsidiary nor any ERISA
Affiliate has incurred any accumulated funding deficiency with respect to any
such Plan within the meaning of ERISA or the Code. The Borrower, each Restricted
Subsidiary and each ERISA Affiliate have complied with all requirements of ERISA
Sections 601 through 608 and Code Section 4980B. Neither the Borrower, nor any
Restricted Subsidiary nor any ERISA Affiliate has made any promises of
retirement or other benefits to employees, except as set forth in any Plan.
Neither the Borrower, nor any Restricted Subsidiary nor any ERISA Affiliate has
incurred any liability to the Pension Benefit Guaranty Corporation in connection
with any such Plan. The assets of each such Plan which is subject to Title IV of
ERISA, if any, are sufficient to provide the benefits under such
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Plan payment of which the Pension Benefit Guaranty Corporation would guarantee
if such Plan were terminated, and such assets are also sufficient to provide all
other "benefit liabilities" (as defined in ERISA Section 4001(a)(1b)) due under
the Plan upon termination. No Reportable Event has occurred and is continuing
with respect to any such Plan. No such Plan or trust created thereunder, or
party in interest (as defined in Section 3(14) of ERISA), or any fiduciary (as
defined in Section 3(21) of ERISA), has engaged in a "prohibited transaction"
(as such term is defined in Section 406 of ERISA or Section 4975 of the Code)
which would subject such Plan or any other Plan of the Borrower, any trust
created thereunder, or any such party in interest or fiduciary, or any party
dealing with any such Plan or any such trust to the penalty or tax on
"prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the
Code. Neither the Borrower, nor any Restricted Subsidiary nor any ERISA
Affiliate is a participant in, or is obligated to make any payment to, any
Multiemployer Plan.
(m) Compliance with Regulations G, T, U and X. Neither the
Borrower nor any Restricted Subsidiary is engaged principally in or has as one
of its important activities the business of extending credit for the purpose of
purchasing or carrying, and neither the Borrower nor any Restricted Subsidiary
owns or presently intends to acquire, any "margin security" or "margin stock" as
defined in Regulations G, T, U, and X (12 C.F.R. Parts 221 and 224) of the Board
of Governors of the Federal Reserve System (herein called "margin stock"). None
of the proceeds of the Loans will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin stock or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulations G, T, U,
and X. Neither the Borrower nor any Restricted Subsidiary nor any bank acting on
its behalf has taken or will take any action which might cause this Agreement or
the Notes to violate Regulation G, T, U, or X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the applicable
provisions of the Securities Exchange Act of 1934, in each case as now in effect
or as the same may hereafter be in effect. If so requested by the Administrative
Agent or any Lender, the Borrower will furnish the Administrative Agent or such
Lender with (i) a statement or statements in conformity with the requirements of
Federal Reserve Forms G-3 and/or U-1 referred to in Regulations G and U of said
Board of Governors and (ii) other documents evidencing its compliance with the
margin regulations, including without limitation an opinion of counsel in form
and substance satisfactory to the Required Lenders. Neither the making of the
Loans nor the use of proceeds thereof will violate,
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or be inconsistent with, the provisions of Regulation G, T, U, or X of said
Board of Governors.
(n) Investment Company Act; Public Utility Holding Company
Act. Neither the Borrower nor any Restricted Subsidiary is required to register
under the provisions of the Investment Company Act of 1940, as amended, and
neither the entering into or performance by the Borrower of this Agreement nor
the issuance of the Notes violates any provision of such Act or requires any
consent, approval or authorization of, or registration with, the Securities and
Exchange Commission or any other governmental or public body or authority
pursuant to any provisions of such Act. Neither the Borrower nor any Restricted
Subsidiary is subject to regulation under the Public Utility Holding Company Act
of 1935.
(o) Government Regulation. Neither the Borrower nor any
Restricted Subsidiary is required to obtain any consent, approval,
authorization, permit or license which has not already been obtained from, or
effect any filing or registration which has not already been effected with, any
federal, state or local regulatory authority in connection with the execution
and delivery of this Agreement or any other Loan Document. Neither the Borrower
nor any Restricted Subsidiary is required to obtain any consent, approval,
authorization, permit or license which has not already been obtained from, or
effect any filing or registration which has not already been effected with, any
federal, state or local regulatory authority in connection with the performance,
in accordance with their respective terms, of this Agreement or any other Loan
Document, or the borrowing hereunder, other than filings and consents relating
to the renewal of Licenses and ongoing filings and consents relating to the
Commission.
(p) Absence of Default. The Borrower and the Restricted
Subsidiaries are in compliance with all of the provisions of their certificates
or articles of incorporation and by-laws, or certificates of partnership and
partnership agreements, as the case may be, and no event has occurred or failed
to occur (including without limitation any matter which could create a Default
hereunder by cross-default) which has not been remedied or waived, the
occurrence or non-occurrence of which constitutes, or with the passage of time
or giving of notice or both would constitute, (i) an Event of Default or (ii) a
default by the Borrower or any Restricted Subsidiary under any material
indenture, agreement or other instrument, including without limiting the
foregoing, the material Pole Agreements, or any judgment, decree or order to
which the Borrower or any Restricted Subsidiary is a party or by which the
Borrower or any Restricted Subsidiary or any of its respective properties may be
bound or affected.
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(q) Accuracy and Completeness of Information. All information,
reports, prospectuses and other papers and data relating to the Borrower and the
Restricted Subsidiaries and furnished by or on behalf of the Borrower or any of
the Restricted Subsidiaries to the Administrative Agent and the Lenders, or any
of them, were, at the time furnished, complete and correct in all material
respects to the extent necessary to give the recipients true and accurate
knowledge of the subject matter. Notwithstanding the foregoing, with respect to
projections of the future performance of the Borrower and the Restricted
Subsidiaries, such representations and warranties are made in good faith and to
the best of the Borrower's knowledge after due inquiry, but without any
assurances by the Borrower of the future achievement of such performance.
(r) Agreements with Affiliates. Except as set forth on
Schedule 9 attached hereto, neither the Borrower nor any Restricted Subsidiaries
have (i) any agreements or binding arrangements of any kind with any Affiliates
or (ii) any management or consulting agreements of any kind with any third party
(including Affiliates).
(s) Payment of Wages. The Borrower and the Restricted
Subsidiaries are in compliance with the Fair Labor Standards Act, as amended,
and the Borrower and the Restricted Subsidiaries have paid all minimum and
overtime wages required by law to be paid to their respective employees.
(t) Solvency. The Borrower and the Restricted Subsidiaries
are, and after giving effect to the making of the Loans and the other
transactions contemplated hereby will be, Solvent.
(u) Collective Bargaining. Except as set forth on Schedule 10
attached hereto, no employee of the Borrower or of any of the Restricted
Subsidiaries is a party to any collective bargaining agreement with the Borrower
or any of the Restricted Subsidiaries and, to the best knowledge of the Borrower
after due inquiry, there are no material grievances, disputes, or controversies
with any union or any other organization of the employees of the Borrower or any
of the Restricted Subsidiaries or threats of strikes, work stoppages, or any
asserted pending demands for collective bargaining by any union or other
organization.
(v) No Adverse Change. Since the date of the most recent
audited annual financial statements of the Borrower and the Restricted
Subsidiaries required to have been delivered to the Administrative Agent and the
Lenders pursuant to Section 6.2 hereof (or, prior to the first such delivery
required hereunder,
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since December 31, 1995), there has occurred no event which would have a
Materially Adverse Effect, except for such events affecting the cable television
industry generally.
(w) Environmental Matters.
(i) None of the properties of the Borrower and the
Restricted Subsidiaries contains, including, without limitation, in, on
or under the soil and groundwater thereunder, any Hazardous Materials
in violation of Environmental Laws or in amounts that could give rise
to liability under Environmental Laws.
(ii) The Borrower and the Restricted Subsidiaries are in
compliance with all Environmental Laws, and, to the best of the
Borrower's knowledge after due inquiry, there is no contamination of
any of such properties which could interfere with the continued
operation of any of such properties or impair the financial condition
of the Borrower or any of the Restricted Subsidiaries.
(iii) Neither the Borrower nor any Restricted Subsidiary
has received from any governmental authority any complaint, notice of
violation, alleged violation, investigation or advisory action or
notice of potential liability regarding matters of environmental
protection or permit compliance under applicable Environmental Laws
with regard to any such properties that have not been resolved to the
satisfaction of the issuing governmental authority, nor is the Borrower
or any Restricted Subsidiary aware that any governmental authority is
contemplating delivering any such notice to the Borrower or any of the
Restricted Subsidiaries.
(iv) There has been no pending or threatened complaint,
notice of violation, alleged violation, investigation or notice of
potential liability under Environmental Laws with regard to any of such
properties.
(v) Hazardous Materials have not been generated,
treated, stored, disposed of, at, on or under any of such property in
violation of any Environmental Laws or in a manner that could give rise
to liability under Environmental Laws, nor have any Hazardous Materials
been transported or disposed of from any of such properties to any
other location in violation of any Environmental Laws or in a manner
that could give rise to liability under Environmental Laws.
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(vi) Neither the Borrower nor any of the Restricted
Subsidiaries are a party to any governmental administrative actions or
judicial proceedings pending under any Environmental Law with respect
to any of such properties nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to any of such properties.
(x) Voting Control of the Borrower. As of the Agreement Date,
all of the shares of the issued and outstanding capital stock of the Borrower
are fully paid and non-assessable and owned, beneficially and of record, as set
forth on Schedule 11 attached hereto. The Borrower has no stock or securities
convertible into or exchangeable for any shares of its capital stock, and there
are no preemptive or similar rights to subscribe for or to purchase, or any
other rights to subscribe for or to purchase, or any options for the purchase
of, or any agreements providing for the issuance (contingent or otherwise) of,
or any calls, commitments, or claims of any character relating to, any such
capital stock, or any stock or securities convertible into or exchangeable for
any such capital stock, except as set forth on Schedule 11 attached hereto. The
Borrower is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or to
register any shares of its capital stock, and there are no agreements
restricting the transfer of any shares of such capital stock, except as set
forth in the Shareholders' Agreements as in effect on the Agreement Date. The
voting control of H. F. Lenfest of the shares of the Borrower's capital stock is
evidenced by the Shareholders' Agreements. There has been no change in or other
modification to such Shareholders' Agreements or the voting control of H. F.
Lenfest evidenced thereby.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement shall be deemed to be
made, and shall be true and correct, at and as of the Agreement Date, and shall
be true and correct in all material respects as of the date of each Advance
which increases the principal amount of the Loans outstanding hereunder, and the
date of the issuance of any Letter of Credit, except to the extent they relate
solely to an earlier date or time period. All representations and warranties
made under this Agreement shall survive, and not be waived by, the execution
hereof by the Administrative Agent and the Lenders, any investigation or inquiry
by any of the Administrative Agent and the Lenders, the making of any Advance or
the issuance of any Letter of Credit.
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ARTICLE 5
General Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower shall have the right to borrow hereunder (whether or not the conditions
to borrowing have been or can be fulfilled) or any Letter of Credit is
outstanding, and unless the Required Lenders shall otherwise consent in writing:
Section 5.1 Preservation of Existence and Similar Matters. The Borrower
will, and will cause each Restricted Subsidiary to:
(a) preserve and maintain its existence in the state of its
formation, its material rights, franchises, licenses and privileges, including,
without limiting the foregoing, the Licenses (to the extent required to prevent
the occurrence of an Event of Default under Section 8.1(l) hereof), all material
Pole Agreements, and all other Necessary Authorizations, and
(b) qualify and remain qualified and authorized to do business
in each jurisdiction in which the character of its properties or the nature of
its businesses requires such qualification or authorization.
Section 5.2 Business; Compliance with Applicable Law. The Borrower will
engage solely in the business of (a) acting as a holding company for its
Subsidiaries, (b) investing in other cable television systems, (c) investing in
other activities directly relating to the cable television industry, and (d)
providing consulting services to Garden State Cablevision L.P., a Delaware
limited partnership. The Borrower will cause the Restricted Subsidiaries to
engage principally in the business of owning, operating and maintaining the
System. The Borrower will, and will cause the Restricted Subsidiaries to, comply
with the requirements of Applicable Law.
Section 5.3 Maintenance of Properties. The Borrower will maintain or
cause to be maintained in the ordinary course of business in good repair,
working order and condition (reasonable wear and tear excepted) all properties
used in its and the Restricted Subsidiaries' businesses (whether owned or held
under lease), and from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 5.4 Accounting Methods and Financial Records. The Borrower
will, and will cause each Restricted Subsidiary to,
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maintain a system of accounting established and administered in accordance with
GAAP, keep adequate records and books of account in which complete entries will
be made in accordance with such accounting principles consistently applied and
reflecting all transactions required to be reflected by such accounting
principles, and keep accurate and complete records of its properties and assets.
The Borrower will, and will cause each Restricted Subsidiary to, maintain a
fiscal year ending on December 31.
Section 5.5 Insurance. The Borrower will, and will cause each
Restricted Subsidiary to:
(a) Maintain insurance including, but not limited to, public
liability, business interruption and worker's compensation insurance from
responsible companies in such amounts and against such risks to the Borrower and
the Restricted Subsidiaries as shall be standard in the cable television
industry for cable television companies similar in size and location to the
Borrower and the Restricted Subsidiaries.
(b) Keep its assets insured by insurers on terms and in a
manner acceptable to the Required Lenders against loss or damage by fire, theft,
burglary, loss in transit, explosions and hazards insured against by extended
coverage, in amounts which are standard in the cable television industry for
cable television companies similar in size and location to the Borrower and the
Restricted Subsidiaries, all premiums thereon to be paid by the Borrower and the
Restricted Subsidiaries.
(c) Require that each insurance policy provide for at least
thirty (30) days' prior written notice to the Administrative Agent of any
termination of or proposed cancellation or nonrenewal of such policy.
Section 5.6 Payment of Taxes and Claims. The Borrower will, and will
cause each Restricted Subsidiary to, pay and discharge all taxes, including,
without limitation, withholding taxes, assessments and governmental charges or
levies required to be paid by it or imposed upon it or its income or profits or
upon any properties belonging to it prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien or charge upon any of its properties; except that no
such tax, assessment, charge, levy or claim need be paid which is being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on the appropriate books in
accordance with GAAP, but only so long as such tax, assessment, charge, levy or
claim does not become a Lien or charge other than a Permitted Lien and no
foreclosure,
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distraint, sale or similar proceedings shall have been commenced. The Borrower
shall, and shall cause each Restricted Subsidiary to, timely file all
information returns required by federal, state or local tax authorities.
Section 5.7 Visits and Inspections. The Borrower will, and will cause
each Restricted Subsidiary to, permit representatives of the Administrative
Agent and the Lenders to (a) visit and inspect the properties of the Borrower
and the Restricted Subsidiaries at all reasonable times, (b) inspect and make
extracts from and copies of its books and records, and (c) discuss with the
principal officers of the Borrower and the Restricted Subsidiaries, its
business, assets, liabilities, financial position, results of operations and
business prospects.
Section 5.8 Payment of Indebtedness; Loans. Subject to any provisions
regarding subordination herein or in any other Loan Document, the Borrower will,
and will cause each of the Restricted Subsidiaries to, pay any and all of its
Indebtedness when and as it becomes due, other than amounts diligently disputed
in good faith and as to which adequate reserves have been set aside in
accordance with GAAP.
Section 5.9 Use of Proceeds. The Borrower will use the aggregate
proceeds of the Loans to finance general corporate expenditures, including,
without limitation, permitted acquisitions, investments and Capital
Expenditures, to provide working capital to the Borrower and the Restricted
Subsidiaries, and to refinance existing Indebtedness for Money Borrowed
outstanding on the Agreement Date and accrued interest thereon as more fully
described on Schedule 12 attached hereto.
Section 5.10 Indemnity. The Borrower will indemnify and hold harmless
each Lender, each Arranging Agent and the Administrative Agent, and each of
their respective employees, representatives, officers, directors, affiliates,
agents and attorneys (collectively, "Indemnitees"), from and against any and all
claims, liabilities, losses, damages, actions, attorneys' fees and demands
incurred by any Indemnitee, whether or not such Indemnitee is a party to any
litigation, investigation or other proceeding, (a) resulting from, arising out
of or otherwise relating to any breach or alleged breach by the Borrower of any
representation or warranty made hereunder, or (b) arising out of (i) the making
or administration of any Loans or the actual or proposed use of the proceeds of
any Loans, (ii) the issuance by the Borrower of additional Indebtedness for
Money Borrowed, (iii) allegations of any participation by any Indemnitee in the
affairs of the Borrower or any Subsidiary of the Borrower, or allegations that
any Indemnitee has any joint liability with the Borrower or any Subsidiary of
the Borrower for any reason, or
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(iv) any claims against any Indemnitee by any investor in or lender to the
Borrower or any Subsidiary of the Borrower, for any reason whatsoever; unless,
in any case referred to above, the Indemnitee seeking indemnification hereunder
is determined to have acted or failed to act with gross negligence or willful
misconduct by a non-appealable judicial order.
Section 5.11 Interest Rate Hedging. The Borrower shall at all times
maintain one or more Interest Rate Hedge Agreements, fixed rate loan agreements
or similar arrangements with respect to its interest obligations relating to an
aggregate principal amount of not less than fifty percent (50%) of Total Debt
outstanding from time to time. Such Interest Rate Hedge Agreements and other
agreements and arrangements shall have the effect of fixing the interest rate
payable by the Borrower with respect to such amount of Total Debt for a weighted
average period of not less than two (2) years from the date of such Interest
Rate Hedge Agreement or other agreement or arrangement or, if earlier, until the
Maturity Date, and shall be subject to terms reasonably acceptable to the
Administrative Agent. Such terms shall include consideration of the
creditworthiness of the other party to such Interest Rate Hedge Agreements or
other agreement or arrangement. All obligations of the Borrower to any of the
Administrative Agent or any Lender pursuant to any Interest Rate Hedge Agreement
shall rank pari passu with the Obligations. All obligations of the Borrower
under any other fixed rate loan agreement or similar arrangement, as described
above, may rank pari passu with the Obligations to the extent they are otherwise
permitted hereunder, but shall not be secured by any Lien and shall not
otherwise be senior to the Obligations.
Section 5.12 Payment of Wages. The Borrower shall at all times comply
with the requirements of the Fair Labor Standards Act, as amended, including,
without limitation, the provisions of such Act relating to the payment of
minimum and overtime wages as the same may become due from time to time.
ARTICLE 6
Information Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower has a right to borrow hereunder (whether or not the conditions to
borrowing have been or can be fulfilled) or any Letter of Credit is outstanding
and unless the Required Lenders shall otherwise consent in writing, the Borrower
will furnish or cause to be furnished to each Lender and to the Administrative
Agent at their respective offices:
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Section 6.1 Quarterly Financial Statements. As soon as available and in
any event within sixty (60) days after the end of each fiscal quarter in each
fiscal year of the Borrower, the consolidated financial statements of the
Borrower and its Subsidiaries and the special-purpose consolidated financial
statements for the Borrower and the Restricted Subsidiaries, each consisting of
a balance sheet as of the end of such fiscal quarter and related statements of
income, stockholders' equity and cash flows for the fiscal quarter then ended
and the fiscal year through that date, all in reasonable detail and certified
(subject to normal year-end audit adjustments) by the chief executive officer,
president or chief financial officer of the Borrower as having been prepared in
accordance with GAAP, and setting forth in comparative form the respective
financial statements for the corresponding date and period in the previous
fiscal year, together with a completed Quarterly Capital Expenditure Report in a
form substantially identical to Exhibit G.
Section 6.2 Annual Financial Statements. As soon as available and in
any event within one hundred twenty (120) days after the end of each fiscal year
of Borrower, the consolidated financial statements of the Borrower and its
Subsidiaries and the special-purpose consolidated financial statements for the
Borrower and the Restricted Subsidiaries, each consisting of a balance sheet as
of the end of such fiscal year and related statements of income, stockholders'
equity and cash flows for the fiscal year then ended, all in reasonable detail
and setting forth in comparative form the financial statements as of the end of
and for the preceding fiscal year, and certified by the Borrower's current
independent certified public accountants or other nationally recognized
independent certified public accountants satisfactory to the Arranging Agents.
The certificate or report of accountants shall be free of qualifications (other
than any consistency qualification that may result from a change in the method
used to prepare the financial statements as to which such accountants concur)
and shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of the Borrower under any of the Loan
Documents, together with a letter of such accountants substantially to the
effect that, based upon their ordinary and customary examination of the affairs
of the Borrower, performed in connection with the preparation of such
consolidated financial statements, and in accordance with generally accepted
auditing standards, they are not aware of the existence of any condition or
event which constitutes a Default or Event of Default or, if they are aware of
such condition or event, stating the nature thereof and confirming the
Borrower's calculations with respect to the certificate to be delivered
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pursuant to Section 6.4 hereof with respect to such financial statements.
Section 6.3 Monthly Operating Reports. As soon as practicable, and in
any event within thirty (30) days from the last day of each month, a monthly
operating report of the Borrower and the Restricted Subsidiaries, certified by
the chief financial or executive officer of the Borrower and of each Restricted
Subsidiary, in such detail and, if requested by the Arranging Agents, on a form
supplied by the Arranging Agents, accurately setting forth (i) the number of new
Basic Subscribers of each Restricted Subsidiary as to which hook-ups were
completed during the preceding month, and (ii) the total number of all Basic
Subscribers, new Basic Subscribers, pay tv subscribers, homes passed and miles
of cable plant as of the end of such month for the Borrower and the Restricted
Subsidiaries, taken as a whole.
Section 6.4 Performance Certificates. At the time the financial
statements are furnished pursuant to Sections 6.1 and 6.2, a certificate of an
Authorized Officer substantially in the form of Exhibit I attached hereto and
otherwise in form and substance satisfactory to the Required Lenders:
(a) reaffirming the representations and warranties set forth
in Article 4 hereof as of the date of such certificate with the same effect as
though such representations and warranties had been made on and as of such date
(except for representations and warranties which expressly relate solely to an
earlier date or time period);
(b) setting forth as at the end of such quarterly period or
fiscal year, as the case may be, the arithmetical calculations required to
establish whether or not the Borrower was in compliance with the requirements of
Sections 7.1, 7.4, 7.6(d), 7.6(e), 7.8, 7.9, 7.10, 7.11, 7.13, 7.16 and 7.17
hereof;
(c) summarizing in reasonable detail (i) all investments made
by the Borrower or any of the Restricted Subsidiaries since the Agreement Date
pursuant to Section 7.6(e) hereof; (ii) all acquisitions made by the Borrower or
any of the Restricted Subsidiaries since the Agreement Date pursuant to Sections
7.4(b), (c) and (d) hereof; and (iii) all investments in excess of $1,000,000
made by the Borrower or any of the Restricted Subsidiaries during such quarterly
period or fiscal year, other than pursuant to Section 7.6(e) hereof; and
(d) stating that, to the best of his or her knowledge after
due inquiry, no Default or Event of Default has occurred as at the end of such
quarterly period or year, as the case may be,
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or, if a Default or an Event of Default has occurred, disclosing each such
Default or Event of Default and its nature, when it occurred, whether it is
continuing and the steps being taken by the Borrower with respect to such
Default or Event of Default.
Section 6.5 Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if
any, submitted to the Borrower or any Restricted Subsidiary in connection with
an audit of the Borrower or any Restricted Subsidiary by the Borrower's or any
such Subsidiary's independent public accountants, including, without limitation,
any management report prepared in connection with the annual audit referred to
in Section 6.2.
(b) No later than January 31 of each year, a copy of the
annual budget for the Borrower for such fiscal year, including the budget for
Capital Expenditures.
(c) Promptly upon receipt thereof by an Authorized Officer,
copies of any material notice or report regarding any License from the grantor
of such License, or regarding the System or any License from the Commission with
respect to (i) the suspension, revocation or modification of any License, (ii) a
denial of a request for a rate change, (iii) disciplinary proceedings involving
the Borrower or any Restricted Subsidiary, (iv) notice of default or other
non-compliance by the Borrower or any Restricted Subsidiary under any License,
or (v) any similar event or occurrence.
(d) Upon any material decrease (by percentage or dollar value)
or termination of any programming discounts from Satellite Services, Inc. or
other Affiliates of TeleCommunications, Inc., pro forma projections in form and
substance reasonably acceptable to the Administrative Agent, which projections
demonstrate the Borrower's compliance with the terms of this Agreement on a pro
forma basis through the Maturity Date.
(e) Upon (i) any sale, lease, transfer or other disposition of
assets of the Borrower or any of its Subsidiaries (other than sales or other
dispositions of obsolete equipment or other immaterial assets in the ordinary
course of business having an aggregate sales price not to exceed $500,000 in any
fiscal year), (ii) any sale or other disposition of any interests in any
Unrestricted Subsidiary, or (iii) the making by the Borrower or any Restricted
Subsidiary of any acquisition pursuant to Section 7.4(b), (c) or (d) or any
investment pursuant to Section 7.6(e), a description of the material terms of
such acquisition, investment, sale, lease, transfer or other disposition, in
form and substance satisfactory to the Administrative Agent.
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(f) From time to time and promptly upon each request, such
data, certificates, reports, statements, opinions of counsel, documents or
further information regarding the business, assets, liabilities, financial
position, projections, results of operations or business prospects of the
Borrower or any Restricted Subsidiary, as the Administrative Agent or any Lender
reasonably may request.
Section 6.6 Notice of Litigation and Other Matters. Prompt notice of
the following events after an Authorized Officer has received notice or has
otherwise become aware thereof:
(a) the commencement of all proceedings and investigations by
or before any governmental body and all actions and proceedings in any court or
before any arbitrator against the Borrower or any Restricted Subsidiary
involving a claim for damages or potential cost to the Borrower or any
Restricted Subsidiary of $500,000 or more with respect to any single or related
series of proceedings, investigations or actions or, to the extent known to the
Borrower or any Restricted Subsidiary, in any other way relating materially
adversely and directly to the Borrower or any Restricted Subsidiary, or any of
its respective properties, assets or businesses or any License, including,
without limitation, proceedings, investigations or actions arising under
Environmental Laws;
(b) any material adverse change with respect to the business,
assets, liabilities, financial position, or results of operations of the
Borrower or any Restricted Subsidiary, other than changes in the ordinary course
of business which have not had and are not likely to have a Materially Adverse
Effect;
(c) any material amendment or change to any budget submitted
under Section 6.5(b) hereof for the operation of the System;
(d) any Default or the occurrence or non-occurrence of any
event (i) which constitutes, or which with the passage of time or giving of
notice or both would constitute a default by the Borrower or any Restricted
Subsidiary under any material agreement other than this Agreement to which the
Borrower or any Restricted Subsidiary is party or by which any of its properties
may be bound, or (ii) which could have a Materially Adverse Effect, giving in
each case the details thereof and specifying the action proposed to be taken
with respect thereto;
(e) the occurrence of any Reportable Event or a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) with respect to any Plan of the Borrower, any Restricted Subsidiary or
any ERISA Affiliate or
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the institution or threatened institution by the Pension Benefit Guaranty
Corporation of proceedings under ERISA to terminate or to partially terminate
any such Plan or the commencement or threatened commencement of any litigation
regarding any such Plan or naming it or the trustee of any such Plan with
respect to such Plan; and
(f) the occurrence of any event subsequent to the Agreement
Date which, if such event had occurred prior to the Agreement Date, would have
constituted an exception to the representation and warranty in Section 4.1(l) of
this Agreement.
ARTICLE 7
Negative Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower has a right to borrow hereunder (whether or not the conditions to
borrowing have been or can be fulfilled) or any Letter of Credit is outstanding
and unless the Required Lenders shall otherwise give their prior consent in
writing:
Section 7.1 Indebtedness of the Borrower and the Restricted
Subsidiaries. The Borrower shall not, and shall not permit any Restricted
Subsidiary to, create, assume, incur or otherwise become or remain obligated in
respect of, or permit to be outstanding, any Indebtedness except:
(a) Indebtedness under this Agreement and the Notes;
(b) Accounts payable, subscriber deposits, accrued expenses
and customer advance payments incurred in the ordinary course of business, which
are (1) current or (2) being contested in good faith by appropriate proceedings
and for which the Borrower or the applicable Restricted Subsidiary has
established adequate reserves on its books;
(c) Obligations arising under Interest Rate Hedge Agreements;
(d) Senior Subordinated Debt;
(e) Unsecured Indebtedness for Money Borrowed, which is
subject to terms which are no more restrictive than the terms of this Agreement
and the other Loan Documents, and which does not amortize or mature prior to one
(1) year after the Maturity Date; provided that the Borrower is a compliance
with Sections 7.8 and 7.17 hereof after giving effect to such incurrence, and
provided further that the Total Leverage Ratio for the calendar
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quarter immediately preceding the incurrence of such Indebtedness for Money
Borrowed is less than 6.0 to 1, after giving effect to such incurrence;
(f) (i) Indebtedness arising under Guaranties (other than the
LCI Guaranty and the AML Movie Studio Guaranty Liability) in an aggregate amount
not to exceed $50,000,000 at any time outstanding, (ii) Indebtedness arising
under the LCI Guaranty, and (iii) Indebtedness arising in respect of the AML
Movie Studio Guaranty Liability which shall not exceed $33,500,000 in the
aggregate;
(g) Other Indebtedness incurred in the ordinary course of
business which is either unsecured or secured by Liens described in clause (i)
of the definition of "Permitted Liens" in an aggregate amount not to exceed
$10,000,000 plus Indebtedness arising under Capitalized Lease Obligations
existing as of the Agreement Date;
(h) Indebtedness of the Borrower to any Restricted Subsidiary
or of any Restricted Subsidiary to the Borrower or any other Restricted
Subsidiary; and
(i) Indebtedness existing as of the Agreement Date as
described on Schedule 12 attached hereto.
Notwithstanding the foregoing, upon the prior written consent of the Required
Lenders, the Borrower may refinance its Indebtedness existing as of the
Agreement Date in respect of its 11.30% Senior Notes due 2000, 11.84% Senior
Notes due 1998, and 9.93% Senior Notes due 2001 issued to the order of various
insurance company lenders (as more fully described on Schedule 12 attached
hereto) with proceeds of the Loans as provided herein or with other
Indebtedness, so long as, in the case of any refinancing other than with
proceeds of the Loans hereunder, (i) there is no increase in the aggregate
principal amount outstanding thereunder as a result of any such refinancing,
(ii) the refinanced Indebtedness has a weighted average life to maturity of not
less than one (1) year greater than the maturity of the Loans, (iii) the terms
governing the refinanced Indebtedness are no more restrictive than the terms of
this Agreement and the other Loan Documents nor the terms governing the
Indebtedness proposed to be refinanced, and (iv) the refinanced Indebtedness is
unsecured. Any such refinanced Indebtedness incurred by the Borrower in
accordance herewith may rank pari passu with the Obligations.
Section 7.2 Limitation on Liens. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, create, assume, incur or permit to exist or
to be created, assumed, incurred or permitted to exist, directly or indirectly,
any Lien
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on any of its properties or assets (including, without limitation, capital
stock), whether now owned or hereafter acquired, except for Permitted Liens.
Section 7.3 Amendment and Waiver. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, enter into any amendment of, or agree to or
accept or consent to any waiver of any of the provisions of (a) its certificate
or articles of incorporation or by-laws, or certificate of partnership or
partnership agreement, as applicable; (b) any Loan Document; or (c) any of the
documents, instruments and agreements evidencing or relating to the Borrower's
11.30% Senior Notes due 2000, 11.84% Senior Notes due 1998, 9.93% Senior Notes
due 2001, the Indebtedness for Money Borrowed issued pursuant to the Public Debt
Indenture or the Senior Subordinated Debt Indenture or any other Subordinated
Debt if the effect of any such amendment or waiver is to (i) increase the
aggregate principal amount outstanding thereunder, (ii) reduce the weighted
average life to maturity thereof, or (iii) cause the terms governing such
Indebtedness to be more restrictive than the terms of this Agreement or of the
existing documents, instruments or agreements governing such Indebtedness.
Section 7.4 Liquidation, Change in Ownership, Disposition or
Acquisition of Assets; Change in Business.
(a) The Borrower shall not, and shall not permit any
Restricted Subsidiary to, at any time (i) liquidate or dissolve itself (or
suffer any liquidation or dissolution) or otherwise wind up its affairs; (ii)
enter into any merger or consolidation (other than any merger or consolidation
of a Restricted Subsidiary into another Restricted Subsidiary or, so long as the
Borrower is the surviving corporation and so long as no Default then exists or
would be caused thereby, of a Restricted Subsidiary into the Borrower); or (iii)
sell, lease, abandon, transfer, exchange or otherwise dispose of all or any of
its assets, property or business (other than sales or other dispositions of
obsolete equipment or other immaterial assets in the ordinary course of business
having an aggregate sales price not to exceed $500,000 in any year and other
than as provided in Section 7.4(c) below); provided that, so long as no Default
then exists or would be caused thereby, the Borrower or any of the Restricted
Subsidiaries may sell or otherwise dispose of assets for fair consideration so
long as: (A) the assets sold or otherwise disposed of in any single or series of
related transactions contributed or accounted for less than fifteen percent
(15%) of Annualized Operating Cash Flow, calculated using the financial
statements of the Borrower and the Restricted Subsidiaries for the most recently
completed fiscal quarter for which financial statements are required to have
been provided to
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the Administrative Agent and the Lenders in accordance with Section 6.1 hereof
as of the date of such proposed sale or other disposition; and (B) the aggregate
amount of Annualized Operating Cash Flow contributed by or attributable to all
assets sold or otherwise disposed of during the term of this Agreement
(calculated in the manner set forth in clause (A) above with respect to each
such sale or other disposition) is less than twenty-five percent (25%) of
Annualized Operating Cash Flow calculated using the financial statements of the
Borrower and the Restricted Subsidiaries for the most recently completed fiscal
quarter for which financial statements are required to have been provided to the
Administrative Agent and the Lenders as of the proposed date of the most recent
such sale or other disposition. All Net Proceeds of any sale, lease, transfer,
exchange or other disposition of assets permitted hereunder shall be used to
prepay the Loans outstanding under the Term Loan or to reduce the Revolving Loan
Commitment to the extent required under Section 2.7(c) hereof.
(b) The Borrower shall not, and shall not permit any
Restricted Subsidiary to, at any time, acquire any assets, property or business
of any other Person, or acquire stock, partnership or other ownership interests
in any other Person, other than as permitted by Section 7.6 hereof and other
than (i) assets (other than capital stock or other ownership interests) directly
related to the cable television business in the United States, or (ii) all of
the issued and outstanding capital stock or other ownership interests of Persons
engaged in businesses directly related to the cable television business in the
United States, for, in any such case described in clauses (i) and (ii) of this
subsection (b), an aggregate purchase price not to exceed $100,000,000 during
the term of this Agreement, and provided that, in any such case, no Default then
exists or would be caused thereby. Prior to consummating any such acquisition,
the Borrower shall provide the Administrative Agent and the Lenders with
calculations specifically demonstrating the Borrower's pro forma compliance with
Sections 7.8, 7.9, 7.10, 7.11, 7.16 and 7.17 hereof, both before and after
giving effect to the proposed acquisition. Any Subsidiary formed or acquired by
the Borrower or any Restricted Subsidiary in connection with any acquisition
described in this subsection 7.4(b) shall be deemed to be a Restricted
Subsidiary unless the Required Lenders shall otherwise consent in writing and
shall execute a Joinder and Acknowledgement to this Agreement in form and
substance satisfactory to the Administrative Agent promptly upon becoming same.
(c) Notwithstanding the foregoing, and exclusive of the
limitation on acquisitions set forth in subsections 7.4(a) and (b) above, so
long as no Default then exists or would be
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caused thereby, the Borrower or any of the Restricted Subsidiaries may make
acquisitions of (i) assets (other than capital stock or other ownership
interests) directly related to the cable television business located in
Contiguous Areas, or (ii) all of the issued and outstanding capital stock or
other ownership interests of Persons engaged in businesses directly related to
the cable television business whose assets are located solely in Contiguous
Areas, with the Net Proceeds of any sale, lease, transfer or other disposition
of assets of the Borrower or any Restricted Subsidiary permitted hereby, so long
as such acquisition is consummated within one (1) year of the sale, lease,
transfer or other disposition giving rise to such Net Proceeds.
(d) The Borrower shall not permit less than ninety percent
(90%) of Annualized Operating Cash Flow as of any date of determination to be
derived directly from the cable television business in the United States.
Section 7.5 Limitation on Guaranties. The Borrower shall not, and shall
not permit any Restricted Subsidiary to, at any time Guaranty, assume, be
obligated with respect to, or permit to be outstanding any Guaranty of, any
obligation of any other Person other than (a) obligations under agreements of
the Borrower or any Restricted Subsidiary entered into in connection with the
acquisition of services, supplies and equipment in the ordinary course of
business of the Borrower or such Restricted Subsidiary, and (b) Guaranties
described in Section 7.1(f) hereof.
Section 7.6 Investments. The Borrower shall not, and shall not permit
any Restricted Subsidiary to, make any loan or advance, or otherwise acquire for
consideration evidences of Indebtedness, capital stock or other securities of
any Person other than as provided in Section 7.4(b) or (c) hereof, except that
so long as no Default then exists or would be caused thereby, the Borrower or
any Restricted Subsidiary may (a) purchase marketable, direct obligations of the
United States of America maturing within three hundred sixty-five (365) days of
the date of purchase, (b) purchase commercial paper issued by corporations, each
of which conducts a substantial part of its business in the United States of
America, maturing within one hundred and eighty (180) days from the date of the
original issue thereof, and rated "P-1" or better by Moody's Investors Service,
(c) purchase repurchase agreements and certificates of deposit maturing within
three hundred sixty-five (365) days of the date of purchase which are issued by
any Lender or by a United States national or state bank having capital, surplus
and undivided profits totaling more than $250 million and rated "A" or better by
Moody's Investors Service, (d) maintain the investments
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described as of the Agreement Date on Schedule 13 attached hereto, (e) make
additional investments in Persons engaged in businesses directly related to the
cable television business as set forth on Schedule 14 attached hereto (i) in an
aggregate amount not to exceed $70,000,000 so long as the Lenfest Australia
Loan, or any portion thereof, or any payment obligations of Lenfest Australia
(whether for interest, fees or otherwise) in respect thereof remain outstanding,
(ii) in an aggregate amount not to exceed $90,000,000 if no such Lenfest
Australia Indebtedness remains outstanding and so long as the Total Leverage
Ratio for either or both of the two (2) most recently completed fiscal quarters
for which financial statements are required to have been provided to the Lenders
in accordance with Section 6.1 or 6.2 hereof, as applicable, is greater than or
equal to 6.0 to 1, and (iii) in any amount so long as the Total Leverage Ratio
for both such fiscal quarters is less than 6.0 to 1, provided that, in each such
case, the Borrower has provided the Administrative Agent and the Lenders with
calculations specifically demonstrating the Borrower's pro forma compliance with
Sections 7.8, 7.9, 7.10, 7.11, 7.16 and 7.17 hereof, both before and after
giving effect to the proposed investment. The Borrower shall require, and shall
cause each of the Restricted Subsidiaries to require, that any loan or advance
made by the Borrower or such Restricted Subsidiary, as applicable, to any other
Person be evidenced by a duly executed and delivered promissory note of such
other Person in an original principal amount not less than the amount of such
loan; provided, however, that loans or advances made to the Borrower or any
Subsidiary of the Borrower need not be evidenced by such promissory notes if
regulatory approval by any governmental body of the State of New Jersey or
Delaware would be required in connection therewith. In addition, the Borrower
shall require, and shall cause each of the Restricted Subsidiaries to require,
that any investment in an Unrestricted Subsidiary be in the form of a loan or
intercompany advance and be evidenced by a promissory note in the principal
amount of such investment. The Borrower will cause each such promissory note to
be repaid by the applicable Unrestricted Subsidiary upon a sale of any assets of
such Unrestricted Subsidiary (other than in the ordinary course of its business)
or upon a sale of any capital stock of such Unrestricted Subsidiary.
Section 7.7 Restricted Payments and Purchases. The Borrower
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly declare or make any Restricted Payment or Restricted Purchase, except
that the Restricted Subsidiaries may declare and make Restricted Payments to,
and Restricted Purchases from, the Borrower, and so long as no Default then
exists or would be caused thereby, and so long as the Total Leverage Ratio for
the two (2) most recently completed fiscal quarters for which financial
statements are required to
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have been delivered to the Lenders pursuant to Section 6.1 or 6.2 hereof, as
applicable, is less than 6.0 to 1, the Borrower may make Restricted Payments in
an aggregate amount not to exceed during any fiscal year, fifty percent (50%) of
Annual Excess Cash Flow for the preceding fiscal year.
Section 7.8 Senior Leverage Ratio. (a) As of the end of any calendar
quarter, (b) at the time of any Advance which increases the aggregate principal
amount of the Loans outstanding hereunder, and (c) at the time of any incurrence
of Indebtedness, any proposed sale, lease, transfer, exchange or other
disposition of assets, any proposed acquisition of assets, or any proposed
investment in any other Person, the Borrower shall not permit the Senior
Leverage Ratio for the calendar quarter end being tested in the case of Section
7.8(a) above, or the most recent quarter end for which financial statements are
required to have been provided to the Administrative Agent and the Lenders
pursuant to Sections 6.1 and 6.2 hereof in the case of Sections 7.8(b) and (c)
above after giving effect to the Advance or other transaction proposed to be
effected as of such date, to exceed the ratios set forth below for calculation
dates using financial statements for periods ending during the periods shown
below:
Senior
Leverage
Period Ratio
------ -----
From the Agreement Date, through
December 30, 1996 5.75:1
From December 31, 1996, through
March 30, 1997 5.50:1
From March 31, 1997, through
December 30, 1997 5.25:1
From December 31, 1997, through
December 30, 1998 5.00:1
From December 31, 1998, through
December 30, 1999 5.00:1
At December 31, 1999 and all
times thereafter 4.50:1
Section 7.9 Operating Cash Flow to Total Interest Expense Ratio. (a) As
of the end of any calendar quarter, (b) at the time of any Advance which
increases the aggregate principal
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amount of the Loans outstanding hereunder, and (c) at the time of any proposed
sale, lease, transfer, exchange or other disposition of assets, any proposed
acquisition of assets, or any proposed investment in any other Person, the
Borrower shall not permit the ratio of Operating Cash Flow to Total Interest
Expense for the twelve-month period then ending in the case of Section 7.9(a)
above, or for the most recently ended twelve-month period for which financial
statements are required to have been provided to the Administrative Agent and
the Lenders pursuant to Section 6.1 and 6.2 hereof in the case of Sections
7.9(b) and (c) above, in each case, after giving effect to the Advance or other
transaction proposed to be effected as of such date, to be less than the ratios
set forth below for calculation dates using financial statements for periods
ending during the periods shown below:
Period Ratio
------ -----
From Agreement Date through 1.50:1
December 31, 1997
From January 1, 1998 and 1.75:1
thereafter
Section 7.10 Operating Cash Flow Plus Cash on Hand to Fixed Charges
Ratio. Commencing as of December 31, 1996, (a) as of the end of any calendar
quarter, (b) at the time of any Advance which increases the aggregate principal
amount of the Loans outstanding hereunder, and (c) at the time of any proposed
sale, lease, transfer, exchange or other disposition of assets, any proposed
acquisition of assets, or any proposed investment in any other Person, the
Borrower shall not permit the ratio of (1) the sum of (x) Operating Cash Flow,
plus (y) cash or Cash Equivalents on hand with respect to the Borrower and the
Restricted Subsidiaries on a consolidated basis, plus (z) the portion of the
unborrowed balance of the Revolving Loan Commitment which could be drawn by the
Borrower in accordance with Sections 7.8, 7.11 and 7.17 hereof, for or as of the
end of the twelve-month period then ending in the case of Section 7.10(a) above,
or for the most recently ended twelve-month period for which financial
statements are required to have been provided to the Administrative Agent and
the Lenders pursuant to Section 6.1 and 6.2 hereof in the case of Sections
7.10(b) and (c) above, to (2) Fixed Charges for such period, after giving effect
to the Advance or other transaction proposed to be effected as of such date, to
be less than 1.00 to 1.
Section 7.11 Annualized Operating Cash Flow to Pro Forma Debt Service
Ratio. (a) As of the end of any calendar quarter,
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(b) at the time of any Advance which increases the aggregate principal amount of
the Loans outstanding hereunder, and (c) at the time of any proposed sale,
lease, transfer, exchange or other disposition of assets, any proposed
acquisition of assets, or any proposed investment in any other Person, the
Borrower shall not permit the ratio of Annualized Operating Cash Flow for the
calendar quarter end being tested in the case of Section 7.11(a) above, or the
most recent quarter end for which financial statements are required to be
delivered to the Administrative Agent and the Lenders pursuant to Sections 6.1
and 6.2 hereof in the case of Sections 7.11(b) and (c) above, to Pro Forma Debt
Service to be less than 1.15 to 1.
Section 7.12 Affiliate Transactions. The Borrower shall not, and shall
not permit any Restricted Subsidiary to, at any time engage in any transaction
with an Affiliate, nor make an assignment or other transfer of any of its
properties or assets to any Affiliate, on terms less advantageous to the
Borrower or the applicable Restricted Subsidiary than would be the case if such
transactions had been effected on an arm's length basis with a non-Affiliate.
Section 7.13 Limitation on Leases; Sale/Leasebacks. The Borrower shall
not, and shall not permit any Restricted Subsidiary to, make or be or become
obligated to make any payment in respect of any obligations as lessee under a
lease, except for (x) payments under leases to be used in connection with the
operation of its business (other than Pole Agreements and tower rental
agreements entered into in the ordinary course of business) which, when
aggregated with all other payments under such leases by the Borrower and the
Restricted Subsidiaries would not exceed in the aggregate during any one fiscal
year of the Borrower, $1,000,000, and during the term of this Agreement,
$9,000,000, and (y) payments relating to Capitalized Lease Obligations permitted
hereunder, and (z) payments under Pole Agreements and tower rental agreements
entered into in the ordinary course of business. The Borrower shall not, and
shall not permit any Restricted Subsidiary to, enter into any sale/leaseback
transaction.
Section 7.14 ERISA Liabilities. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, allow any of its Plans to have an
accumulated funding deficiency as defined in Code Section 4971(c)(ii) and
measured at the end of the plan year. The Borrower shall not, and shall not
permit any Restricted Subsidiary to, become a participant in any Multiemployer
Plan.
Section 7.15 Restrictions on Upstream Dividends by Subsidiaries. The
Borrower shall not permit to exist at any time
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any consensual restriction limiting the ability (whether by covenant, event of
default, subordination or otherwise) of any Restricted Subsidiary to (a) make
Restricted Payments to or Restricted Purchases from the Borrower or any
Restricted Subsidiary, (b) pay any obligation owed to the Borrower or any
Restricted Subsidiary, (c) make any loans or advances to or investments in the
Borrower or in any Restricted Subsidiary, (d) transfer any of its property or
assets (other than property or assets subject to Permitted Liens) to the
Borrower or any Restricted Subsidiary, or (e) create any Lien upon its property
or assets whether now owned or hereafter acquired or upon any income or profits
therefrom, except for restrictions provided in this Agreement and the other Loan
Documents.
Section 7.16 Capital Expenditures. The Borrower shall not permit the
aggregate amount of Capital Expenditures made by the Borrower and the Restricted
Subsidiaries during the fiscal year ending December 31, 1996 to exceed
$66,000,000.
Section 7.17 Total Debt to Annualized Operating Cash Flow Ratio. (a) As
of the end of any calendar quarter, (b) at the time of any Advance which
increases the aggregate principal amount of the Loans outstanding hereunder, and
(c) at the time of any incurrence of Indebtedness, any proposed sale, lease,
transfer, exchange or other disposition of assets, any proposed acquisition of
assets, or any proposed investment in any other Person, the Borrower shall not
permit the Total Leverage Ratio for the calendar quarter end being tested in the
case of Section 7.17(a) above, or the most recent quarter end for which
financial statements are required to be delivered to the Administrative Agent
and the Lenders pursuant to Sections 6.1 and 6.2 hereof in the case of Sections
7.17(b) and (c) above, after giving effect to the Advance or other transaction
proposed to be effected as of such date, to exceed the ratios set forth below
for calculation dates using financial statements for periods ending during the
periods shown below:
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Total
Leverage
Period Ratio
------ -----
From the Agreement Date, through
December 30, 1996 7.50:1
From December 31, 1996, through
March 30, 1997 7.00:1
From March 31, 1997, through
December 30, 1997 6.75:1
From December 31, 1997, through
March 30, 1998 6.50:1
From March 31, 1998, through
December 30, 1998 6.25:1
From December 31, 1998 and all
times thereafter 6.00:1
ARTICLE 8
Default
Section 8.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
(a) Any material representation or warranty made under this
Agreement shall prove incorrect or misleading in any material respect when made
or deemed to be made pursuant to Section 4.2 hereof;
(b) The Borrower shall default in the payment of any principal
or interest under the Notes, or any of them, or fees or other amounts payable
hereunder or under any other Loan Document, including, without limitation, under
Section 2.1 hereof in connection with the reimbursement of draws under any
Letter of Credit when due;
(c) The Borrower shall default in the performance or
observance of any agreement or covenant contained in Article 6 or 7 hereof;
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(d) The Borrower shall default in the performance or
observance of any other agreement or covenant contained in this Agreement not
specifically referred to elsewhere in this Section 8.1, and such default shall
not be cured to the Required Lenders' satisfaction within a period of thirty
(30) days from the date of the occurrence of such default;
(e) There shall occur any default in the performance or
observance of any agreement or covenant or material breach of any representation
or warranty contained in any of the Loan Documents (other than this Agreement or
as otherwise provided in Section 8.1 of this Agreement), which shall not be
cured to the Required Lenders' satisfaction within a period of thirty (30) days
from the date of the occurrence of such default;
(f) Neither H.F. Lenfest (individually or through his control,
by written proxy, of the voting rights of his immediate family with respect to
the capital stock of the Borrower) nor Tele-Communications, Inc., a Delaware
corporation, directly or indirectly through one or more direct or indirect
wholly-owned Subsidiaries, shall own beneficially fifty percent (50%) or more of
all voting shares of the Borrower's capital stock and have the right to elect at
least fifty percent (50%) of the members of the board of directors of the
Borrower; or the Borrower shall cease to own, directly or indirectly through a
wholly-owned Restricted Subsidiary, all of the issued and outstanding capital
stock of the Restricted Subsidiaries;
(g) There shall be entered a decree or order for relief in
respect of the Borrower or any Restricted Subsidiary under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
applicable Federal or state bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar
official of the Borrower or any Restricted Subsidiary or of any substantial part
of its properties, or ordering the winding-up or liquidation of the affairs of
the Borrower or any Restricted Subsidiary or an involuntary petition shall be
filed against the Borrower or any Restricted Subsidiary, and (i) such petition
shall not be diligently contested, or (ii) any such petition shall continue
undismissed for a period of sixty (60) consecutive days;
(h) The Borrower or any Restricted Subsidiary shall file a
petition, answer or consent seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other applicable Federal
or state bankruptcy law or other similar law, or the Borrower or any Restricted
Subsidiary shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the
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appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Borrower or
any Restricted Subsidiary or of any substantial part of its properties, or the
Borrower or any Restricted Subsidiary shall fail generally to pay its debts as
they become due, or the Borrower or any Restricted Subsidiary shall take any
action in furtherance of any such action;
(i) A final judgment shall be entered by any court against the
Borrower or any Restricted Subsidiary for the payment of money in excess of
$2,500,000 in the aggregate in excess of insurance coverage, or a warrant of
attachment or execution or similar process shall be issued or levied against
property of the Borrower or any Restricted Subsidiary which, together with all
other such property of the Borrower and the Restricted Subsidiaries subject to
other such process exceeds $2,500,000 in the aggregate in excess of insurance
coverage, and if, within thirty (30) days after the entry, issue or levy
thereof, such judgment, warrant or process shall not have been paid or
discharged or stayed pending appeal, or if, after the expiration of any such
stay, such judgment, warrant or process shall not have been paid or discharged;
(j) There shall be at any time any "accumulated funding
deficiency," as defined in ERISA or in Section 412 of the Code, with respect to
any Plan maintained by the Borrower, any Restricted Subsidiary or any ERISA
Affiliate, or to which the Borrower, any Restricted Subsidiary or any ERISA
Affiliate has any liabilities, or any trust created thereunder; or a trustee
shall be appointed by a United States District Court to administer any such
Plan; or the Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any such Plan; or the Borrower, any Restricted Subsidiary or any ERISA
Affiliate shall incur any liability to the Pension Benefit Guaranty Corporation
in connection with the termination of any such Plan; or any Plan or trust
created under any Plan of the Borrower, any Restricted Subsidiary or any ERISA
Affiliate shall engage in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) which would subject any such
Plan, any trust created thereunder, any trustee or administrator thereof, or any
party dealing with any such Plan or trust to the tax or penalty on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; or
the Borrower, any Restricted Subsidiary or any ERISA Affiliate shall enter into
or become obligated to contribute to a Multiemployer Plan;
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(k) There shall occur any default or event of default or any
event which gives rise to a right of redemption or similar option or privilege
with respect to Indebtedness of the Borrower or any Restricted Subsidiary or
which causes the Borrower or any Restricted Subsidiary to be required to offer
to purchase any such Indebtedness under any agreement or instrument evidencing
Indebtedness of the Borrower or any Restricted Subsidiary in an aggregate
principal amount exceeding $5,000,000, or there shall occur any material default
under any Interest Rate Hedge Agreement, fixed rate loan agreement or other
similar arrangement having a notional principal amount of $5,000,000 or more,
which default or event of default, in any such case, has not been cured within
any applicable cure period and as to which notice, if any is required to be
given in order for such event to constitute an event of default, has been given
under such agreement or instrument;
(l) Any number of Licenses shall be terminated or revoked such
that the Borrower or one or more Restricted Subsidiaries are no longer entitled
to operate the portion of the System subject to such Licenses and retain the
revenue received therefrom, or the Borrower or any Restricted Subsidiary or any
grantor or grantors of Licenses shall fail to renew any number of Licenses at
the stated expiration thereof such that the Borrower or one or more Restricted
Subsidiaries are no longer entitled to operate the portion of the System subject
to such Licenses and retain the revenue received therefrom, and the overall
effect of all such terminations, revocations and failures to renew would be or
has been to reduce, by ten percent (10%) or more, Annualized Operating Cash Flow
as of the Agreement Date; or
(m) Any material provision of any Loan Document shall at any
time and for any reason be declared to be null and void, or a proceeding shall
be commenced by the Borrower or any Restricted Subsidiary, or by any
governmental authority having jurisdiction over the Borrower or any Restricted
Subsidiary, seeking to establish the invalidity or unenforceability thereof
(exclusive of questions of interpretation of any provision thereof), or the
Borrower or any Restricted Subsidiary shall deny that it has any liability or
obligation for the payment of principal or interest purported to be created
under any Loan Document.
Section 8.2 Remedies. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in
Section 8.1(g) or (h), the Administrative Agent, at the direction of the
Required Lenders, shall (i) terminate the Revolving Loan Commitment and Term
Loan, and/or (ii) declare the
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principal of and interest on the Loans and the Notes and all other amounts owed
under this Agreement, the Notes and the other Loan Documents to be forthwith due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything in this Agreement, the Notes, or the
other Loan Documents to the contrary notwithstanding, and/or (iii) declare the
face amount of each outstanding Letter of Credit to be forthwith due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, anything in this Agreement, the Notes, or the other
Loan Documents to the contrary notwithstanding.
(b) Upon the occurrence and continuance of an Event of Default
specified in Section 8.1(g) or Section 8.1(h), such principal, interest and
other amounts (including, without limitation, the face amount of all Letters of
Credit) shall thereupon and concurrently therewith become due and payable and
the Revolving Loan Commitment and Term Loan shall forthwith terminate, all
without any action by any of the Administrative Agent, the Lenders, the Required
Lenders or the holders of the Notes, and without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in this
Agreement, the Notes or the other Loan Documents to the contrary
notwithstanding.
(c) The Administrative Agent, in accordance with Section 9.8
hereof, shall exercise all of the post-default rights granted to it and to them
under the Loan Documents or under Applicable Law.
(d) The rights and remedies of the Administrative Agent and
the Lenders hereunder shall be cumulative, and not exclusive.
ARTICLE 9
The Agents
Section 9.1 Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes, and hereby agrees that it will require any
transferee of any of its interest in its Loans and in its Notes irrevocably to
appoint and authorize, the Administrative Agent to take such actions as its
agent on its behalf and to exercise such powers hereunder as are delegated by
the terms hereof, together with such powers as are reasonably incidental
thereto. Neither the Administrative Agent nor any of its respective directors,
officers, employees or agents shall be liable for any action taken or omitted to
be taken by it or them
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hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct.
Section 9.2 Interest Holders. The Administrative Agent may treat each
Lender, or the Person designated in the last notice filed with the
Administrative Agent under this Section, as the holder of all of the interests
of such Lender in its Loans and in its Notes until written notice of transfer,
signed by such Lender (or the Person designated in the last notice filed with
the Administrative Agent) and by the Person designated in such written notice of
transfer, in form and substance satisfactory to the Administrative Agent, shall
have been filed with the Administrative Agent.
Section 9.3 Consultation with Counsel. The Administrative Agent may
consult with such legal counsel selected by it and shall not be liable for any
action taken or suffered by it in good faith reliance on the advice of such
counsel.
Section 9.4 Documents. The Administrative Agent shall be under no duty
to examine, inquire into, or pass upon the validity, effectiveness or
genuineness of this Agreement, any Note or any instrument, document or
communication furnished pursuant hereto or in connection herewith, and the
Administrative Agent shall be entitled to assume that they are valid, effective
and genuine, have been signed or sent by the proper parties and are what they
purport to be.
Section 9.5 Administrative Agent and Affiliates. With respect to the
Loans and all other matters herein, the Lender which is an affiliate of the
Administrative Agent shall have the same rights and powers hereunder as any
other Lender and the Administrative Agent and its affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower and its Subsidiaries, and any Affiliates of, or Persons doing business
with, the Borrower and its Subsidiaries, as if it were not affiliated with the
Administrative Agent and without any obligation to account therefor. The Lenders
acknowledge that the Administrative Agent and its affiliates have other lending
and investment relationships with the Borrower and its Subsidiaries and its
Affiliates and in the future may enter into additional such relationships.
Section 9.6 Responsibility of the Administrative Agent. The duties and
obligations of the Administrative Agent under this Agreement are only those
expressly set forth in this Agreement. The Administrative Agent shall be
entitled to assume that no Default or Event of Default has occurred and is
continuing unless it has actual knowledge, or has been notified by the Borrower,
of such fact, or has been notified by a Lender that such Lender
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considers that a Default or an Event of Default has occurred and is continuing,
and such Lender shall specify in detail the nature thereof in writing. The
Administrative Agent shall not be liable hereunder for any action taken or
omitted to be taken except for its gross negligence or willful misconduct.
Section 9.7 Action by Administrative Agent.
(a) The Administrative Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, and with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, this Agreement, unless the Administrative Agent shall have been instructed
by the Required Lenders to exercise or refrain from exercising such rights or to
take or refrain from taking such action; provided that the Administrative Agent
shall not exercise any rights under Section 8.2(a) or 8.2(c) of this Agreement
without the request of the Required Lenders. The Administrative Agent shall not
incur any liability under or in respect of this Agreement with respect to
anything which it may do or refrain from doing in the reasonable exercise of its
judgment or which may seem to it to be necessary or desirable in the
circumstances, except for its gross negligence or willful misconduct.
(b) The Administrative Agent shall not be liable to the
Lenders or to any Lender in acting or refraining from acting under this
Agreement in accordance with the instructions of the Required Lenders or all the
Lenders, if expressly required by the terms of this Agreement, and any action
taken or failure to act pursuant to such instructions shall be binding on all
Lenders.
Section 9.8 Notice of Default or Event of Default. In the event that
the Administrative Agent or any Lender shall acquire actual knowledge, or shall
have been notified, of any Default or Event of Default, the Administrative Agent
or such Lender shall promptly notify the Lenders and the Administrative Agent,
and the Administrative Agent shall take such action and assert such rights under
this Agreement as the Required Lenders shall request in writing, and the
Administrative Agent shall not be subject to any liability by reason of its
action pursuant to any such request. If the Required Lenders shall fail to
request the Administrative Agent to take action or to assert rights under this
Agreement in respect of any Default or Event of Default within ten (10) days
after their receipt of the notice of any Default or Event of Default from the
Administrative Agent, or shall request inconsistent action with respect to such
Default or Event of Default, the Administrative Agent may, but shall not be
required to, take such action and assert such rights as it deems in its
discretion to be advisable for the protection of the
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Lenders, except that, if the Required Lenders have instructed the Administrative
Agent not to take such action or assert such right, in no event shall the
Administrative Agent act contrary to such instructions.
Section 9.9 Responsibility Disclaimed. The Administra- tive Agent shall
be under no liability or responsibility whatso- ever as Administrative Agent:
(a) To the Borrower or any other Person as a consequence of
any failure or delay in performance by or any breach by, any Lender of any of
its or their obligations under this Agreement;
(b) To any Lender, as a consequence of any failure or delay in
performance by, or any breach by, the Borrower or any other Person of any of its
obligations under this Agreement or the Notes or any other Loan Document; or
(c) To any Lender, for any statements, representations or
warranties in this Agreement, or any other document contemplated by this
Agreement, or any information provided pursuant to this Agreement, any other
Loan Document, or any other document contemplated by this Agreement, or for the
validity, effectiveness, enforceability or sufficiency of this Agreement, the
Notes, any other Loan Document, or any other document contemplated by this
Agreement.
Section 9.10 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower) pro rata
according to their respective Commitment Ratios, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including reasonable fees and expenses of experts, agents,
consultants and counsel), or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of this Agreement, any other Loan
Document, or any other document contemplated by this Agreement or any action
taken or omitted by the Administrative Agent under this Agreement, any other
Loan Document, or any other document contemplated by this Agreement, except that
no Lender shall be liable to the Administrative Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent.
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Section 9.11 Credit Decision. Each Lender represents and warrants to
each other and to the Administrative Agent and the Borrower that:
(a) In making its decision to enter into this Agreement and to
make its Advances it has independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of the Borrower and
the Restricted Subsidiaries and that it has made an independent credit judgment,
and that it has not relied upon information provided by the Administrative
Agent; and
(b) So long as any portion of the Loans remains outstanding,
it will continue to make its own independent evaluation of the financial
condition and affairs of the Borrower and the Restricted Subsidiaries.
Section 9.12 Successor Agents. The Administrative Agent may resign at
any time by giving written notice thereof to the Lender and the Borrower, and
may be removed at any time for cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within ten (10) days after the retiring Administrative Agent's
giving of notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent which shall be any Lender
or a commercial bank organized under the laws of the United States of America or
any political subdivision thereof which has combined capital and reserves in
excess of $250,000,000. Such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges, duties and
obligations of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Article shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Administrative Agent.
Section 9.13 Arranging Agents. The Arranging Agents shall have no
duties or obligations under this Agreement or the other Loan Documents in their
capacities as Arranging Agents other than as expressly provided herein.
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ARTICLE 10
Change in Circumstances
Affecting Advances
Section 10.1 LIBOR Basis Determination Inadequate or Unfair. If with
respect to any proposed LIBOR Advance for any Interest Period, any Lender
determines that deposits in dollars (in the applicable amount) are not being
offered to such Lender in the relevant market for such Interest Period, or if
the rate quoted by the Administrative Agent does not reflect such Lender's
actual cost of funding such Advance, such Lender shall forthwith give notice
thereof to the Administrative Agent, the Borrower and the Lenders, whereupon
until the Administrative Agent notifies the Borrower that the circumstances
giving rise to such situation no longer exist, the obligations of such Lender to
make LIBOR Advances shall be suspended.
Section 10.2 Illegality. If any applicable law, rule or regulation, or
any change therein, or any interpretation or change in interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency, shall make it
unlawful or impossible for any Lender to make, maintain or fund its LIBOR
Advances, such Lender shall notify the Administrative Agent, and the
Administrative Agent shall forthwith give notice thereof to the Lenders and the
Borrower. Before giving any notice to the Administrative Agent pursuant to this
Section, such Lender shall designate a different lending office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender. Upon
receipt of such notice, notwithstanding anything contained in Article 2 hereof,
the Borrower shall repay in full the then outstanding principal amount of each
LIBOR Advance of such Lender so affected, together with accrued interest
thereon, either (a) on the last day of the then current Interest Period
applicable to such Advance if such Lender may lawfully continue to maintain and
fund such Advance to such day or (b) immediately if such Lender may not lawfully
continue to fund and maintain such Advance to such day. Concurrently with
repaying each LIBOR Advance of such Lender so affected, notwithstanding anything
contained in Article 2 hereof, the Borrower shall borrow a Base Rate Advance
from such Lender, and such Lender shall make such Advance in an amount such that
the outstanding principal amount of the Notes held by such Lender shall equal
the outstanding principal amount of such Notes immediately prior to such
repayment.
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Section 10.3 Increased Costs.
(a) If any applicable law, rule or regulation, or any change
therein, or any interpretation or change in interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof or compliance by any Lender
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(1) shall subject any Lender to any tax, duty or
other charge with respect to this Agreement, the Notes, the Loans or
payments by the Borrower of principal, interest, fees or other amounts
due from the Borrower hereunder or under the Notes or its obligation to
make Loans hereunder (except for taxes on the overall net income of
such Lender), or shall change the basis of taxation of payments to any
Lender of the principal of or interest on its Loans or in respect of
any other amounts due under this Agreement in respect of its Loans, or
its obligation to make Loans; or
(2) shall impose, modify or deem applicable any
reserve (including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System, but excluding any included in
an applicable LIBOR Reserve Percentage), special deposit, capital
adequacy, assessment or other requirement or condition against assets
of, deposits with or for the account of, or commitments or credit
extended by, any Lender or shall impose on any Lender or the London
Interbank Borrowing Market any other condition affecting its obligation
to make Loans;
and the result of any of the foregoing is to increase the cost to such Lender of
making or maintaining any such Loans, or to reduce the amount of any sum
received or receivable by the Lender under this Agreement or under its Notes
with respect thereto, then, on the earlier of a date within fifteen (15) days
after demand by such Lender or the Maturity Date, the Borrower agrees to pay to
such Lender such additional amount or amounts as will compensate such Lender for
such increased costs. Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section 10.3 and will designate a different lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the sole judgment of such Lender made in good faith, be otherwise
disadvantageous to such Lender.
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(b) A certificate of any Lender claiming compensation under
this Section 10.3 and setting forth the additional amount or amounts to be paid
to it hereunder and calculations therefor shall be presumptively correct in the
absence of manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods. If any Lender demands compensation
under this Section 10.3 with respect to LIBOR Advances, the Borrower may at any
time, upon at least five (5) Business Days' prior notice to such Lender, prepay
in full the then outstanding LIBOR Advances of such Lender, together with
accrued interest thereon to the date of prepayment, along with any reimbursement
required under Section 2.10 hereof. Concurrently with prepaying such LIBOR
Advances the Borrower shall borrow a Base Rate Advance from such Lender, and
such Lender shall make such Advance in an amount such that the outstanding
principal amount of the Notes held by such Lender shall equal the outstanding
principal amount of such Notes immediately prior to such prepayment.
Section 10.4 Effects on Other Advances. If notice has been given
pursuant to Sections 10.1, 10.2 or 10.3 suspending the obligation of any Lender
to make any LIBOR Advance, or requiring LIBOR Advances of any Lender to be
repaid or prepaid, then, unless and until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such repayment no longer apply,
all Advances which would otherwise be made by such Lender as LIBOR Advances
shall be made instead as Base Rate Advances.
ARTICLE 11
Miscellaneous
Section 11.1 Notices.
(a) Except as provided in the following sentence, all notices
and other communications under this Agreement shall be in writing and shall be
deemed to have been given three (3) days after deposit in the mail, designated
as certified mail, return receipt requested, post-prepaid, or one (1) day after
being entrusted to a reputable commercial overnight delivery service, or when
sent out by telecopy addressed to the party to which such notice is directed at
its address determined as provided in this Section 11.1. All Requests for
Advances and other borrowing and payment notices shall be in writing and shall
be deemed to be given only upon actual receipt by the Administrative Agent. All
notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:
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(i) If to the Borrower, to it at:
Lenfest Communications, Inc.
c/o The Lenfest Group
200 Cresson Boulevard
Oaks, Pennsylvania 19456-0989
Telecopy No.: (610) 650-3011
Attn: Harry F. Brooks
via U.S. Mail:
Lenfest Communications, Inc.
c/o The Lenfest Group
200 Cresson Boulevard
P.O. Box 989
Oaks, Pennsylvania 19456-0989
with a copy to:
The Lenfest Group
200 Cresson Boulevard
Oaks, Pennsylvania 19456-0989
Telecopy No.: (610) 650-3061
Attn: Samuel W. Morris, Jr., Esq.
and to:
The Lenfest Group
200 Cresson Boulevard
Oaks, Pennsylvania 19456-0989
Telecopy No.: (610) 650-3061
Attn: Stephen N. Plant
(ii) If to the Administrative Agent, to it at:
Toronto Dominion (Texas), Inc.
909 Fannin Street, Suite 1700
Houston, Texas 77010
Attn: Manager, Agency
with a copy to:
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 262-1928
Attn: Melissa Glass
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(iii) If to the Lenders, to them at:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Attn: Manager, Agency
with a copy to:
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 262-1928
Attn: Melissa Glass
PNC Bank, National Association
100 South Broad Street
9th Floor
Philadelphia, Pennsylvania 19101
Telecopy No.: (215) 585-6680
Attn: Jeffrey E. Hauser
NationsBank of Texas, N.A.
901 Main Street
64th Floor Plaza
Dallas, Texas 75202
Telecopy No.: (214) 508-9390
Attn: Gregory I. Meador
Union Bank of California, N.A.
400 California, N.A.
17th Floor
San Francisco, California 94104
Telecopy No.: (415) 765-3146
Attn: David Chicca
Bank of Montreal, Chicago Branch
430 Park Avenue
16th Floor
New York, New York 10022
Telecopy No.: (212) 605-1648
Attn: Mike Andres
The Bank of Nova Scotia
One Liberty Plaza
26th Floor
New York, New York 10006
Telecopy No.: (212) 225-5090
Attn: Margot Bright
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Banque Nationale de Paris
725 S. Figueroa Street
Los Angeles, California 90017
Telecopy No.: (213) 488-9602
Attn: Janice Ho
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Telecopy No.: (212) 856-3558
Attn: Coleen Risorto
CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, Pennsylvania 19101-7618
Telecopy No.: (215) 973-77212
Attn: Doug Blackman
Dresdner Bank AG, New York
and Grand Cayman Branches
75 Wall Street
New York, New York 10005
Telecopy No.: (212) 429-2129
Attn: Jane Majeski
The First National Bank of Maryland
25 South Charles Street
18th Floor
Baltimore, Maryland 21201
Telecopy No.: (410) 244-4746
Attn: Tim Knabe
First Hawaiian Bank
1132 Bishop Street
19th Floor
Honolulu, Hawaii 96813
Telecopy No.: (808) 525-8973
Attn: William Schink
LTCB Trust Company
165 Broadway
New York, New York 10006
Telecopy No.: (212) 608-2371
Attn: Tetsuya Fukunaga
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MeesPierson N.V.
445 Park Avenue
5th Floor
New York, New York 10022
Telecopy No.: (212) 801-0420
Attn: Claudia Chifos
Merita Bank Ltd, Grand Cayman Branch
437 Madison Avenue
New York, New York 10017
Telecopy No.: (212) 318-9318
Attn: Eric Mann
Royal Bank of Canada
Financial Square
24th Floor
New York, New York 10006
Telecopy No.: (212) 426-6460
Attn: Eduardo Salazar
The Sumitomo Bank, Ltd.
Sears Tower
Suite 4800
233 S. Wacker Drive
Chicago, Illinois 60606
Telecopy No.: (312) 876-6436
Attn: Patrick Kennedy
Van Kampen American Capital
Prime Rate Income Trust
One Parkview Plaza
Oak Brook Terrace, Illinois 60181
Telecopy No.: (708) 684-6740
Attn: Mr. Jeffrey Maillet]
Copies shall be provided to persons other than parties hereto only in the case
of notices under Article 8 hereof.
(b) Any party hereto may change the address to which notices
shall be directed under this Section 11.1 by giving ten (10) days' written
notice of such change to other parties.
Section 11.2 Expenses. The Borrower will promptly pay:
(a) all reasonable out-of-pocket costs and expenses of the
Arranging Agents in connection with the preparation, negotiation, execution and
delivery of this Agreement and other Loan Documents, and the transactions
contemplated hereunder and thereunder and the making of the initial Advance
hereunder whether or not such Advance is made, provided that legal fees and
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expenses under this subsection 11.2(a) shall be limited to the reasonable fees
and disbursements of Powell, Goldstein, Frazer & Murphy, special counsel for the
Arranging Agents;
(b) all reasonable out-of-pocket costs and expenses of the
Administrative Agent in connection with the administration of the transactions
contemplated in this Agreement or the other Loan Documents (other than routine
overhead expenses) and the preparation, negotiation, execution and delivery of
any waiver, amendment or consent by the Lenders or the Required Lenders relating
to this Agreement or the other Loan Documents, including, but not limited to,
the reasonable fees and disbursements of any experts, agents or consultants and
of counsel for the Administrative Agent; and
(c) all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Lenders in obtaining performance under this
Agreement or the other Loan Documents and in connection with any restructuring,
refinancing or "work out" of the transactions contemplated hereby and thereby,
and all reasonable out-of-pocket costs and expenses of collection if default is
made in the payment of the Notes, which in each case shall include reasonable
fees and out-of-pocket expenses of any experts, agents, consultants and counsel
for each of the Administrative Agent and the Lenders.
Section 11.3 Waivers. The rights and remedies of the Administrative
Agent and the Lenders under this Agreement and the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies which they would
otherwise have. No failure or delay by the Administrative Agent, the Required
Lenders, and the Lenders, or any of them, in exercising any right shall operate
as a waiver of such right. The Administrative Agent and the Lenders expressly
reserve the right to require strict compliance with the terms of this Agreement
in connection with any funding of a request for an Advance. In the event the
Lenders decide to fund a request for an Advance at a time when the Borrower is
not in strict compliance with the terms of this Agreement, such decision by the
Lenders shall not be deemed to constitute an undertaking by the Lenders to fund
any further requests for Advances or preclude the Lenders from exercising any
rights available to the Lenders under the Loan Documents or at law or equity.
Any waiver or indulgence granted by the Lenders or by the Required Lenders shall
not constitute a modification of this Agreement, except to the extent expressly
provided in such waiver or indulgence, or constitute a course of dealing by the
Administrative Agent and the Lenders at variance with the terms of the Agreement
such as to require further notice by the Administrative Agent and the Lenders of
their intent to require strict adherence to the terms of the Agreement in the
future.
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Any such actions shall not in any way affect the ability of the Administrative
Agent and the Lenders, in their discretion, to exercise any rights available to
them under this Agreement or under any other agreement, whether or not the
Administrative Agent and the Lenders are party, relating to the Borrower.
Section 11.4 Set-Off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence of an Event of Default and during the continuation thereof,
the Lenders and any subsequent holder or holders of the Notes are hereby
authorized by the Borrower at any time or from time to time, without notice to
the Borrower (other than as expressly provided below) or to any other Person,
any such notice being hereby expressly waived, to set-off, appropriate and apply
any and all deposits (general or special, time or demand, including, but not
limited to, Indebtedness evidenced by certificates of deposit, in each case
whether matured or unmatured) and any other Indebtedness at any time held or
owing by the Lenders or such holder to or for the credit or the account of the
Borrower, against and on account of the obligations and liabilities of the
Borrower, to the Lenders or such holder under this Agreement, the Notes and any
other Loan Document, including, but not limited to, all claims of any nature or
description arising out of or connected with this Agreement, the Notes or any
other Loan Document, irrespective of whether (a) the Lenders or the holder of
the Notes shall have made any demand hereunder or (b) the Lenders shall have
declared the principal of and interest on the Loans and Notes and other amounts
due hereunder to be due and payable as permitted by Section 8.2 and although
such obligations and liabilities, or any of them, shall be contingent or
unmatured. Any sums obtained by any Lender or by any subsequent holder of the
Notes shall be subject to the pro rata treatment provisions of Section 2.11
hereof. Upon direction by the Administrative Agent with the consent of the
Required Lenders, each Lender holding deposits of the Borrower shall exercise
its set-off rights as so directed. The Administrative Agent shall give the
Borrower notice of any exercise of set-off rights of which it is aware after the
occurrence thereof; provided, however, that failure by the Administrative Agent
to provide such notice shall not invalidate or otherwise render inappropriate or
unlawful any such exercise of set-off rights hereunder.
Section 11.5 Assignment.
(a) The Borrower may not assign or transfer any of its rights
or obligations hereunder or under the Notes without the prior written consent of
the Administrative Agent and the Lenders.
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(b) Following the Syndication Period, each Lender may at any
time enter into assignment agreements or participations with one or more other
banks or other Persons pursuant to which such Lender may assign or participate
its interest under this Agreement and the Notes and the other Loan Documents,
including, its interest in any particular Advance or portion thereof, as
follows:
(i) Each Lender may sell assignments or participations
of up to one hundred percent (100%) of its interest hereunder to (A)
one or more U.S. affiliates of such Lender, and (B) any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank, without restriction.
(ii) All other assignments and participations (as
applicable) shall be subject to the following additional terms and
conditions:
(A) No Lender shall assign its interests in
either the Revolving Loan Commitment or the Term Loan without
(i) assigning an identical percentage of the Revolving Loan
Commitment (including, without limitation, the Letter of
Credit Commitment thereunder) and the Loans and Letters of
Credit outstanding under both the Revolving Loan Commitment
and the Term Loan, (ii) obtaining the prior consent of the
Administrative Agent and, (iii) so long as no Default has
occurred and is continuing, obtaining the prior consent of the
Borrower. No such consent shall be unreasonably withheld or
delayed.
(B) Any Person purchasing a participation or
an assignment of the Loans from a Lender shall be required to
represent and warrant that its purchase shall not constitute a
"prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code).
(C) Assignments (including any assignment of
any Advance or portion thereof) may be made with all voting
rights, and shall be made pursuant to an Assignment and
Assumption Agreement substantially in the form attached hereto
as Exhibit H. No assignment shall be in an amount less than
$5,000,000 or such lesser amount as shall be agreed to by the
Borrower and the Administrative Agent. As of the effective
date thereof, assignments shall relieve the assigning Lender
of all future obligations with respect to the portion
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of the Loans so assigned and shall confer on the assignee all
rights and obligations of the assigning Lender with respect to
such portion of the Loans.
(D) Participants shall have the same rights
and benefits as the assigning Lender under Sections 2.10 and
2.12 and Articles 6 and 10 hereof.
(E) No participation agreement shall confer
any rights under this Agreement or the other Loan Documents to
any purchaser thereof, or relieve the selling Lender from its
obligations under this Agreement; provided, however, that a
participation agreement may confer on the participant the
right to approve or disapprove (w) decreases in the interest
rates or commitment fees applicable to the Loans, (x) any
forgiveness of principal or interest, (y) any extension of any
Maturity Date or any scheduled date for the payment of
principal or reduction in either Commitment, or (z) any
release of any collateral or guaranty with respect to the
Obligations.
(F) No assignment, participation or other
transfer of any rights hereunder or under the Notes shall be
effected that would result in any interest requiring
registration under the Securities Act of 1933, as amended, or
qualification under any state securities law.
(G) If applicable, the assigning Lender
shall, and shall cause each of its assignees and participants
to provide to the Administrative Agent on or prior to the
Agreement Date or effective date of any assignment, as the
case may be, an appropriate Internal Revenue Service form as
required by Applicable Law supporting the assignee's or
participant's position that no withholding by the Borrower for
U.S. income tax payable by the Lenders and their assignees and
participants in respect of amounts received by it hereunder is
required. For purposes of this Agreement, an appropriate
Internal Revenue Service form shall mean Form 1001 (Ownership
Exemption or Reduced Rate Certificate of the U.S. Department
of Treasury), or Form 4224 (Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or
Business in the United States), or any successor or related
forms adopted by the relevant U.S. taxing authorities.
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(c) The Borrower hereby agrees that any holder of a
participation in, and any assignee or transferee of, all or any portion of any
amount owed by the Borrower under this Agreement and the Notes may exercise any
and all rights of banker's lien, set-off, or counterclaim with respect to any
and all amounts owed by the Borrower to such assignee, transferee, or holder as
fully as if such assignee, transferee, or holder had made the Loans in the
amount of the obligation in which it holds a participation or which is assigned
or transferred to it.
(d) Except as specifically set forth in this Section, nothing
in this Agreement or the other Loan Documents, expressed or implied, is intended
to or shall confer on any Person other than the respective parties hereto and
thereto and their successors and assignees permitted hereunder and thereunder
any benefit or any legal or equitable right, remedy, or other claim under this
Agreement or the other Loan Documents.
(e) Each Lender who sells or assigns a portion of its Loans,
Commitments or Notes, including, without limitation, to another Lender, but
excluding assignments made pursuant to Section 11.5(b)(i) hereof, shall pay to
the Administrative Agent an assignment fee of $3,000 for each such assignment on
or before the effective date of such assignment.
(f) The provisions of this Section 11.5 shall not apply to any
purchase of participations among the Lenders pursuant to Section 2.11 hereof.
Section 11.6 Accounting Principles. All references in this Agreement to
generally accepted accounting principles shall be to such principles as in
effect from time to time. All accounting terms used herein without definition
shall be used as defined under GAAP. All calculations to be made hereunder with
respect to the Borrower and the Restricted Subsidiaries on a consolidated basis
shall be made using the special-purpose financial statements of such Persons on
a consolidated basis prepared in accordance herewith.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Section 11.8 Governing Law. This Agreement and the other Loan Documents
shall be construed in accordance with and governed by the internal laws of the
State of New York, without giving effect to any conflict of law principles.
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Section 11.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 11.10 Interest.
(a) In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by
Applicable Law, and in the event any such payment is inadvertently made by the
Borrower or inadvertently received by any Lender, then such excess sum shall be
credited as a payment of principal, unless the Borrower shall notify such Lender
in writing that it elects to have such excess sum returned forthwith. It is the
express intent hereof that the Borrower not pay and the Lenders not receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may legally be paid by the Borrower under Applicable Law.
(b) Notwithstanding the use by the Lenders of the Base Rate
and LIBOR as reference rates for the determination of interest on the Loans, the
Lenders shall be under no obligation to obtain funds from any particular source
in order to charge interest to the Borrower at interest rates tied to such
reference rates.
Section 11.11 Headings. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 11.12 Amendment and Waiver. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be waived orally but
only by an instrument in writing signed by the Required Lenders and, in the case
of an amendment, also by the Borrower, except that in the event of (a) any
decrease (other than pro rata) or any increase in the amount of the Revolving
Loan Commitment or the Term Loan , (b) any delay in the timing of, or reduction
of the amount of, any mandatory reduction in the Revolving Loan Commitment or
the Term Loan, or any payments of principal, interest, and fees due hereunder,
or any change in the method of calculating interest and fees payable hereunder,
(c) any release or impairment of collateral or any guaranty issued in favor of
the Administrative Agent and the Lenders in respect of the Obligations, (d) any
waiver of any Event of Default arising from the failure by the Borrower to pay
any sum due hereunder, or (e) any amendment of Section 2.11 or this Section
11.12 or of the definition of Required Lenders or any provision specifying the
number of Lenders required to take
-95-
<PAGE>
action hereunder, any amendment or waiver may be made only by an instrument in
writing signed by each of the Lenders and, in the case of an amendment, also by
the Borrower.
Section 11.13 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement and the other documents described or contemplated herein
embody the entire agreement and understanding among the parties hereto and
thereto and supersede all prior agreements and understandings relating to the
subject matter hereof and thereof.
Section 11.14 Consent to Jurisdiction. The Borrower agrees that any
suit, action or proceeding with respect to this Agreement or Advances hereunder
may be brought in any court of the United States of America for the Southern
District of New York or the State of New York, and by execution and delivery of
this Agreement the Borrower irrevocably submits to each such jurisdiction for
that purpose. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in such court and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Borrower agrees that a final judgment in
any such suit, action or proceeding brought in such a court, after all
appropriate appeals, shall be conclusive and binding upon the Borrower.
Section 11.15 Confidentiality. The Lenders shall hold all non-public,
proprietary or confidential information (which has been identified as such by
the Borrower) obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices; however,
the Lenders may make disclosure of any such information to their examiners,
Affiliates,outside auditors, counsel, consultants, appraisers and other
professional advisors in connection with this Agreement or as reasonably
required by any proposed syndicate member or any proposed transferee or
participant in connection with the contemplated transfer of any Note or
participation therein or as required or requested by any governmental authority
or representative thereof or in connection with the enforcement hereof or of any
Loan Document or related document or pursuant to legal process or with respect
to any litigation between or among the Borrower and any of the Lenders or
involving any Lender. In no event shall any Lender be obligated or required to
return any materials furnished to it by the Borrower. The foregoing provisions
shall not apply to a Lender with respect to information that (i) is or becomes
generally available to the public (other than through such Lender), (ii) is
already in the possession of such Lender on a
-98-
<PAGE>
nonconfidential basis, or (iii) comes into the possession of such Lender in a
manner not involving a breach of a duty of confidentiality owing to the
Borrower.
ARTICLE 12
Waiver of Jury Trial
Section 12.1 Waiver of Jury Trial. THE BORROWER, THE ADMINISTRATIVE
AGENT, EACH LENDER AND EACH ARRANGING AGENT HEREBY WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE
BORROWER, THE ADMINISTRATIVE AGENT, THE LENDERS AND THE ARRANGING AGENTS, OR ANY
OF THEM, OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS, IS A PARTY, AS TO ALL
MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF
THE NOTES OR THE OTHER LOAN DOCUMENTS AND THE RELATIONS AMONG THE PARTIES SET
FORTH ABOVE.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed under seal by their duly authorized officers, all as of
the day and year first above written.
BORROWER: LENFEST COMMUNICATIONS, INC.
By:_______________________________
[CORPORATE SEAL]
Its:________________________
Attest:___________________________
Its:________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
TORONTO DOMINION (TEXAS), INC., as
Administrative Agent
By:_______________________________
Its:________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
THE TORONTO-DOMINION BANK, as an
Arranging Agent and a Lender
By:_______________________________
Its:________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as an
Arranging Agent and a Lender
By:____________________________________
Its:_____________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
NATIONSBANK OF TEXAS, N.A., as an
Arranging Agent and a Lender
By:____________________________________
Its:_____________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
BANK OF MONTREAL, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
THE BANK OF NOVA SCOTIA, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
BANQUE NATIONALE DE PARIS, as a Lender
By:__________________________________
Its:___________________________
By:__________________________________
Its:___________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
CIBC INC., as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
CORESTATES BANK, N.A., as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND, as
a Lender
By:__________________________________
Its:___________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
FIRST HAWAIIAN BANK, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
LTCB TRUST COMPANY, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
MEESPIERSON N.V., as a Lender
By:________________________________
Its:_________________________
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
MERITA BANK LTD, GRAND CAYMAN BRANCH, as
a Lender
By:________________________________
Its:_________________________
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
ROYAL BANK OF CANADA, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
THE SUMITOMO BANK, LTD., as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST, as a Lender
By:________________________________
Its:_________________________
LENFEST COMMUNICATIONS
CREDIT AGREEMENT
Signature Page
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ACKNOWLEDGEMENT
We acknowledge the use of our report dated July 18, 1996, on the interim
financial statements of Lenfest Communications, Inc. and subsidiaries; the use
of our report dated May 17, 1996, on the interim financial statements of The
Wilmington, Delaware System (A Cable Television System of Heritage Cable of
Delaware, Inc. Acquired by Lenfest Communications, Inc. in an Exchange of Assets
Transaction); and the use of our report dated July 18, 1996, on the interim pro
forma financial statements of Lenfest Communications, Inc. and subsidiaries,
included in this Form S-4 registration of Lenfest Communications, Inc. and
subsidiaries.
Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not
be considered a part of this registration statement prepared or certified by us
within the meaning of Sections 7 and 11 of the Act.
/s/ PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
August 6, 1996
<PAGE>
Exhibit 15.2
ARTHUR
ANDERSEN
---------------------------
Arthur Andersen LLP
---------------------------
Suite 410
August 6, 1996 Liberty View
457 Haddonfield Road
Cherry Hill, NJ 08002-2220
609 317 1000
Lenfest Communications, Inc.:
We are aware that Lenfest Communications, Inc. has included in its registration
statement the balance sheet as of March 31, 1996 and the related statements of
the operations, partners' (deficit) capital and cash flows for the three month
periods ended March 31, 1995 and 1996, of Garden State Cablevision L.P., and
includes our report dated June 4, 1996 covering the unaudited interim
financial information contained herein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the registration
statement prepared or certified by our firm or a report prepared or certified
by our firm within the meaning of Secitions 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<PAGE>
Exhibit 15.3
August 6, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Lenfest Communications, Inc.
Registration on Form S-4
We are aware that our report dated June 5, 1996 on our review of interim
financial information of Sammons Cable for the three months ended March 31, 1995
and the two months ended February 29, 1996 is included in this registration
statement. Pursuant to Rule 436(c) under the Securities Act of 1933, this report
should not be considered a part of the registration statement prepared or
certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
<PAGE>
EXHIBIT 23.2
To: Lenfest Communications, Inc.
Re: Registration Statement on Form S-4 for Senior Securities
Date: August 6, 1996
===============================================================================
In our capacity as special federal communications regulatory counsel to
Lenfest Communications, Inc., a Delaware corporation ("Lenfest"), we have
reviewed and advised Lenfest with respect to certain disclosure in the
Prospectus that forms a part of the above referenced Registration Statement,
including amendments thereto, under the heading "Legislation and Regulation."
In that regard, we hereby consent to the use of our name under the heading
"Legal Matters" in said Prospectus. In giving such consent, we do not thereby
concede that we are within the category of persons whose consent is required
under Section 7(a) of the Securities Act of 1933, as amended, or the rules and
regulations promulgated pursuant thereto by the Securities and Exchange
Commission.
Sincerely,
FLEISCHMAN AND WALSH, L.L.P.
/s/ Fleischman and Walsh, L.L.P.
---------------------------------
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made part of this
registration statement.
/s/ PRESSMAN CIOCCA & SMITH
Hatboro, Pennsylvania
August 6, 1996
<PAGE>
Exhibit 23.4
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Philadelphia, Pa.
August 6, 1996
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File No.
333- ) of our reports dated April 18, 1996, on our audits of the financial
statements and financial statement schedule of Sammons Cable. We also consent to
the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
Dallas, Texas
August 6, 1996
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d)OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
LENFEST COMMUNICATIONS,INC.
(Exact name of obligor as specified in its charter)
Delaware 23-2094942
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
200 Cresson Boulevard
Oakes, Pennsylvania 19456
(Address of principal executive offices) (Zip code)
----------------------
10 1/2% Senior Subordinated Exchange Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule
24 of the Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 10th day of July, 1996.
THE BANK OF NEW YORK
By: /s/ Nancy B. Gill
---------------------------
Name: Nancy B. Gill
Title: Assistant Treasurer
-4-
<PAGE>
================================================================================
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1995, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............................................................ $ 4,500,312
Interest-bearing balances ..................................................................................... 643,938
Securities:
Held-to-maturity securities ................................................................................... 806,221
Available-for-sale securities ................................................................................. 2,036,768
Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank:
Federal funds sold .............................................................................................. 4,166,720
Securities purchased under agreements to resell ................................................................. 50,413
Loans and lease financing receivables:
Loans and leases, net of unearned income ...................................................................... 27,068,535
LESS: Allowance for loan and lease losses ..................................................................... 520,024
LESS: Allocated transfer risk reserve ......................................................................... 1,000
Loans and leases, net of unearned income and allowance, and reserve ........................................... 26,547,511
Assets held in trading accounts ................................................................................. 758,462
Premises and fixed assets (including capitalized leases) ........................................................ 615,330
Other real estate owned ......................................................................................... 63,769
Investments in unconsolidated subsidiaries and associated companies ............................................. 223,174
Customers' liability to this bank on acceptances outstanding .................................................... 900,795
Intangible assets ............................................................................................... 212,220
Other assets .................................................................................................... 1,186,274
------------
Total assets .................................................................................................... $ 42,711,907
============
LIABILITIES
Deposits:
In domestic offices ........................................................................................... $ 21,248,127
Noninterest-bearing ........................................................................................... 9,172,079
Interest-bearing .............................................................................................. 12,076,048
In foreign offices, Edge and Agreement subsidiaries, and IBFs ................................................. 9,535,088
Noninterest-bearing ........................................................................................... 64,417
Interest-bearing .............................................................................................. 9,470,671
Federal funds purchased and securities sold under agreements to repurchase in domestic offices of
the bank and of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased ....................................................................................... 2,095,668
Securities sold under agreements to repurchase ................................................................ 69,212
Demand notes issued to the U.S. Treasury......................................................................... 107,340
Trading liabilities ............................................................................................. 615,718
Other borrowed money:
With original maturity of one year or less .................................................................... 1,638,744
With original maturity of more than one year .................................................................. 120,863
Bank's liability on acceptances executed and outstanding ........................................................ 909,527
Subordinated notes and debentures ............................................................................... 1,047,860
Other liabilities ............................................................................................... 1,836,573
------------
Total liabilities ............................................................................................... 39,224,720
------------
EQUITY CAPITAL
Common stock .................................................................................................... 942,284
Surplus ......................................................................................................... 525,666
Undivided profits and capital reserves .......................................................................... 1,995,316
Net unrealized holding gains (losses) on available-for-sale securities .......................................... 29,668
Cumulative foreign currency translation adjustments ............................................................. (5,747)
------------
Total equity capital ............................................................................................ 3,487,187
------------
Total liabilities and equity capital ............................................................................ $ 42,711,907
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot -|
Thomas A. Renyi |- Directors
Alan R. Griffith -|
================================================================================
<PAGE>
LETTER OF TRANSMITTAL
LENFEST COMMUNICATIONS, INC.
Offer for all Outstanding
10 1/2% Senior Subordinated Notes Due 2006
in Exchange for
10 1/2% Senior Subordinated Notes Due 2006,
Which Have Been Registered Under
the Securities Act of 1933, as Amended,
Pursuant to the Prospectus, dated , 1996
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
================================================================================
The Bank of New York, Exchange Agent
By Mail:
The Bank of New York
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Lucille Firrincieli
By Hand or Overnight Courier:
The Bank of New York
Corporate Trust Services
Window, Ground Level
101 Barclay Street - 7E
New York, New York 10286
Attn: Ms. Lucille Firrincieli
By Facsimile:
(212) 815-5915
Attn: Ms. Lucille Firrincieli
Confirm by Telephone:
(212) 815-5741
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated , 1996 (the "Prospectus"), of Lenfest Communications,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $300,000,000 of the
Company's 10 1/2% Senior Subordinated Notes Due 2006, which have been registered
under the Securities Act of 1933, as amended (the "New Notes"), for a like
principal amount of the issued and outstanding 10 1/2% Senior Subordinated Notes
Due 2006 (the "Old Notes") of the Company from the registered holders (the
"Holders") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from April 29, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
whose Old Notes are accepted for exchange will not receive any payment in
respect of accrued interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
-2-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company, the aggregate principal amount of Old
Notes indicated below. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of the Company all right, title and interest
in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the Holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the Holder of such Old Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business and such Holders have no arrangement with any person
to participate in a distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances. If the undersigned
is not a broker-dealer, the undersigned represents that it is not engaged in,
and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of the Company, is engaged in or intends to engage
in, or has any arrangement or understanding with any person to participate in, a
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) could not rely on the applicable interpretations of the staff of
the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. If
the undersigned is a broker-dealer that will receive New Notes for its own
account pursuant to the Exchange Offer, it represents that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities and acknowledges
-3-
<PAGE>
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not changed) in the name
of the undersigned or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
-4-
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX BELOW.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
===============================================================================================================================
DESCRIPTION OF OLD NOTES 1 2 3
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Holder(s) Certificate Aggregate Principal Principal Amount
(Please fill in, if blank) Number(s)* Amount of Old Note(s) Tendered**
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------------------------------
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes
represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be
in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
===============================================================================================================================
</TABLE>
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number Transaction Code Number
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)________________________________________
Window Ticket Number (if any)__________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________
Name of Institution Which Guaranteed Delivery__________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number ________________ Transaction Code Number________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name___________________________________________________________________
Address________________________________________________________________
-5-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes To be completed ONLY if certificates for Old
not exchanged and/or New Notes are to be issued in the Notes not exchanged and/or New Notes are to be sent to
name of and sent to someone other than the person or someone other than the person or persons whose
persons whose signature(s) appear(s) on this Letter below, or signature(s) appear(s) on this Letter below or to such person
if Old Notes delivered by book-entry transfer which are not or persons at an address other than shown in the box
accepted for exchange are to be returned by credit to an entitled "Description of Old Notes" on this Letter above.
account maintained at the Book-Entry Transfer Facility other
than the account indicated above. Mail: New Notes and/or Old Notes to:
Issue: New Notes and/or Old Notes to: Name(s)___________________________________________
(Please Type or Print)
Name(s)____________________________________________________
(Please Type or Print) __________________________________________________
(Please Type or Print)
___________________________________________________________
(Please Type or Print) Address___________________________________________
Address ___________________________________________________ __________________________________________________
(Zip Code)
___________________________________________________________
(Zip Code)
(Complete Substitute Form W-9)
|_| Credit unexchanged Old Notes delivered by book-
entry transfer to the Book-Entry Transfer Facility
account set forth below.
____________________________________________________________
(Book-Entry Transfer Facility)
- -------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
-6-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
Dated:___________________________________________________________, 1996
X __________________________________ ___________________________, 1996
X __________________________________ ___________________________, 1996
Signature(s) of Owner Date
Area Code and Telephone Number:__________________________________
If a holder is tendering any Old Notes, this letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):_______________________________________________________________________
_______________________________________________________________________________
(Please Type or Print)
Capacity:______________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE (If required
by Instruction 3)
Signature(s) Guaranteed by an Eligible Institution:____________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name and Firm)
Dated: ____________________________________________________________, 1996
-7-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
for the 10 1/2% Senior Subordinated Notes Due 2006 of
Lenfest Communications, Inc.
for the 10 1/2% Senior Subordinated Notes Due 2006 of
Lenfest Communications, Inc.
Which Have Been Registered Under the Securities Act of 1933, as Amended
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer
- -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such
procedures, (i) such tender must be made through an Eligible Institution, (ii)
on or prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter, are deposited by the Eligible Institution within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is
-8-
<PAGE>
suggested that the mailing be registered mail, properly insured, with return
receipt requested, and made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to noteholders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Old Notes to be tendered in the box above entitled
"Description of Old Notes -- Principal Amount Tendered." A reissued certificate
representing the balance of nontendered Old Notes will be sent to such tendering
holder, unless otherwise provided in the appropriate box of this Letter,
promptly after the Expiration Date. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter, Bond Powers and Endorsements, Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder
or holders of any certificate(s) specified herein, such certificate(s) must be
endorsed accompanied by appropriate bond powers, in either case signed exactly
as the name or names of the registered holder or holders appear(s) on the
certificate(s) and signatures on such certificate(s) must be guaranteed by an
Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary
-9-
<PAGE>
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program (each, an "Eligible Institution").
Signatures on this letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer identification
or social security number of the person named must also be indicated.
Noteholders tendering Old Notes by book-entry transfer may request that Old
Notes not exchanged be credited to such account maintained at the Book-Entry
Transfer Facility as such noteholder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name and address of the person signing this Letter.
5. Tax Identification Number
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of New Notes may be subject to backup withholding in an
amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See
-10-
<PAGE>
the enclosed Guidelines of Certification of Taxpayer Identification Number on
Substitute Form W-9 (the "W-9 Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to a backup withholding as a result of a failure to report all interest
or dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide a TIN to the Company within 60
days, backup withholding will begin and continue until such holder furnishes its
TIN to the Company.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of Old
Notes to the Company or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed to such tendering holder and the
Exchange Agent will retain possession of an amount of New Notes with a face
amount equal to the amount of such transfer taxes due by such tendering holder
pending receipt by the Exchange Agent of the amount of such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
-11-
<PAGE>
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent lenders will be
accepted. All tendering holders of Old Notes by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. Withdrawal of Tenders.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth above prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the holder
in the same manner as the original signature on this Letter (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes that have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following the procedures described
above at any time on or prior to 5:00 p.m., New York City time, on the
Expiration Date.
-12-
<PAGE>
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus, this Letter and other related documents
may be directed to the Exchange Agent, at the address and telephone number
indicated above.
-13-
<PAGE>
<TABLE>
<CAPTION>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
<S> <C> <C>
==========================================================================================================================
| SUBSTITUTE | PART I -- PLEASE PROVIDE | |
| | YOUR TIN IN THE BOX AT | TIN: _____________________________ |
| FORM W-9 | RIGHT AND CERTIFY BY | Social Security Number or |
| | SIGNING AND DATING BELOW | Employer Identification Number |
| | | |
| | | |
| Department of the Treasury |--------------------------------------------------------------------------------|
| Internal Revenue Service | PART II -- TIN Applied for |_| |
| | |
| |--------------------------------------------------------------------------------|
| | CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY |
| Payor's Request for Taxpayer | THAT: |
| Identification Number ("TIN") | |
| and Certification | (1) The number shown on this form is my correct Taxpayer |
| | Identification Number (or I am waiting for a number to be issued |
| | to me); |
| | |
| | (2) I am not subject to backup withholding either because: (a) |
| | I am exempt from backup withholding, or (b) I have not |
| | been notified by the Internal Revenue Service (the "IRS") that |
| | I am subject to backup withholding as a result of failure to |
| | report all interest or dividends, or (c) the IRS has notified |
| | me that I am no longer subject to backup withholding; and |
| | |
| | (3) any other information provided on this form is true and correct. |
| | |
| | Signature:__________________________________ Date: ____________________ |
| | |
| | |
- --------------------------------------------------------------------------------------------------------------------------|
| You must cross out item (2) of the above certification if you have been notified by the IRS that you are |
| subject to backup withholding because of under reporting of interest or dividends on your tax return and you |
| have not been notified by the IRS that you are no longer subject to backup withholding. |
===========================================================================================================================
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
================================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
______________________________________ ______________________________________
Signature Date
===============================================================================
-14-
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for Tender of
10 1/2% Senior Subordinated Notes Due 2006
(including those in book-entry form)
of
LENFEST COMMUNICATIONS, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Lenfest Communications, Inc. (the "Company") made pursuant
to the Prospectus, dated ____________, 1996 (the "Prospectus"), if certificates
for the outstanding 10 1/2% Senior Subordinated Notes Due 2006 of the Company
(the "Old Notes") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to The Bank of New York (the "Exchange Agent") as set forth below.
In addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.
The Bank of New York, Exchange Agent.
By Mail:
The Bank of New York
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Lucille Firrincieli
By Hand or Overnight Courier:
The Bank of New York
Corporate Trust Services
Window, Ground Level
101 Barclay Street - 7E
New York, New York 10286
Attn: Ms. Lucille Firrincieli
By Facsimile:
(212) 815-5915
Attn: Ms. Lucille Firrincieli
Confirm by Telephone:
(212) 815-5741
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer - Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Old Notes Tendered:*
$__________________________________________________
Certificate Nos. (if available):
___________________________________________________
Total Principal Amount Represented by
Certificate(s):
$__________________________________________________
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
_______________________________________________________________________________
PLEASE SIGN HERE
X___________________________________________ _______________________________
X___________________________________________ _______________________________
Signature(s) of Owners(s) Date
or Authorized Signatory
Area Code and Telephone Number:________________________________________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.
Please print name(s) and addresses)
Name(s): ____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
Capacity: ____________________________________________________________
____________________________________________________________
Address (es): ____________________________________________________________
____________________________________________________________
Account Number: ____________________________________________________________
____________________________________________________________
Account Number: ____________________________________________________________
-2-
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Old Notes being tendered hereby or confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company, in proper form for transfer, together with any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the Expiration Date.
Name of Firm ____________________________________________________________
Address ____________________________________________________________
____________________________________________________________
Area Code & Telephone No. ___________________________________________________
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
(Please Type or Print)
Title ____________________________________________________________________
Dated ________________________
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL
-3-
<PAGE>
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
_____________________________ (the "Company") proposes to make
an offer (the "Exchange Offer") to exchange its ________________________ (the
"Old Securities") for its (the "New Securities"). The terms and conditions of
the Exchange Offer as currently contemplated are set forth in a prospectus,
dated ______________, 199__ (the "Prospectus"), proposed to be distributed to
all record holders of the Old Securities. The Old Securities and the New
Securities are collectively referred to herein as the "Securities".
The Company hereby appoints The Bank of New York to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company
on or about _____________, 199__. The Letter of Transmittal accompanying the
Prospectus is to be used by the holders of the Old Securities to accept the
Exchange Offer, and contains instructions with respect to the delivery of
certificates for Old Securities tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City
time, on _______________, 199__ or on such later date or time to which the
Company may extend the Exchange Offer (the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange Offer from time to time and may extend the
Exchange offer by giving oral (confirmed in writing) or written notice to you
before 9:00 A.M., New York City time, on the business day following the
previously scheduled Expiration Date.
[The Company expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Securities
not theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified in the Prospectus under the caption
["The Exchange Offer -- Certain Conditions to the Exchange Offer."] The Company
will give oral (confirmed in writing) or written notice of any amendment,
termination or nonacceptance to you as promptly as practicable.]
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
<PAGE>
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned ["The Exchange
Offer"] or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old
Securities at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of the Exchange Offer within two business days after the date of
the Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the Old
Securities by causing the Book-Entry Transfer Facility to transfer such Old
Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Old Securities have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Old Securities
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the President, Senior Vice President,
Executive Vice President, or any Vice President of the Company (such approval,
if given orally, to be confirmed in writing) or any other party designated by
such an officer in writing, you are authorized to waive any irregularities in
connection with any tender of Old Securities pursuant to the Exchange Offer.
5. Tenders of Old Securities may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned ["The
Exchange Offer -- Procedures for Tendering Old Securities"], and Old Securities
shall be considered properly tendered to you only when tendered in accordance
with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old
Securities which the President, Senior Vice President, Executive Vice President,
or any Vice President of the Company shall approve as having been properly
tendered shall be considered to be properly tendered (such approval, if given
orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Old
Securities received subsequent to the Expiration Date and accept its
instructions with respect to disposition of such Old Securities.
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7. You shall accept tenders:
(a) in cases where the Old Securities are registered in two
or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Securities provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Securities where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Old Securities to the transfer agent for split-up and return any untendered
Old Securities to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date of
all Old Securities properly tendered and you, on behalf of the Company, will
exchange such Old Securities for New Securities and cause such Old Securities to
be cancelled. Delivery of New Securities will be made on behalf of the Company
by you at the rate of $1,000 principal amount of New Securities for each $1,000
principal amount of the corresponding series of Old Securities tendered promptly
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said Old Securities by the Company; provided, however, that in all
cases, Old Securities tendered pursuant to the Exchange Offer will be exchanged
only after timely receipt by you of certificates for such Old Securities (or
confirmation of book-entry transfer into your account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents. You shall issue New Securities only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Old Securities tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old
Securities tendered if any of the conditions set forth in the Exchange Offer are
not met. Notice of any decision by the Company not to exchange any Old
Securities tendered shall be given (and confirmed in writing) by the Company to
you.
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11. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the Old Securities tendered because of an
invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption ["The Exchange Offer -- Certain Conditions to the
Exchange Offer"] or otherwise, you shall as soon as practicable after the
expiration or termination of the Exchange Offer return those certificates for
unaccepted Old Securities (or effect appropriate book-entry transfer), together
with any related required documents and the Letters of Transmittal relating
thereto that are in your possession, to the persons who deposited them.
12. All certificates for reissued Old Securities, unaccepted
Old Securities or for New Securities shall be forwarded by (a) first-class
certified mail, return receipt requested under a blanket surety bond protecting
you and the company from loss or liability arising out of the non-receipt or
non-delivery of such certificates or (b) by registered mail insured separately
for the replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
(b) will be regarded as making no representations and having
no responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Old Securities represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting
in reliance upon any certificate, instrument, opinion, notice, letter, telegram
or other document or security delivered to you and reasonably believed by you to
be genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
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(f) may rely on and shall be protected in acting upon
written or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Old Securities
pursuant to the Exchange Offer as to the wisdom of making such tender or as to
the market value or decline or appreciation in market value of any Old
Securities.
15. You shall take such action as may from time to time be
requested by the Company or its counsel (and such other action as you may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery (as defined in the Prospectus)
or such other forms as may be approved from time to time by the Company, to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company will furnish you with copies of such
documents at your request. All other requests for information relating to the
Exchange Offer shall be directed to the Company, Attention: __________________.
16. You shall advise by facsimile transmission or telephone,
and promptly thereafter confirm in writing to _______________________________ of
the Company and such other person or persons as it may request, daily (and more
frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the number
of Old Securities which have been tendered pursuant to the Exchange Offer and
the items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Old
Securities tendered, the aggregate principal amount of Old Securities accepted
and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery
shall be stamped by you as to the date and the time of receipt thereof and shall
be preserved by you
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for a period of time at least equal to the period of time you preserve other
records pertaining to the transfer of securities. You shall dispose of unused
Letters of Transmittal and other surplus materials by returning them to the
Company.
18. You hereby expressly waive any lien, encumbrance or right
of set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
20. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Securities reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Old Securities; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross negligence or
willful misconduct. In no case shall the Company be liable under this indemnity
with respect to any claim against you unless the Company shall be notified by
you, by letter or cable or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not be liable for the fees and expenses of any
additional counsel thereafter retained by you so long as the Company shall
retain counsel satisfactory to you to defend such suit.
22. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall
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file any appropriate reports with the Internal Revenue Service. The Company
understands that you are required to deduct 31% on payments to holders who have
not supplied their correct Taxpayer Identification Number or required
certification. Such funds will be turned over to the Internal Revenue Service in
accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Old Securities, your check in the amount of all
transfer taxes so payable, and the Company shall reimburse you for the amount of
any and all transfer taxes payable in respect of the exchange of Old Securities;
provided, however, that you shall reimburse the Company for amounts refunded to
you in respect of your payment of any such transfer taxes, at such time as such
refund is received by you.
24. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and without regard to conflicts of law principles, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
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If to the Company:
____________________________
____________________________
____________________________
Facsimile:__________________
Attention:__________________
If to the Exchange Agent:
The Bank Of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee Administration
29. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Notwithstanding
the foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Securities, funds or property then held by you
as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the
date hereof.
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Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
____________________ CORPORATION
By:_____________________________
Name:
Title:
Accepted as the date first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:_____________________________
Name:
Title:
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SCHEDULE I
FEES
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