FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 33-96804
LENFEST COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2094942
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1105 North Market St., Suite 1300,
P. O. Box 8985,
Wilmington, Delaware 19899
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(Address of Principal executive offices) (Zip Code)
(302) 427-8602
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _X_
Indicate the number of shares outstanding of each of the Registrant's
class of common stock, as of March 27, 1998: 158,896 shares of Common Stock,
$0.01 par value per share. All shares of the Registrant's Common Stock are
privately held, and there is no market price or bid and asked price for said
Common Stock.
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Item 1. BUSINESS.
General
Lenfest Communications, Inc. ("Lenfest" or the "Company") is principally
engaged in the development and operation of cable television systems primarily
through its subsidiaries which operate under the name of Suburban Cable
("Suburban Cable"). Other subsidiaries hold the Company's investments in other
cable television system operating companies, media entities and companies
providing services to cable television system operating companies.
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 December 31, 1997, the Company's Core Cable
Television Operations served approximately 991,800 basic customers and passed
approximately 1,388,900 homes. At December 31, 1997, the Company also held
equity interests in other cable television entities serving approximately
441,300 basic customers, of which approximately 380,000 were in areas near or
contiguous to the Core Cable Television Operations. The Company's attributable
portion in such other cable television entities is approximately 183,000 basic
customers, giving the Company a combined domestic base of approximately
1,174,800 basic customers.
The Company's Core Cable Television Operations are located primarily in
the suburban areas surrounding Philadelphia (Eastern 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, 1993 through
December 31, 1997, the Company's Core Cable Television Operations have
experienced an average EBITDA margin of 50.3%.
H. F. (Gerry) Lenfest, President and Chief Executive Officer of the
Company, together with his children, and Tele-Communications, Inc. ("TCI"),
through LMC Lenfest, Inc., an indirect wholly owned subsidiary, each
beneficially owns 50% of the Company's outstanding common stock. Mr. Lenfest is
a cable industry pioneer who founded the Company in 1974 and has grown the
Company both internally and through acquisitions. The Company 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."
Mr. Lenfest and LMC Lenfest, Inc. have an agreement that provides,
together with the amended and restated Certificate of Incorporation of the
Company, that Mr. Lenfest has the right to designate a majority of the Board of
Directors of the Company until the earlier of January 1, 2002 or his death.
During such period, vacancies in respect of the directors designated by Mr.
Lenfest are to be filled by designees of Mr. Lenfest or in the event of Mr.
Lenfest's death, of The Lenfest Foundation. Thereafter, the Lenfest Family
("H.F. (Gerry) Lenfest, Marguerite Lenfest, their issue, and The Lenfest
Foundation") 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.
Operating Strategy
Management believes that the Company has significant growth potential in
the continued business of providing analog television programming services, as
well as in the business of providing new services such as Internet access,
digital video and audio programming services, video-on-demand, paging and other
data services. As a base for achieving that growth, the Company has implemented
the following:
o Field Operations: The Company's operations are clustered in
one extended market area, with Field Operations management
divided into four regions of approximate equal size (i.e.,
250,000 customers each). Management of these regions provides
individualized focus on the day-to-day requirements of the
operations, including plant maintenance,
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installations of new customers and service and repair
functions. Across all four regions the Company standardized
scheduling of installations and repairs, the hours of
operation and all related work procedures. The customer,
therefore, sees a consistent and superior level of service,
regardless of the region.
o Customer Management (i.e., Billing) System: In 1997 the
Company effected the conversion to one common Customer
Management System platform (CBIS - Cincinnati Bell Information
Systems) from the previous five separate systems. That
standardized platform now allows fulfillment of work order
scheduling, sales, service and repair and billing inquiries
from any location for the entire cluster. This
state-of-the-art Customer Management System will also be the
platform for support of new products, such as paging and
Internet.
o Customer Service: In May, 1997, the Company opened a Customer
Satisfaction Center ("Call Center") in New Castle County,
Delaware. At that time, the Call Center served as the source
for inbound telephone customer service for one system of
100,000 customers. As planned, the Company proceeded to
migrate the inbound telephone customer service for additional
systems to that Call Center through the balance of the year.
By year end 1997, approximately 55% of the Company's customer
base was supported out of that location. By the end of 1998,
the Company expects the entire customer base to be supported
from that location. The Company intends to use the Call Center
to provide billing, sales and service for cable television and
new products. Among other customer service initiatives, the
Company has implemented same day, evening and weekend
installation and repair appointment options.
o Marketing and Advertising Sales: The concentration of a
significant sized customer base in one cluster affords the
Company enhanced benefits in both marketing and the sale of
advertising. The Company utilizes the local market media
(television, radio and print) to reach a wide audience in an
efficient manner given the match of the Company's coverage
area to the local media market. As the size of the Company's
cluster has grown, there has been no appreciable increase in
costs required to purchase those mass media.
Overview Of Core Cable Television Operations
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. Through its acquisitions, the Company has successfully developed a
substantial cluster of contiguous cable operating systems, which comprise the
Company's Core Cable Television Operations. This single cluster is located in
areas surrounding Philadelphia, all of which are no more than a two hour drive
from the corporate offices of Suburban Cable TV Co. Inc. ("Suburban") in Oaks,
Pennsylvania, which is approximately 20 miles northwest of Philadelphia.
The following table provides customer data for each of the years in the
five-year period ended December 31, 1997, for the Company's owned and operated
and affiliated cable television systems.
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<TABLE>
<CAPTION>
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Year Ended December 31,
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1993 1994 1995 1996 1997
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<S> <C> <C> <C> <C> <C>
Owned and Operated
Homes passed
Beginning of period 759,635 870,718 892,549 904,753 1,278,673
Internal growth 48,283 21,831 12,204 26,424 63,129
% Internal growth 5.87% 2.51% 1.37% 2.11% 4.76%
Acquired 62,800 --- --- 347,496 47,085
End of period 870,718 892,549 904,753 1,278,673 1,388,887
Basic customers
Beginning of period 477,130 550,703 577,377 596,366 927,249
Internal growth 31,573 26,674 18,989 24,817 27,609
% Internal growth 6.08% 4.84% 3.29% 2.75% 2.86%
Acquired 42,000 --- --- 306,066 36,900
End of period 550,703 577,377 596,366 927,249(b) 991,758
Affiliated Systems
Homes passed
Beginning of period 491,003 505,521 518,425 538,082 594,068
Internal growth 14,518 12,904 19,657 25,053 13,331
% Internal growth 2.96% 2.55% 3.79% 4.40% 2.24%
Acquired --- --- --- 30,933 ---
End of period 505,521 518,425 538,082 594,068 607,399
Attributable homes passed at
end of period (a) 163,258 185,457 229,390 248,720 254,294
Basic customers
Beginning of period 336,388 353,935 366,041 384,480 431,819
Internal growth 17,547 12,106 18,439 25,686 9,458
% Internal growth 5.22% 3.42% 5.04% 6.32% 2.19%
Acquired --- --- --- 21,653 ---
End of period 353,935 366,041 384,480 431,819 441,277
Attributable basic customers 113,294 130,247 162,338 179,118 182,886
at end of period (a)
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(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 December 31, 1997, the Company held a 50% equity interest in Garden State
Cablevision L.P., a 30% equity interest in the cable television subsidiaries of Susquehanna
Cable Co., a 45% equity interest in Raystay Co. and a 30% equity interest in Clearview Partners.
See "-- Unrestricted Cable Television Systems." The Company receives no direct customer revenue
from attributable basic customers.
(b) Ending customers for 1996 were restated as a result of the conversion to a
single billing system in 1997 and the resulting conversion to a unified
criteria for calculating customers.
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</TABLE>
Technical Overview and Upgrade Strategy
The Company utilizes a combination of coaxial and fiber optic cables to
distribute a wide range of programming and other broadband services to its
customers. As of December 31, 1997, approximately 95% of the Company's cable
television systems had the capacity to carry a minimum of 52 analog channels,
and approximately 28% had the capacity to carry a minimum of 78 analog channels.
The Company has commenced an upgrade of its cable television systems to
increase the channel capacity, improve the system reliability and provide the
capability for carrying enhanced, interactive two-way services such as
video-on-demand and Internet access. The Company recently has revised its plant
upgrade strategy to begin accelerating the wide deployment of fiber optic cable
throughout all of its cable television systems to create segmented service areas
with between 500 and 2,000 homes in each area,
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followed by the activation of two-way return amplifiers in each of the segmented
nodes. This strategy (using the already installed coaxial network
infrastructure) will allow the Company to accelerate delivery of two-way
interactive services. The planned fiber deployment will improve the reliability
of the network by reducing the number of amplification devices. The Company will
continue to target selected areas for upgrade to 750MHz (110 analog channel
capacity), based on local demographics, program carriage requirements and
existing franchise commitments.
The Company's upgrade strategy also includes the introduction of second
generation digital set-top devices, and it has entered into a supplier agreement
for delivery commencing in 1998. These digital set-top devices will have the
capability to receive a minimum of 12 digitally compressed channels of
programming transmitted across one analog channel on the cable network. This 12
to 1 compression ratio will provide the capability to significantly increase the
number of programming services across the existing network by replacing one
current analog service (such as pay-per-view programming) with 12 new channels
of programming. Using digital compression, the Company will be able to increase
capacity to 100 channels, or more, depending on the number of analog channels
utilized on the existing cable network.
Rates And Ancillary Revenue Sources
Lenfest's cable television systems typically offer four levels of
programming services: basic; cable programming service ("CPS"); premium
services; and pay-per-view. As of December 31, 1997, the basic service package
consisted of local off-air broadcast channels, and public service/access
channels. The monthly rate charged for the basic service package ranged from
$8.69 to $14.95. The CPS package consisted of satellite-delivered networks such
as ESPN, MTV, CNN, The Discovery Channel and USA Network. The monthly rate for
the CPS package ranged from $11.42 to $19.46. Rates for basic and CPS services
and customer equipment and installation are currently subject to governmental
regulation. See "Legislation and Regulation."
The Company also offers premium services, which include HBO, Cinemax, The
Movie Channel, Showtime, The Disney Channel and STARZ. As of December 31, 1997,
the monthly charge for each of these services, priced individually, ranged from
$8.95 to $11.95. Rates for premium services and pay-per-view services are
currently exempt from governmental regulation. See "Legislation and Regulation."
Lenfest's systems typically offer four channels of pay-per-view services
which include feature movies, special events and adult programming. As of
December 31, 1997, prices for movies and adult programming ranged from $1.95 to
$6.95. Special event prices vary considerably based upon the type of event.
Pay-per-view revenues 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 and offer one or both of the leading shop-at-home services, 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.
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. See "Legislation and Regulation."
Programming And Equipment Supply
Through an agreement with Satellite Services, Inc. (a wholly owned
subsidiary of TCI), the Company is able to purchase a majority 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
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independently. Programming is the Company's largest single expense item,
accounting for 24.2% of total operating expense during 1997. The four cable
television operators in which the Company has an equity interest (Garden State
Cablevision L.P., Susquehanna Cable Co., Clearview Partners and Raystay Co.)
also obtain a significant amount of 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.
Franchises
As of December 31, 1997, the Company held 350 cable television franchises.
These franchises are all non-exclusive and 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, 1997, franchise fee payments made by the Company have
averaged approximately 3.4% 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."
The Company has never had a franchise revoked, and management believes
that its franchise relationships are good.
Unrestricted Cable Television Systems
In addition to its Core Cable Television Operations, at December 31, 1997,
Lenfest held investments in four cable television system entities. Lenfest holds
a 50% equity interest in Garden State Cablevision L.P. ("Garden State"); a 30%
equity interest in the cable subsidiaries of Susquehanna Cable Co. ("SCC"); a
45% equity interest in Raystay Co. ("Raystay"); and a 30% equity interest in
Clearview Partners ("Clearview"). As of December 31, 1997, these entities
operated cable television systems serving approximately 441,300 basic customers,
of which approximately 380,000 are served by systems which are near or
contiguous to the Company's cluster of cable television systems. As a result of
Lenfest's investment in these companies, the companies participate in Lenfest's
programming purchasing relationship with Satellite Services, Inc. See " --
Programming and Equipment Supply."
Garden State serves the Cherry Hill, New Jersey area. The following table
provides customer data at year end for each of the years in the three-year
period ended December 31, 1997 for Garden State's cable television system.
<TABLE>
<CAPTION>
Year Ended December 31,
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1995 1996 1997
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<S> <C> <C> <C>
Homes passed ............................... 292,454 294,390 297,783
Basic customers ............................ 200,086 204,179 208,204
Basic penetration .......................... 68.4% 69.4% 69.9%
</TABLE>
SCC has systems in York and Williamsport, Pennsylvania as well as
smaller systems in Maine, Mississippi, Illinois and Indiana. The following table
provides customer data at year end for each of the years in the three-year
period ended December 31, 1997 for SCC's cable television systems.
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<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Homes passed ............................... 182,465 206,715 211,778
Basic customers ............................ 137,885 159,871 164,186
Basic penetration .......................... 75.6% 77.3% 77.5%
</TABLE>
Beginning May 28, 1998, each of Lenfest and Susquehanna Media Co. (the
owner of the balance of the equity interest in SCC and its cable subsidiaries)
may offer to purchase all of the shares of stock of SCC and its cable
subsidiaries owned by the other. If the recipient of the offer rejects the
offer, the recipient 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 were contained
in the initial offer. Lenfest has pledged its stock in SCC and in the SCC cable
subsidiaries as collateral for obligations incurred by Susquehanna Media Co.
Raystay owns and operates cable television systems in Pennsylvania. The
following table provides customer data at year end for each of the years in the
three-year period ended December 31, 1997 for Raystay's cable television
systems.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Homes passed ............................... 63,163 79,029 83,451
Basic customers ............................ 46,509 57,743 59,085
Basic penetration .......................... 73.6% 73.1% 70.8%
</TABLE>
Beginning July 30, 1998, upon a change of control which results in the
Company controlling Raystay, the stockholders of Raystay have the right to cause
the Company to purchase their shares, subject to certain conditions. In
addition, effective September 30, 2002 either the Company or the other
stockholders of Raystay may offer to purchase all of the other's shares of
stock. If the recipient of the offer rejects the offer, the recipient is then
obligated to purchase all the shares of stock of the other party(ies) on the
same terms and conditions as were contained in the initial offer.
Clearview owns and operates cable television systems in Pennsylvania and
Maryland. As of December 31, 1997, Clearview had approximately 9,800 basic
customers and passed approximately 14,400 homes.
Unrestricted Non-Cable Investments
Lenfest Advertising, Inc. (d/b/a Radius Communications)
Lenfest Advertising, Inc. purchased the Philadelphia area assets of Cable
AdNet Partners, an indirect subsidiary of TCI in February, 1996. In October
1996, after Lenfest Advertising acquired Metrobase Cable Advertising from Harron
Communications for $4.5 million, it began doing business under the name of
Radius Communications ("Radius").
Effective January 1, 1997, Radius, through its subsidiary, Lenfest
Philadelphia Interconnect, Inc., entered into a partnership with Comcast
Philadelphia Interconnect Partner for the purpose of representing regional and
national cable advertising sales in the Greater Philadelphia market. Under the
agreement, the percentage interests of the partners is determined on the basis
of the number of customers of the partners in the designated market area at the
beginning of the year. For 1997, the Company's partnership interest was 72%. The
partners have equal representation on the Executive Committee, and the Company
will be the managing partner of the partnership for its first two years. At
December 31, 1997, Radius provided local cable advertising sales and insertion
for the Company and sixteen other cable television system operators with
approximately 1.8 million customers, of which approximately 750,000 were
customers of the Company.
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StarNet, Inc.
StarNet, Inc. offers program promotion for basic, premium and pay-per-view
cable television through its "NuStar" service.
NuStar delivers and inserts fully tagged promotional spots for programming
into 25 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 proprietary equipment in cable
system headends. NuStar launched its service in 1989, and as of December 31,
1997 served cable television systems having 23 million customers. In December
1996, StarNet converted its service to Digicipher II delivery on a KU Band
transponder and relaunched the NuStar service as Customized NuStar and Classic
NuStar. Customized NuStar provides individual MSOs with their own satellite feed
in order to insert promotional spots of their own choosing.
In September 1996, StarNet formed a joint venture with Prevue Networks,
Inc. ("Prevue") in which each entity contributed assets consisting of all of
their pay-per-view promotional services. For its contribution of The Barker(R)
assets, StarNet received a 28% equity in the new venture, called Sneak Prevue
LLC. Prevue contributed all of its Sneak Prevue assets and received 72% of the
equity. The joint venture is managed and operated by Prevue. The joint venture
currently serves 33 million cable television customers using both The Barker(R)
and Sneak Prevue delivery systems.
Local Programming
In late 1996, a decision was made to combine the Company's NewsChannel
operations with Suburban Cable's existing local origination channels. In
October, 1997, however, the Company ceased airing the NewsChannel. The Company
currently is evaluating the creation of a new regional programming channel to
provide local news, information and entertainment.
MicroNet, Inc.
As of October 31, 1997, MicroNet, Inc. and MicroNet Delmarva Associates,
LP (collectively, "MicroNet"), each a wholly-owned subsidiary of the Company,
sold substantially all of their assets related to their video, voice and data
transmission businesses, and Suburban, Lenfest Atlantic, Inc. and Lenfest New
Castle County sold certain of their towers. The purchase price was approximately
$70.3 million, subject to adjustments. The Company repaid all of the bank debt
($7.0 million) owed by MicroNet and used approximately $45 million to repay
amounts owed under the Bank Credit Facility (as defined below). The Company used
the balance for working capital purposes.
Effective with the three-month period ended June 30, 1997, MicroNet is
accounted for as discontinued operations. The revenues and expenses of MicroNet
are not included with the consolidated revenues and expenses of the Company, but
are reflected as income (loss) from discontinued operations. The prior period
financial statements included herein have been restated to reflect the
continuing operations of the Company.
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Lenfest International, Inc.
The Company and TCI each are partners in L-TCI Associates, a partnership
which held, as of December 31, 1997, a 29.0% interest in Videopole, a French
cable television company serving rural areas of France and suburbs of Paris. As
of December 31, 1997, Videopole held franchises in areas with nearly 547,000
homes, had built cable television systems passing approximately 317,000 homes,
and served approximately 113,000 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.
As of December 31, 1997, the Company's indirect interest in Videopole was
23.2% and TCI's indirect interest was 5.8%.
Lenfest Australia, Inc.
At December 31, 1997, the Company owned securities representing a 13.6%
voting interest and a 41.5% economic interest in Australis Media Limited
("Australis"), a publicly held Australian pay television company. The Company
had acquired its interest in Australis through a series of investments totaling
$131.0 million. In the fourth quarter of 1997, the Company wrote off the
remaining balance of its investment in Australis, approximately $12.0 million.
In December 1997, Australis announced that it was suffering a liquidity
crisis, and shortly thereafter, its stock was de-listed on the Australian Stock
Exchange.
Competition
Cable systems compete to varying degrees with a number of other
communications and entertainment media for customers. These media include, but
are not limited to movie theaters and movie store rentals, Internet service,
sporting events, and the direct reception of broadcast signals by the viewer's
own antenna.
Other services compete directly with cable television by offering similar
video services. Currently, the most significant competition faced by the Company
is in providing service to commercial or multiple dwelling units (MDUs).
Competitors focus on MDUs because they can access a number of customers with one
contract thereby producing economies of scale.
Cable communications systems operate pursuant to franchises granted on a
non-exclusive basis. The 1992 Cable Act prohibits franchising authorities from
unreasonably denying requests for additional franchises and permits franchising
authorities to operate cable systems. Well-financed businesses from outside the
cable industry (such as public utilities that own certain of the poles to which
cable is attached) may become competitors for franchises or providers of
competing services. See "Legislation and Regulation."
Private satellite master antenna television (SMATV), direct broadcast
systems (DBS), and Multi-channel Multipoint Distribution systems (MMDS) are the
three types of companies that offer direct competitive services. The possibility
of additional hardwire competition from companies like Bell Atlantic, RCN,
Connectiv, or PECO exists, but due to the level of effort required to build and
develop a hardwired video distribution service, the Company estimates any
significant threat from these entities to be several years away.
Cable operators face additional competition from SMATV systems that serve
condominiums, apartment and office complexes and private residential
developments. SMATV systems offer both reception of local television stations
and many of the same satellite-delivered programming services offered by
franchised cable communications systems. SMATV operators often enter into
exclusive agreements with building owners or homeowners' associations. These
services currently cannot offer non-broadcast local programming.
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Cable communications systems also compete with wireless program
distribution services such as MMDS which use low-power microwave frequencies to
transmit video programming over-the-air to subscribers. There are two MMDS
operators which are authorized to provide or are providing broadcast and
satellite programming to subscribers in areas served by the Company's cable
systems, CAI Wireless and Orionvision. Neither uses digital technology and each
offers fewer channels, albeit at a lower price, than are currently available
through Suburban Cable. The customer is required to have an antenna installed on
his house and needs a converter box to translate the signals. CAI Wireless
currently has about 9,500 customers in Suburban Cable's service areas, all
within a 35 mile radius of CAI's tower in Philadelphia. Orionvision currently
has 5,000 customers within a 30 mile radius of its tower in Corbin City, New
Jersey. About 60% of Orionvision's customer base falls within Suburban Cable's
New Jersey franchise areas. Additionally, the FCC has adopted regulations
allocating frequencies in the 28-Ghz band for a new multichannel wireless video
service called Local Multipoint Distribution Service ("LMDS") that is similar to
MMDS. The FCC initiated spectrum auctions for LMDS licenses in February 1998.
Congress has enacted legislation and the FCC has adopted regulatory
policies providing a more favorable operating environment for new and existing
technologies that provide, or have the potential to provide, substantial
competition to cable systems. These technologies include, among others, DBS
service whereby signals are transmitted by satellite to receiving facilities
located on customer premises. Programming is currently available to individual
households, condominiums, apartment and office complexes through conventional,
medium and high-power satellites. DBS providers can offer more than 100 channels
to their subscribers. Several major companies are offering or are currently
developing nationwide DBS services, including DirecTV, EchoStar Communications
Corporation and ASkyB and Primestar (an affiliate of TCI). DBS systems use video
compression technology to increase the channel capacity of their systems to
provide movies, broadcast stations and other program services comparable to
those of cable systems. Digital satellite service ("DSS") offered by DBS systems
currently has certain advantages over cable systems with respect to programming
capacity and digital quality, as well as certain current disadvantages that
include high up-front customer equipment and installation costs and a lack of
local programming and service. The FCC and Congress are presently considering
proposals to enhance the ability of DBS providers to gain access to additional
programming and to authorize DBS carriers to transmit local signals to local
markets.
DBS offers sports and movie packages to its customers that Suburban Cable
cannot currently offer due to technical and regulatory constraints. Higher DBS
penetrations are achieved in the rural areas where fewer customers can get
connected to cable at a reasonable cost.
DirecTV/USSB is now making concerted efforts to provide service to a
number of Suburban Cable's commercial/bulk accounts. Additionally, Bell Atlantic
has recently signed an agreement with DirecTV to sell DirecTV/USSB services to
residential customers as well as commercial/MDU accounts, in certain of its
operating areas. Bell Atlantic has not yet announced where it will sell
DirecTV/USSB services.
Advances in communications technology as well as changes in the
marketplace and the regulatory and legislative environment are constantly
occurring. Thus, it is not possible to predict the effect that ongoing or future
developments might have on the cable communications industry or on the
operations of the Company.
Employees
As of December 31, 1997, the Company had 1,646 full-time employees, of
which 175 employees were covered by collective bargaining agreements at three
locations.
As of December 31, 1997, the Company's Core Cable Television Operations
had 1,093 full-time employees, of which 175 employees were covered by collective
bargaining agreements at three locations.
The Company considers its relations with its current employees to be good.
10
<PAGE>
Legislation and Regulation
The cable television industry is regulated by the FCC, some states 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 discussion summarizes certain federal, state
and local laws and regulations affecting cable television.
Federal Laws. The 1984 Cable Act, the 1992 Cable Act and the 1996
Telecommunications Act are the principal federal statutes governing the cable
industry. These statutes regulate the cable industry, among other things, with
respect to: (i) cable system rates for both basic and certain non-basic
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 systems; (vi)
consumer protection and customer service requirements; (vii) franchise renewals;
(viii) television broadcast signal mandatory carriage and retransmission
consent; (ix) technical standards; and (x) privacy of customer information.
Federal Regulations. The FCC, the principal federal regulatory agency with
jurisdiction over cable television, has promulgated regulations implementing the
federal statutes.
Rate Regulation. Nearly all cable television systems are subject to local
rate regulation of basic service pursuant to a formula established by the FCC
and enforced by local franchising authorities. Additionally, the FCC reviews
rates for non-basic service tiers (other than per-channel or per-program
services) in response to complaints filed by franchising authorities; prohibits
cable television systems from requiring subscribers to purchase service tiers
above basic service in order to purchase premium service if the system is
technically capable of doing so; and has adopted regulations to establish, on
the basis of actual costs, the price for installation of cable service and
rental of cable equipment.
Regulation of non-basic tier rates is scheduled to terminate on March 31,
1999. Regulation of both basic and non-basic tier cable rates also ceases for
any cable system subject to "effective competition." The 1996 Telecommunications
Act expanded the definition of "effective competition" to include 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.
The FCC's rate regulations employ a benchmark system for measuring the
reasonableness of existing basic and non-basic service rates. Alternatively,
cable operators have the opportunity to make cost-of-service showings which, in
some cases, may justify rates above the applicable benchmarks. 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 costs. Cost-based adjustments to these capped
rates can also be made in the event a cable operator adds or deletes channels or
significantly upgrades its system. In addition, new product tiers consisting of
services new to the cable system can be created free of rate regulation as long
as certain conditions are met, e.g., services may not be moved from existing
tiers to the new product tier. The rules also require that charges for
cable-related equipment (e.g., converter boxes and remote control devices) and
installation be unbundled from the provision of cable service and based upon
actual costs plus a reasonable profit.
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 non-basic cable services and associated equipment, and refunds can
be required.
Carriage of Broadcast Television Signals. Commercial television broadcast
stations which are "local" to a cable system must elect every three years either
to require the cable system to carry the station, subject to certain exceptions,
or to negotiate for "retransmission consent" to carry the station. Broadcast
stations typically seek monetary compensation or the carriage of additional
programming in return for granting retransmission consent. The next three-year
election between mandatory carriage and retransmission consent for local
commercial television stations will occur on October 1, 1999. Local
non-commercial television stations are also given mandatory carriage rights,
subject to certain exceptions. Unlike commercial stations, noncommercial
stations are not given the option to require negotiation of retransmission
consent. In addition, cable systems must obtain retransmission consent for the
carriage of
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<PAGE>
all "distant" commercial broadcast stations, except for certain "superstations,"
i.e., commercial satellite-delivered independent stations such as WGN.
Deletion of Certain Programming. Cable television systems that serve 1,000
or more customers must delete the simultaneous or non-simultaneous network
programming of a distant station upon the appropriate request of a local
television station holding local exclusive rights to such programming. FCC
regulations also enable television broadcast stations that have obtained
exclusive distribution rights for syndicated programming in their market to
require a cable system to delete or "black out" such programming from other
television stations which are carried by the cable system.
Public and Leased Access Channels. The 1984 Cable Act permits local
franchising authorities to require 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 leased access
rates to be set according to a formula determined by the FCC.
Ownership. The 1996 Telecommunications Act repealed the 1984 Cable Act's
restrictions on local exchange telephone companies ("LECs") from providing video
programming directly to customers within their local exchange telephone service
areas. With certain limited exceptions, a LEC may not acquire more than a 10%
equity interest in an existing cable system operating within the LEC's service
area. The 1996 Telecommunications Act also authorized LECs and others to operate
"open video systems" without obtaining a local cable franchise, although LECs
operating such systems can be required to make payments to local governmental
bodies in lieu of cable franchise fees.
The 1996 Telecommunications Act eliminated the FCC rule prohibiting common
ownership between a cable system and a national broadcast television network,
and 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 SMATV systems having
overlapping service areas, except in limited circumstances. The 1996
Telecommunications 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.
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. The 1992 Cable Act
makes several changes to the renewal process which could make it easier in some
cases for a franchising authority to deny renewal. In the renewal process, a
franchising authority may seek to impose new and more onerous requirements, such
as upgraded facilities, increased channel capacity or enhanced services,
although the municipality must take into account the cost of meeting such
requirements.
Other FCC Regulations. Additional FCC regulations relate to a cable
system's carriage of local sports programming; privacy of customer information;
equipment compatibility; franchise transfers; franchise fees; closed captioning;
equal employment opportunity; pole attachments; application of the rules
governing political broadcasts; customer service; technical standards; home
wiring and limitations on advertising contained in non-broadcast children's
programming. The 1996 Telecommunications Act changes the formula for pole
attachment fees which could result in substantial increases in payments by cable
operators to utilities for pole attachment rights when services other than cable
services are delivered by cable systems.
12
<PAGE>
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 system with respect to over-the-air
television stations.
State and Local Regulation. Because a cable television uses local streets
and rights-of-way, cable television systems are subject to local regulation,
typically imposed through the franchising process, and certain states have also
adopted cable television legislation and regulations. Cable franchises are
nonexclusive, granted for fixed terms and usually terminable if the cable
operator fails to comply with material provisions. Franchises usually call for
the payment of fees (which are limited under the 1984 Cable Act to 5% of the
system's gross revenues from cable service) to the granting authority. The terms
and conditions of cable 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 operate their own multichannel video distribution system without
having to obtain a franchise. 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.
The foregoing does not 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 or the Company can be
predicted at this time.
Item 2. DESCRIPTION OF PROPERTY.
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.
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 this single location. The
office has approximately 57,000 square feet, which management believes is
adequate. In 1997, the Company, through one of its non-cable subsidiaries,
purchased land adjacent to its Oaks, PA office location where it expects to
build a master head-end facility. Management believes that its properties are in
good operating condition and are suitable and adequate for the Company's
business operations.
Item 3. LEGAL PROCEEDINGS.
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 41.5% 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 alleged
that the Company and Mr. Lenfest breached fiduciary
13
<PAGE>
duties that they owed to him and claimed damages of A$220 million. In August
1995, Mr. Hadid amended the suit to include allegations that the Defendants
defrauded him by making certain representations to him in connection with the
acquisition of his company and claimed additional damages of A$485 million. Mr.
Hadid seeks total monetary damages in the amount of A$718 million (approximately
U.S.$467 million as of December 31, 1997). The Defendants have denied all claims
made against them by Mr. Hadid and stated their belief that Mr. Hadid's
allegations are without merit. They are defending this action vigorously.
The trial in this action began on February 2, 1998 and is expected to last
until sometime in the third quarter of 1998. As of the date hereof, Mr. Hadid
and other witnesses testifying on his behalf have not completed their testimony
and cross examination. The Defendants have not presented any part of their case.
While the Company continues to deny all of Mr. Hadid's claims, it cannot predict
the outcome of the trial.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1997.
Item 5. MARKET FOR REGISTRANT`S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the Company's common
stock. As of March 27, 1998, there were five record holders of the Company's
common stock. No dividends have been paid on the Company's common stock in the
period from January 1, 1995 through December 31, 1997. In addition, the
borrowing agreements which were and are in effect between the Company and the
lenders party thereto during such periods prohibit the payment of any dividends.
Item 6. SELECTED FINANCIAL DATA.
Summary 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, 1997 set forth below 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, 1997
included elsewhere in this Form 10-K. The statement of operations data with
respect to the fiscal years ended December 31, 1993 and 1994 have been derived
from audited consolidated financial statements of the Company not included
herein.
14
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------
(Dollars in thousands)
Statement of Operations Data* 1993 1994 1995 1996 1997
------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues $ 205,326 $ 226,185 $ 254,225 $ 381,810 $ 447,390
Programming expenses 44,033 49,267 55,322 82,804 93,088
Selling, general & administrative 46,527 50,269 55,262 82,688 105,470
Technical and other 20,167 27,269 34,529 50,449 56,109
Depreciation and amortization 62,089 72,813 74,272 111,277 129,939
-------- --------- -------- ----------- -----------
Operating income 32,510 26,567 34,840 54,592 62,784
Interest expense (35,090) (47,749) (60,909) (107,201) (120,788)
Other income and expense (net) (10,232) (7,072) 4,245 (90,361) (50,070)
-------- --------- -------- ----------- -----------
Loss from continuing operations
before income taxes (12,812) (28,254) (21,824) (142,970) (108,074)
Income tax benefit 2,018 10,174 10,724 14,329 38,740
-------- --------- -------- ----------- -----------
Loss from continuing operations (10,794) (18,080) (11,100) (128,641) (69,334)
Discontinued operations, net of taxes (1,073) (819) (395) 363 33,738
Extraordinary loss, net of taxes --- --- (6,739) (2,484) ---
-------- --------- -------- ----------- -----------
Net loss $ (11,867) $ (18,899) $ (18,234) $ (130,762) $ (35,596)
======== ========= ======== =========== ===========
Balance Sheet Data*
(end of period)
Total assets $ 634,938 $ 664,555 $ 843,110 $ 1,221,788 $ 1,219,720
Total debt 612,392 626,121 810,725 1,312,863 1,295,306
Stockholders' equity (deficit) (56,029) (49,609) (45,192) (233,790) (254,264)
Core Cable Television Operations (Restricted Group)
Financial Ratios and Other
Data (a)
Revenues $ 197,630 $ 212,800 $ 232,155 $ 354,561 $ 413,792
EBITDA (b) (c) 100,476 105,711 115,261 182,905 205,861
EBITDA margin (d) 50.8% 49.7% 49.6% 51.6% 49.7%
Interest expense $ 34,699 $ 47,016 $ 59,966 $ 105,463 $ 120,549
Capital expenditures (e) 41,658 42,162 40,168 51,703 87,510
Total debt 609,159 616,657 807,535 1,309,735 1,293,579
Ratio of total debt to EBITDA 6.06x 5.83x 7.01x 7.16x 6.28x
Monthly revenue per average
basic customer $ 32.05 $ 31.44 $ 32.97 $ 34.25 $ 35.18
Annual EBITDA per average
basic customer 195.51 187.42 196.40 212.00 210.04
Annual capital expenditures per
average basic customer (e) 81.06 74.75 68.44 59.93 89.28
Summary Customer Data
(end of period) (a)
Homes passed 870,718 892,549 904,753 1,278,673 1,388,887
Basic customers 550,703 577,377 596,366 927,249 991,758
Basic Penetration 63.2% 64.7% 65.9% 72.5% 71.4%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- - ----------------------
* Prior year data is restated to reflect continuing operations.
(a) The Core Cable Television Operations (Restricted Group) consists of all of the Company's wholly owned cable
television subsidiaries. Financial ratios and other information are presented for the Restricted Group to
facilitate the evaluation of the results of operations of those operating entities on which the Company
relies to service all of its debt obligations.
(b) EBITDA represents consolidated net income from continuing operations plus the provision for income taxes,
interest expense, depreciation, amortization, any other non-cash items reducing consolidated net income and
cash actually distributed by an unconsolidated affiliate, minus all non-cash items increasing consolidated
net income. 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) CAH, Inc. became a part of the restricted group in 1996. CAH, Inc. has not been included in the 1993-1995
presentation.
(d) EBITDA margin measures EBITDA as a percentage of revenues.
(e) Excludes the purchase price of acquisitions consummated during the period.
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CAPITALIZATION
The following table sets forth the consolidated capitalization and cash
and cash equivalents of the Company as of December 31, 1997.
(Dollars in thousands)
Cash and Cash Equivalents $ 15,623
==================
Total Debt
Bank credit facility $ 240,000
11.84% Senior Notes 10,500
11.30% Senior Notes 45,000
9.93% Senior Notes 11,625
8-3/8% Senior Notes, net of discount 687,082
Obligations under capital leases 7,318
10-1/2% Senior Subordinated Notes, net of discount 293,781
------------------
Total debt 1,295,306
------------------
Stockholders' equity (Deficit)
Common stock 2
Additional paid-in capital 50,747
Unrealized gain on marketable securities, net 5,256
Accumulated deficit (310,269)
------------------
Total stockholders' equity (deficit) (254,264)
------------------
Total capitalization $ 1,041,042
==================
Item 7. 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 regulation of certain aspects of the cable
television industry, have affected adversely the Company's ability to increase
or restructure its rates for certain services. These regulations are intended to
limit future rate increases. See "Legislation and Regulation."
16
<PAGE>
The Company has generated increases in revenues and EBITDA for each of the
past three fiscal years primarily through acquisitions and, to a lesser extent,
through internal customer growth, increases in monthly revenue per customer and,
growth in advertising and home shopping revenues. As used herein, "EBITDA"
represents consolidated net income from continuing operations plus the provision
for income taxes, interest expense, depreciation, amortization, any other
non-cash items reducing consolidated net income and cash actually distributed by
an unconsolidated affiliate, minus all non-cash items increasing consolidated
net income. 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 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.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
CONSOLIDATED RESULTS
Revenues for the company increased 17.2% to $447.4 million as compared to
1996, primarily as a result of the Company's Core Cable Television Operations.
The TCI Exchange, the Sammons Acquisition, the Salem Acquisition, the Shore
Acquisition, and the Turnersville Acquisition, which are described in Note 5 to
the financial statements included herein (collectively, the "Acquisitions"),
accounted for approximately $40.2 million or 61.3% of the increase.
Service and Programming Expenses increased 12.0% to $149.2 million for the
year ended December 31, 1997 compared to the prior year. These expenses are
related to technical salaries, general operating, and network programming costs.
The service and programming increase was primarily due to increased costs
associated with the Core Cable Television Operations.
Selling, General, and Administrative Expense increased 27.6% to $105.5
million for the year ended December 31, 1997 compared to the prior year. These
expenses are associated with office salaries, facility, and marketing costs.
This increase was primarily due to administrative expenses associated with the
Core Cable Television Operations.
Depreciation and Amortization Expense increased 16.8% to $129.9 million
for the year ended December 31, 1997 compared to the prior year. This increase
was primarily due to the Acquisitions and additional capital expenditures
associated with the Core Cable Television Operations.
EBITDA increased 15.2% to $196.2 million for the year ended December 31,
1997 compared to the prior year. The increase was primarily due to the Core
Cable Television Operations. The EBITDA margin decreased to 43.9% in 1997
compared to 44.6% for 1996. This decrease was primarily caused by one time costs
associated with the consolidation effort related to the Core Cable Television
Operations.
Interest Expense increased 12.7% to $120.8 million for the year ended
December 31, 1997 compared to the prior year. The increase was primarily due to
higher average outstanding indebtedness related to the Acquisitions.
Loss from continuing operations before income tax decreased 24.4% to
$108.1 million. The decrease was attributable to a loss associated with the
write-down of the Company's investment in Australis. The 1997 write-down of the
Company's investment in Australis was $44.6 million compared to an $86.4 million
write-down of the investment in the prior year.
Core Cable Television Operations
Revenues increased 16.7% to $413.8 million for the year ended December 31,
1997 compared to the prior year. Revenues for basic and CPS tiers and customer
equipment and installation, ("regulated services") increased 24.3 % or $60.4
million compared to the prior year. This increase was primarily
17
<PAGE>
attributable to the realization of the full effect of the Acquisitions, strong
internal customer growth of approximately 2.9%, and rate increases occurring
predominately in the second and fourth quarters. Non-regulated service revenue
decreased 7.1% or $6.0 million for the year ended December 31, 1997 compared to
the prior year. This decrease was primarily as a result of the regional sports
network, Prism, ceasing operations on September 30, 1997. On October 1, 1997,
the Company added the new regional sports network, Comcast SportsNet to the
regulated CPS tier. Advertising, home shopping, and non-recurring revenue
increased 22.3% or $4.8 million for the year ended December 31, 1997 compared to
the prior year. This increase was primarily attributable to the Acquisitions and
internal customer growth.
Service and Programming Expenses increased 13.2% to $126.9 million for the
year ended December 31, 1997 compared to the prior year. These expenses are
related to technical salaries, general operating costs, and programming costs.
The technical service increase was primarily due to increased costs associated
with the consolidation efforts of the Company which included integrating the
Acquisitions. The programming expense increase was primarily due to the
Acquisitions and increased customer costs associated with the basic and CPS tier
services.
Selling, General and Administrative Expense increased 32.5% to $86.4
million for the year ended December 31, 1997 compared to the prior year. These
expenses are associated with office salaries, facility, and marketing costs.
This increase was primarily due to the Acquisitions and expenses associated with
the consolidation efforts of the Company which included migrating customer
service to the new Call Center.
Depreciation and Amortization Expense increased 16.7% to $125.0 million
for the year ended December 31, 1997 compared to the prior year. This increase
was primarily due to the Acquisitions as well as additional capital
expenditures.
EBITDA increased 12.6% to $205.9 million for the year ended December 31,
1997 compared to the prior year. The increase was primarily associated with the
Acquisitions. The EBITDA margin decreased to 49.7% in 1997 compared to 51.6% for
1996. This decrease was primarily caused by one-time costs associated with the
consolidation efforts of the Company.
Unrestricted Subsidiaries
The largest of the Company's Unrestricted Subsidiaries in 1997 were Radius
Communications and StarNet.
Lenfest Advertising, Inc. (d/b/a Radius Communications)
- - -------------------------------------------------------
Revenues, prior to payment of affiliate fees, increased 70.2% to $25.9
million as compared to 1996, primarily as a result of the full realization of
the MetroBase Advertising acquisition in September 1996. Affiliate fees
increased 68.3% to $11.8 million, of which $4.8 million was paid to the Company.
Affiliate fees paid to the Company are eliminated in consolidation.
Operating Expenses increased proportionately to the increase in
revenues for the year ended December 31, 1997, due to the expansion of the
combined sales forces of Cable AdNet and MetroBase advertising.
Depreciation and Amortization Expense increased by 83.3% to $1.9 million
as compared to 1996 as a result of the purchasing of Digital Insertion equipment
used in daily operations.
Operating income decreased 28.6% to $0.5 million for the year ended
December 31, 1997, compared to $0.7 million in the prior year.
StarNet, Inc.
- - -------------
Revenues decreased by 38.1% to $5.0 million for the year ended December
31, 1997, primarily due to the elimination of The Barker(R) and Promoter
services.
Direct expenses decreased 36.3% to $6.0 million as compared to 1996 due
primarily to the reduction of operational expenses eliminated with the
termination of The Barker(R) and Promoter services.
Depreciation and Amortization Expense decreased by 23.7% to $1.2 million
as compared to 1996 as a result of assets related to The Barker(R) being
transferred to Sneak Prevue, LLC, a partnership between StarNet, Inc. and
Prevue.
Operating loss decreased by 23.8% to $2.1 million in 1997 compared to $2.8
million in 1996.
18
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
CONSOLIDATED RESULTS
Revenues for the company increased 50.2% to $381.8 million for the year
ended December 31, 1996 as compared to 1995, primarily as a result of the
Company's Core Cable Television Operations. The Acquisitions accounted for
approximately $103.9 million or 81.4% of the increase.
Service and Programming Expenses increased 48.3% to $133.3 million for the
year ended December 31, 1996 compared to the prior year. These expenses are
related to technical salaries, general operating and programming costs. The
service and programming increase was primarily due to increased costs associated
with the Acquisitions.
Selling, General and Administrative Expense increased 49.6% to $82.7
million for the year ended December 31, 1996 compared to the prior year. These
expenses are associated with customer service, office, and marketing. This
increase was primarily due to selling and administrative expenses associated
with the Acquisitions.
Depreciation and Amortization Expense increased 49.8% to $111.3 million
for the year ended December 31, 1996 compared to the prior year. This increase
was primarily due to the Acquisitions.
EBITDA increased 54.0% to $170.3 million for the year ended December 31,
1996 compared to the prior year. The increase was primarily due to the
Acquisitions. The EBITDA margin increased to 44.6% in 1996 compared to 43.5% for
1995. This increase was primarily a result of an increase in EBITDA for Core
Cable Television Operations.
Interest Expense increased 76.0% to $107.2 million for the year ended
December 31, 1996 compared to the prior year. The increase was primarily due to
higher average outstanding indebtedness related to the Acquisitions.
Loss from continuing operations before income tax increased 555.1% to
$143.0 million. The increase was attributable to a loss associated with the
write-down of the Company's investment in Australis.
Core Cable Television Operations
Revenues increased 52.7% to $354.6 million for the year ended December 31,
1996 compared to the prior year. Revenues for regulated services increased 56.3
% or $89.6 million compared to the prior year. This increase was primarily
attributable to the Acquisitions, internal customer growth of approximately
2.8%, and rate increases occurring predominately in the second and fourth
quarters. Non-regulated service revenue increased 43.9% or $25.8 million for the
year ended December 31, 1996 compared to the prior year. This increase was
primarily as a result of the Acquisitions. Advertising, home shopping and
non-recurring revenue increased 49.4% or $7.1 million compared to the prior
year. This increase was primarily attributable to the Acquisitions.
Service and Programming Expenses increased 57.9% to $112.1 million for the
year ended December 31, 1996 compared to the prior year. These expenses are
related to technical salaries, general operating, and programming costs. The
technical service increase was primarily associated the Acquisitions. The
programming expense increase was primarily due to the Acquisitions and increased
customer costs associated with the basic and CPS tier services.
Selling, General and Administrative Expense increased 37.6% to $65.2
million for the year ended December 31, 1996 compared to the prior year. These
expenses are associated with office salaries, facility, and marketing costs.
This increase was primarily associated with the Acquisitions.
19
<PAGE>
Depreciation and Amortization Expense increased 50.8% to $107.1 million
for the year ended December 31, 1997 compared to the prior year. This increase
was primarily due to the Acquisitions as well as increased capital expenditures.
EBITDA increased 58.7% to $182.9 million for the year ended December 31,
1996 compared to the prior year. The increase was primarily associated with the
Acquisitions. The EBITDA margin increased to 51.6% in 1996 compared to 49.6% for
1995. This increase was primarily caused by cash distributions made to the
Company by certain Unrestricted Subsidiaries and affiliates.
Unrestricted Subsidiaries
Lenfest Advertising, Inc. (d/b/a Radius Communications)
- - -------------------------------------------------------
Revenues, prior to payment of affiliate fees, were $15.2 million.
Affiliate fees were $7.0 million, of which $4.3 million was paid to the Company.
Affiliate fees paid to the Company are eliminated in consolidation.
Operating Expenses, including affiliate fees, totaled $13.8 million.
Operating Income was $0.7 million.
Radius, which began operations in 1996 in connection with the purchase of
certain advertising assets, had no revenue or expenses in 1995.
StarNet, Inc.
- - -------------
Revenues decreased 8.8% to $8.1 million in 1996 as compared to 1995, the
net result of the elimination of The Barker(R) and Promoter services in
November of 1996.
Direct expenses decreased 12.4% to $9.4 million due primarily to the
reduction of operational expenses eliminated with the termination of
The Barker(R) and Promoter services.
Depreciation and Amortization Expense increased 11.0% to $1.5 million for
the year ended December 31, 1996, primarily as a result of purchasing assets
related to The Barker(R).
Operating loss was $2.8 million for the year ended December 31, 1996, as
compared to $3.4 million for the prior year.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (the "FASB") has recently issued
its Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company is in the process of
determining the preferred format. The adoption of SFAS No. 130 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows.
The FASB has also recently issued its SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ( "SFAS No. 131"). SFAS No.
131 established standards for the way that public business enterprises report
information about operating segments in interim financial reports issued to
stockholders. It also established standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for fiscal years beginning after December 15,
1997. Financial statement disclosures for prior periods are required to be
restated. The Company is in the process of evaluating the disclosure
requirements. The adoption of SFAS No. 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
The Company's businesses require cash for operations, debt service,
capital expenditures and acquisitions. To date, cash requirements have been
funded by cash flow from operations and borrowings.
Financing Activities. At December 31, 1997, the Company had aggregate
total indebtedness of
20
<PAGE>
approximately $1,295.3 million. The Company's senior indebtedness of
approximately $1,001.5 million consisted of: (i) three debt obligations in the
amount of approximately $45.0 million, $10.5 million and $11.6 million
(collectively, the "Private Placement Notes"); (ii) $687.1 million of 8-3/8%
Notes; (iii) $240 million under a bank credit facility dated as of June 27, 1996
(the "Bank Credit Facility"); and (iv) obligations under capital leases of
approximately $7.3 million. The Company issued the Private Placement Notes from
1988 to 1991 in connection with the refinancing of revolving bank debt. The Bank
Credit Facility consists of a $150 million term loan facility and a $300 million
revolving credit facility. At December 31, 1997, the term loan was fully drawn.
At December 31, 1997, the only outstanding senior subordinated
indebtedness was the Company's Subordinated Notes which were issued on June 27,
1996 pursuant to a private offering to certain institutional and other
accredited investors and subsequently exchanged in a registered exchange offer
for publicly traded Subordinated Notes. The Subordinated Notes are general
unsecured obligations of the Company subordinate in right of payment to all
present and future senior indebtedness of the Company.
On February 5, 1998, the Company issued $150 million of 7-5/8% Senior
Notes due 2008 and $150 million of 8-1/4% Senior Subordinated Notes due 2008.
The proceeds of this offering were used to repay the Private Placement Notes,
pay off and cancel the Company's bank term loan facility and to pay down the
revolving credit facility. As of March 27, 1998, the Company's revolving credit
facility had no outstanding borrowings.
The Bank Credit Facility contains provisions which limit the Company's
ability to make certain investments in excess of $50 million in the aggregate
and prohibiting the Company from having: (i) a Senior Debt Leverage Ratio for
the quarter ended December 31, 1997 through December 30, 1999 in excess of
5.00:1 and 4.50:1 commencing on December 31, 1999 and thereafter; and (ii) a
Total Debt Leverage Ratio in excess of 6.50:1 at December 31, 1997, and
declining to 6.00:1 commencing on December 31, 1998 and thereafter. The Company
expects to refinance the Bank Credit Facility in 1998.
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 Company's borrowings. There are no restrictions relating to the payment to
the Company of dividends, advances or other payments by any of the Company's
subsidiaries.
Cash flow generated from continuing operations, excluding changes in
operating assets and liabilities that result from timing issues and considering
only adjustments for non-cash charges, was approximately $89.1 million for the
year ended December 31, 1997 compared to approximately $62.2 million for the
year ended December 31, 1996. In 1997, the Company was required to make interest
payments of approximately $120.6 million on outstanding debt obligations,
whereas in 1996, the Company was required under its then existing debt
obligations to make interest payments of approximately $103.8 million. This
increase was primarily attributable to increased debt incurred by the Company in
connection with the Acquisitions.
Future minimum lease payments under all capital leases and non-cancelable
operating leases for each of the years 1998 through 2001 are $5.9 million (of
which $680,000 is payable to a principal stockholder), $5.9 million (of which
$714,000 is payable to a principal stockholder), $5.5 million (of which $750,000
is payable to a principal stockholder) and $3.8 million (of which $788,000 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 2012.
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.
In November 1994, Mr. Lenfest and TCI International, Inc. jointly and
severally guaranteed $67.0 million in program license obligations of the
distributor of Australis' movie programming. At December 31, 1997, the amount
subject to the guarantee under the license agreements was approximately $47.5
million.
21
<PAGE>
The Company had agreed to indemnify Mr. Lenfest against loss from such
guaranty to the fullest extent permitted under the Company's debt obligations.
Under the terms of the Bank Credit Facility, however, Mr. Lenfest's claims for
indemnification are limited to $33.5 million. Effective March 6, 1997, as
subsequently amended, Mr. Lenfest released the parent Company and its cable
operating subsidiaries from their indemnity obligation until the last to occur
of January 1, 1999 and the last day of any fiscal quarter during which the
Company could incur the indemnity obligation without violating the terms of the
Bank Credit Facility. Certain of the Company's Unrestricted Subsidiaries have
agreed to indemnify Mr. Lenfest for his obligations under the guarantee.
Capital Expenditures. It is anticipated that during 1998, the Company will
spend at least $80.0 million for capital expenditures for its Core Cable
Television Operations. These capital expenditures will be for the upgrading of
certain of its cable television systems, maintenance and other capital projects
associated with implementing the Company's clustering strategy. The amount of
such capital expenditures for years subsequent to 1998 will depend on numerous
factors, many of which are beyond the Company's control. These factors include
whether competition in a particular market necessitates a cable television
system upgrade and whether a particular cable television system has sufficient
capacity to handle new product offerings. The Company, however, anticipates that
capital expenditures for years subsequent to 1998 will continue to be
significant.
Resources. Management believes that the Company has sufficient funds
available from operating cash flow and from borrowing capacity under the Bank
Credit Facility to fund its operations, capital expenditure plans and debt
service throughout 1998. However, the Company's ability to borrow funds under
the Bank Credit Facility requires that the Company be in compliance with the
Senior and Total Debt Leverage Ratios or obtain the consent of the lenders
thereunder to a waiver or amendment of the applicable Senior or Total Debt
Leverage Ratio. Management believes that the Company will be in compliance with
such Debt Leverage Ratios.
Year 2000 Issue. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Certain of the Company's computer programs that have date-sensitive software may
recognize the date using "00" as the year 1900 rather than the year 2000 (the
"Year 2000 Issue"). If this situation occurs, the potential exists for computer
system failure or miscalculations by computer programs, which could cause
disruption of operations.
The Company is in the process of identifying the computer systems that
will require modification or replacement so that they will properly utilize
dates beyond December 31, 1999. The Company has initiated communications with
all of its significant software suppliers to determine their plans for
remediating the Year 2000 Issue in their software which the Company uses or
relies upon. The Company's estimate to complete the remediation plan includes
the estimated time associated with mitigating the Year 2000 Issue for third
party software. However, there can be no guarantee that the systems of other
companies on which the Company relies will be converted on a timely basis, or
that a failure to convert by another company would not have material adverse
effect on the Company.
The Company continues to use both internal and external resources to
reprogram or replace software for Year 2000 Issue modifications. The costs
directly attributable to the Year 2000 Issue are not expected to have a material
effect on the Company's financial position, results of operation or cash flows.
The costs of the project and the date on which the Company plans to
complete the Year 2000 Issue modifications and replacements are based on
management's best estimates, which were derived using assumptions of future
events, including the continued availability of resources and the reliability of
third party modification plans. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
plans.
22
<PAGE>
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.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The financial statements and supplementary data are included herein
beginning at page F-1.
Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
During the period beginning January 1, 1995 and ended December 31, 1997,
there have been no disagreements with any independent accountant engaged as the
principal accountant to audit the Company's financial statements nor has any
such person resigned, declined to stand for the reelection or been dismissed.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
MANAGEMENT
Directors And Executive Officers
The directors and executive officers of the Company are as set forth
below:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
---- --- --------
H. F. Lenfest ................... 67 President, CEO and Director
H. Chase Lenfest ................ 34 Director
Brook J. Lenfest ................ 29 Director
John C. Malone .................. 57 Director
William R. Fitzgerald ........... 40 Director
Harry F. Brooks ................. 60 Executive Vice President, Assistant Secretary
Marguerite B. Lenfest ........... 64 Treasurer
Samuel W. Morris, Jr. ........... 54 Vice President - General Counsel and Secretary
Maryann V. Bryla ................ 32 Vice President - Finance, Assistant Secretary
Donald L. Heller ................ 52 Vice President
</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
Services, Inc. and TeleSTAR Marketing, Inc. ("TeleSTAR"). 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.
H. Chase Lenfest has served as a Director of the Company since December
1997 and is Director of Local Sales of Lenfest Programming Services, Inc. From
January 1996 to January 1997, he was the Regional Photo Classified Manager of
Lenfest Programming Services, Inc. He was employed by TelVue Corporation from
February 1994 until January 1996. Prior to 1994, he was a stockbroker with Wheat
First Butcher & Singer. He is the son of H. F. and Marguerite B. Lenfest.
Brook J. Lenfest has served as a Director of the Company since December
1997 and is Vice President and Director of Operations for the StarNet, Inc. He
has been an officer of StarNet, Inc. since January 1995. Prior to assuming his
current position, he was Vice President-Business Development,
23
<PAGE>
Director of Communications and Product Manager for StarNet, Inc. From 1993 to
1994, he was Marketing Manager for the Company's South Jersey Cablevision (now
Lenfest Atlantic, Inc.) subsidiary. Prior to that he held various positions at
Garden State Cablevision. He is the son of H. F. and Marguerite B. Lenfest.
John C. Malone has served as a director of the Company since January 1982
other than for a brief period in 1997. Dr. Malone has served as the Chief
Executive Officer of TCI since January 1994, and as Chairman of the Board of TCI
since November 1996. Dr. Malone served as President of TCI from January 1994 to
March 1997, as Chief Executive Officer of TCI Communications, Inc., a subsidiary
of TCI ("TCIC"), from March 1992 to October 1994 and as President of TCIC from
1973 to October 1994. Dr. Malone is also a director of TCI, TCIC,
Tele-Communications International, Inc., TCI Pacific Communications, Inc., TCI
Satellite Entertainment, Inc., BET Holdings, Inc., The At Home Corporation and
The Bank of New York.
William R. Fitzgerald has served as a Director of the Company since
January 30, 1998. Mr. Fitzgerald serves as Executive Vice President of Corporate
Development and Partnership Relations for TCI. Mr. Fitzgerald joined TCI
Communications, Inc. in March of 1996. Prior to joining TCI, he was a Senior
Vice President and Partner with Daniels & Associates. Before joining Daniels &
Associates, Mr. Fitzgerald was a Vice President at The First National Bank of
Chicago.
Harry F. Brooks is Executive Vice President and 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.
Marguerite B. Lenfest has served as 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 of the
Company since November 1993 and Secretary since December 17, 1997. 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.
Mr. Morris also serves as a director of Australis Media Ltd. since January 1998.
Maryann V. Bryla has been Vice President, Finance of the Company since
March 1997 and Assistant Secretary since January 1998. Prior to that, Ms. Bryla
was Assistant Vice President of Finance of the Company since November 1996 and
Director of Investor Relations since June 1996. Prior to joining the Company,
Ms. Bryla was a lending officer in the Telecommunication and Media Lending
Division of PNC Bank, N.A. Prior to that, she was an Assistant Treasurer and
Manager in the North America Corporate Finance Syndications Division at The
Chase Manhattan Bank. Ms. Bryla is also Assistant Secretary of Lenfest
Clearview, Inc. and StarNet, Inc. and Treasurer of Suburban.
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 provided movies and
professional sports. Mr. Heller is also Vice President of Lenfest International,
Inc. and Lenfest Australia, Inc. He is currently a director of TelVue
Corporation and Australis Media Ltd.
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 A. Krzywicki has been an Executive Vice President of Suburban
since January 1, 1996,
24
<PAGE>
and a Vice President of Suburban from 1989 to December 31, 1995. She has been
Assistant Secretary of the Company since January 1998. She is primarily
responsible for marketing, programming, customer service, training and public
relations.
Robert M. Lawrence has been an Executive Vice President of Suburban since
January 1996, and a Regional Vice President and General Manager of Suburban from
March 1982 to December 31, 1995. He has been Assistant Secretary of the Company
since January 1998. He is responsible for technical operations, engineering,
franchise relations, information systems and purchasing.
Item 11. EXECUTIVE COMPENSATION.
The Company has no long-term compensation plans. The following table sets
forth certain information for the years ended December 31, 1995, 1996 and 1997
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
Annual Compensation
Name and All Other
Principal Position Year Salary Bonus Compensation
- - ------------------- ---- ------ ----- ------------
H. F. Lenfest 1997 $ 749,996 $ --- $ 255,022(a) (b)
President and CEO 1996 1,000,000 --- 268,135(a) (b)
1995 500,000 750,000 293,218(a) (b)
Samuel W. Morris, Jr. 1997 $ 262,496 $ 25,000 $ 8,000(a)
Vice President and 1996 250,000 30,000 7,500(a)
General Counsel 1995 200,000 100,000 7,500(a)
Robert Lawrence 1997 $ 206,596 $ 20,000 $ 8,000(a)
Executive Vice President 1996 190,000 --- 7,500(a)
Suburban 1995 115,000 15,500 5,750(a)
Debra A. Krzywicki 1997 $ 189,404 $ --- $ 8,000(a)
Executive Vice President 1996 170,000 --- 7,500(a)
Suburban 1995 105,000 --- 5,250(a)
Harry F. Brooks 1997 $ 157,500 $ 40,000 $ 8,000(a)
Executive Vice President 1996 150,000 --- 7,500(a)
1995 135,000 --- 6,750(a)
- - ----------------
(a) Matching contributions under the Company's 401(k) Plan for the individuals in years noted. The contribution
for Mr. Lenfest for the years 1997, 1996 and 1995 were $8,000, $7,500 and $7,500, respectively.
(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 1997,
1996 and 1995 pursuant to these arrangements were $346,043, $346,043 and $325,471, 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 $247,022,
$260,635 and $232,985 in 1997, 1996 and 1995, 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.
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
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.
Item 12. SECURITY AND OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of December 31, 1997, 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>
<S> <C> <C>
Shares of Percent of
Name and Address Common Stock Common Stock
- - ---------------- ------------ ------------
H. F. Lenfest, Director (a)(b)(c)(d)(g) 79,448 50.0%
John C. Malone, Director (e)(f) 79,448 50.0%
Brook J. Lenfest (a)(c)(d)(g) 14,862 9.4%
H. Chase Lenfest (a)(c)(d)(g) 14,862 9.4%
Diane A. Lenfest (a)(c)(g) 14,862 9.4%
LMC Lenfest, Inc. (c)(f)(h) 79,448 50.0%
(an indirect wholly owned subsidiary of TCI)
All officers and directors as a 158,896 100.0%
group (10 persons)
- - ------------------------
(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 and 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 Notes (d) and (g) below.
(c) H. F. Lenfest and LMC Lenfest, Inc. have an agreement that provides, together with the amended
and restated Certificate of Incorporation of the Company, that Mr. Lenfest has the right to
designate a majority of the Board of Directors until the earlier of January 1, 2002 or until
his death. 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
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.
</TABLE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED 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 and an affiliate of Mr. Malone, 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, 1997, the Company incurred
programming expenses under its agreement with SSI of approximately $62.9
million.
Garden State obtains its cable television programming from SSI through the
Company. The programming services are at a rate which is not more than Garden
State could obtain independently. For the year ended December 31, 1997, Garden
State obtained approximately $14.7 million of programming through the Company.
26
<PAGE>
The Company, through its StarNet, Inc., sells cross channel tune-in
promotional services for cable television to affiliates of TCI. For the year
ended December 31, 1997, the Company generated revenues of $1.9 million for such
services.
Through October 31, 1997, the Company rented four office and warehouse
spaces from H. F. Lenfest and Marguerite Lenfest. Thereafter, the Company rented
three. For the year ended December 31, 1997, the Company paid the Lenfests an
aggregate of $647,000 under such leases. Rental payments are on terms that are
no less favorable than those the Company could obtain from independent parties.
For the year ended December 31, 1997, the Company incurred pay-per-view
order placement fees to TelVue Corporation, an affiliate of H. F. Lenfest,
$470,000 for pay-per-view order placement services.
In November 1994, Mr. Lenfest and TCI International, Inc. jointly and
severally guaranteed $67.0 million in program license obligations of the
distributor of Australis' movie programming. At December 31, 1997, the amount
subject to the guarantee under the license agreements was approximately $47.5
million.
The Company had agreed to indemnify Mr. Lenfest against loss from such
guaranty to the fullest extent permitted under the Company's debt obligations.
Under the terms of the Bank Credit Facility, however, Mr. Lenfest's claims for
indemnification are limited to $33.5 million. Effective March 6, 1997, as
subsequently amended, Mr. Lenfest released the parent Company and its cable
operating subsidiaries from their indemnity obligation until the last to occur
of January 1, 1999 and the last day of any fiscal quarter during which the
Company could incur the indemnity obligation without violating the terms of the
Bank Credit Facility. Certain of the Company's Unrestricted Subsidiaries have
agreed to indemnify Mr. Lenfest for his obligations under the guarantee.
The Company has agreed to pay the legal expenses of H. F. Lenfest and
Marguerite Lenfest related to a pending SEC action against them. 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.
The Company paid the legal expenses of Harry Brooks related to the federal
criminal action against him as disclosed in the Company's Report on Form 10-K
for the year ended December 31, 1996. The Company also paid Mr. Brooks an amount
which enabled him to pay the $25,000 fine levied against him in such action and
to pay the costs of his work release and home confinement program.
John C. Malone, a director of the Company, is a director of The Bank of
New York, which is the Trustee under the Indentures for the Company's Senior
Notes and Subordinated Notes and a lender under the Bank Credit Facility.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements.
The following financial statements are filed as part of the report:
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants
Consolidated Balance Sheets, December 31, 1996 and 1997
Consolidated Statements of Operations, Years Ended December 31,
1995, 1996 and 1997
Consolidated Statements of Changes in
Stockholders' Equity (Deficit), Years Ended December 31, 1995, 1996
and 1997
Consolidated Statements of Cash Flows, Years Ended December 31, 1995,
1996 and 1997
Notes to Consolidated Financial Statements
27
<PAGE>
(a)(2) Independent Certified Public Accountants' Report and Financial
Statement Schedule.
The following Independent Certified Public Accountants' Report and
Financial Statement Schedule are filed as a part of the report:
(i) Report of Independent Certified Public Accountants on
Schedule
(ii) Schedule II -- Valuation and Qualifying Accounts
(a)(3) Exhibits.
The following Exhibits are furnished as part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Title or Description
- - ------ --------------------
<S> <C>
(a) Exhibits.
The following Exhibits are furnished as part of this Report:
1 Purchase Agreement, dated January 30, 1998, between the Company, Salomon Brothers Inc. and
NationsBanc Montgomery Securities LLC.
*2.1 Amended and Restated Asset Exchange Agreement, dated September 8, 1995, between LenComm, 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 Company.
+++3.2 Amended and Restated Bylaws of the Company.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*4.1 Form of $700,000,000 8 3/8% Senior Note Due 2005.
**4.2 Indenture between the Company and The Bank of New York, dated as of November 1, 1995.
+++4.3 Indenture, dated as of June 15, 1996, between the Company and The Bank of New York.
+++4.4 Form of Certificated Note, dated June 27, 1996, between the
Company and Salomon Brothers Inc. (In accordance with Item 601
of Regulation S-K similar Notes between the Company 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 Company and Salomon Brothers
Inc., Toronto Dominion Securities (USA) Inc., CIBC Wood Gundy Securities Corp. and NationsBanc
Capital Markets, Inc.
4.7 Registration Agreement, dated January 30, 1998, between the Company, Salomon Brothers Inc. and
NationsBanc Montgomery Securities
4.8 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York relating to
the $150,000,000 7 5/8% Senior Notes due 2008.
4.9 Form of $150,000,000 7 5/8% Senior Notes due 2008. (In accordance with Item 601 of Regulation S-K
similar notes between the same parties which reference CUSIP No. 526055 AF 5 and CUSIP No. U52547
AA 1 have not been filed because they are identical in all material respects to the filed exhibit.)
4.10 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York relating to
the $150,000,000 8 1/4% Senior Subordinated Notes due 2008.
4.11 Form of $150,000,000 8 1/4% Senior Subordinated Notes due 2008. (In accordance with Item 601 of
Regulation S-K similar notes between the same parties which reference CUSIP No. U52547 AB 9
and CUSIP No. 526055 AH 1 have not been filed because they are identical in all material respects
to the filed exhibit.)
*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, dated as of May
Marguerite Lenfest and Satellite Services, Inc. and Communications, Inc.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*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, Brook
J. Lenfest and the Lenfest Foundation.
*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 CoreStates 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 AdNet 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.)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
**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 MBL 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, N.A.,
as Arranging Agents, the Lenders and Toronto-Dominion (Texas), Inc., as Administrative Agent.
+10.26 First Amendment, dated as of February 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.
+10.27 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 MBL Life Assurance Corp. and Full & Co. have not been filed because
they are identical in all material respects to the filed exhibit.)
++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 Assurance
Society have not been filed because they are identical in all material respects to
the filed exhibit.)
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
++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.
+++10.39 First Amendment, dated August 29, 1996, to Credit Agreement, dated as of February
29, 1996, by and among Lenfest Australia, Inc., The Toronto-Dominion Bank,
NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc.
#10.40 Second Amendment, dated September 30, 1996, to Credit Agreement, dated as of
February 29, 1996, by and among Lenfest Australia, Inc., The Toronto-Dominion
Bank, NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc.
#10.41 Form of First Amendment, dated as of October 28, 1996, to Credit Agreement, dated
as of June 27, 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.
##10.42 Letter, dated March 6, 1997, from H. F. Lenfest to the Company.
###10.43 Agreements, dated as of June 5, 1997, between H. F. Lenfest and Lenfest Jersey,
Inc., Lenfest York, Inc., Lenfest Raystay, Inc. and MCN, Inc. (formerly, MicroNet, Inc.).
10.44 Letter, dated March 26, 1998 (effective September 30, 1997), from H. F. Lenfest to the Company.
*21. Subsidiaries of the Company.
27. Financial Data Schedule.
* Incorporated by reference to the Company's Registration Statement on Form S-1, No.
33-96804, declared effective by the Securities and Exchange Commission on November
8, 1995.
** Incorporated by reference to the Company's Report on Form 10-Q, dated December 22,
1995, for the quarter ended September 30, 1995.
*** Incorporated by reference to the Company's Report on Form 8-K, dated February 26,
1996.
+ Incorporated by reference to the Company's Report on Form 10-K, dated March 29,
1996, for the year ended December 31, 1995.
++ Incorporated by reference to the Company's Report on Form 10-Q, for the quarter
ended March 31, 1996.
+++ Incorporated by reference to the Company's Registration Statement on Form S-4, No.
333-09631, dated August 6, 1996.
# Incorporated by reference to the Company's Report on Form 10-Q, dated November 14,
1996, for the quarter ended September 30, 1996.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
## Incorporated by reference to the Company's Report on Form 10-K, dated March 22,
1997, for the year ended December 31, 1996.
### Incorporated by reference to the Company's Report on Form 10-Q, dated August 14,
1997, for the quarter ended June 30, 1997.
(b) Reports on Form 8-K.
None.
</TABLE>
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
<S> <C>
Report of Independent Certified Public Accountants. . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets, December 31, 1996 and 1997. . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations, Years Ended December 31, 1995, 1996 and 1997. . . . . F-5
Consolidated Statements of Changes in Stockholders' Equity (Deficit),
Years Ended December 31, 1995, 1996 and 1997. . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1996 and 1997. . . . . F-7
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . F-9
FINANCIAL STATEMENTS SCHEDULE
Report of Independent Certified Public Accountants on Schedule. . . . . . . . . . . . . . . F-38
Schedule II -- Valuation and Qualifying Accounts. . . . . . . . . . . . . . . . . . . . . . F-39
</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. (a Delaware corporation) and subsidiaries as of December
31, 1996 and 1997, 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, 1997. 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 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
provide a reasonable basis for our opinion.
In our opinion, 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, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the financial statements, the Company has sold
substantially all of the assets of MicroNet, Inc. and MicroNet Delmarva
Associates, L.P., wholly owned subsidiaries of the Company. Prior period
financial statements have been restated to reflect the continuing operations of
the Company.
Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
March 4, 1998 (except as to the first paragraph of Note 20,
as to which the date is March 26, 1998)
F-2
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997
-------------- --------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 19,162 $ 15,623
Marketable securities 79,830 14,452
Accounts receivable - trade and other, less allowance
for doubtful accounts of $1,985 in 1996 and $2,923 in 1997 19,885 23,206
Inventories 2,757 2,153
Prepaid expenses 2,364 2,960
Property and equipment, net of accumulated
depreciation 372,387 413,787
Investments in affiliates, accounted for under the equity
method, and related receivables 41,333 46,471
Other investments, at cost 10,410 10,410
Goodwill, net of amortization 74,404 73,136
Deferred franchise costs, net of amortization 494,568 507,023
Other intangible assets, net of amortization 24,908 28,341
Deferred Federal tax asset (net) 52,257 74,251
Net assets of discontinued operations 20,971 2,660
Other assets 6,552 5,247
-------------- --------------
$ 1,221,788 $ 1,219,720
============== ==============
</TABLE>
See accompanying notes. (continued)
F-3
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997
-------------- --------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
<S> <C> <C>
Notes payable $ 1,303,200 $ 1,287,988
Obligations under capital leases - related party 5,186 3,722
Obligations under capital leases - unrelated parties 4,477 3,596
Accounts payable and accrued expenses - unrelated parties 38,781 50,867
Accounts payable - affiliate 12,855 26,304
Customer service prepayments and deposits 8,614 6,984
Deferred interest - 7,063
Deferred state tax liability (net) 9,066 9,580
Investment in Garden State Cablevision L.P. 72,454 77,880
-------------- --------------
TOTAL LIABILITIES 1,454,633 1,473,984
MINORITY INTEREST in equity of consolidated
subsidiaries 945 -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, 158,896 shares
authorized, issued and outstanding 2 2
Additional paid-in capital 50,747 50,747
Unrealized gain (loss) on marketable securities, net of deferred
tax liabilities of $317 in 1996 and $2,830 in 1997 (9,866) 5,256
Accumulated deficit (274,673) (310,269)
-------------- --------------
(233,790) (254,264)
-------------- --------------
$ 1,221,788 $ 1,219,720
============== ==============
</TABLE>
See accompanying notes.
F-4
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1995 1996 1997
------------- ------------ -------------
<S> <C> <C> <C>
REVENUES $ 254,225 $ 381,810 $ 447,390
OPERATING EXPENSES
Service 15,670 29,299 33,772
Programming - from affiliate 37,685 57,344 62,892
Programming - other cable 17,637 25,460 30,196
Selling, general and administrative 55,262 82,688 105,470
Direct costs - non-cable 18,859 21,150 22,337
Depreciation 49,126 65,712 78,801
Amortization 25,146 45,565 51,138
------------- ------------ -------------
219,385 327,218 384,606
------------- ------------ -------------
OPERATING INCOME 34,840 54,592 62,784
OTHER INCOME (EXPENSE)
Interest expense (60,909) (107,201) (120,788)
Equity in net (losses) of unconsolidated affiliates (10,682) (17,870) (7,334)
Recognized (loss) on decline in market value of securities -
Australis Media Limited - (86,400) (44,572)
Other income and expense (net) 14,927 13,909 1,836
------------- ------------ -------------
(56,664) (197,562) (170,858)
------------- ------------ -------------
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (21,824) (142,970) (108,074)
INCOME TAX BENEFIT (NET) 10,724 14,329 38,740
------------- ------------ -------------
(LOSS) FROM CONTINUING
OPERATIONS (11,100) (128,641) (69,334)
DISCONTINUED OPERATIONS (net of applicable income taxes)
Income (loss) from discontinued operations of MicroNet,
Inc. and affiliates (395) 363 1,469
Gain on sale of assets of MicroNet, Inc. and affiliates - - 32,269
------------- ------------ -------------
(395) 363 33,738
------------- ------------ -------------
(LOSS) BEFORE
EXTRAORDINARY LOSS (11,495) (128,278) (35,596)
EXTRAORDINARY (LOSS)
Early extinguishment of debt, net of income taxes of
$3,629 in 1995 and $1,337 in 1996 (6,739) (2,484) -
------------- ------------ -------------
NET (LOSS) $ (18,234) $ (130,762) $ (35,596)
============= ============ =============
</TABLE>
See accompanying notes.
F-5
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
COMMON STOCK
BALANCE AT BEGINNING
AND END OF YEAR $ 2 $ 2 $ 2
============ ============ =============
ADDITIONAL PAID-IN CAPITAL
BALANCE AT BEGINNING
AND END OF YEAR $ 50,747 $ 50,747 $ 50,747
============ ============ =============
UNREALIZED GAIN (LOSS) ON MARKETABLE
SECURITIES
Balance at beginning of year $ 25,319 $ 47,970 $ (9,866)
Net unrealized gain (loss) on marketable securities, net of
deferred tax liabilities 22,651 (57,836) 15,122
------------ ----------- ------------
BALANCE AT END OF YEAR $ 47,970 $ (9,866) $ 5,256
============ =========== ============
ACCUMULATED DEFICIT
Balance at beginning of year $ (125,677) $ (143,911) $ (274,673)
Net (loss) (18,234) (130,762) (35,596)
----------- ----------- ------------
BALANCE AT END OF YEAR $ (143,911) $ (274,673) $ (310,269)
=========== =========== ============
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) $ (45,192) $ (233,790) $ (254,264)
============ =========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1996 1997
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (18,234) $ (130,762) $ (35,596)
(Income) loss from discontinued operations 395 (363) (1,469)
(Gain) on sale of assets of discontinued operations - - (32,269)
Extraordinary loss 6,739 2,484 -
------------ ------------- ------------
Loss from continuing operations (11,100) (128,641) (69,334)
Adjustments to reconcile loss from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 74,272 111,277 129,939
Accretion of debt discount 328 1,081 1,788
Accretion of discount on marketable securities - (1,026) (477)
Net (gains) on sales of marketable securities (13,517) (342) (468)
Recognized loss on decline in market value of securities -
Australis Media Limited - 86,400 44,572
(Gain) on disposition of partnership interest - (7,210) -
Deferred income tax (benefit) (10,724) (15,226) (23,992)
Write off of assets upon rebuild of cable systems 282 846 -
(Gain) loss on sales of property and equipment (115) (326) 694
Equity in net losses of unconsolidated affiliates 10,682 17,870 7,334
Loss on other investments 75 - -
Minority interests (1,347) (2,492) (945)
Changes in operating assets and liabilities, net of effects from acquisitions:
Cash - restricted escrow 3,273 - -
Accounts receivable 2,675 (7,100) (3,321)
Inventories 2,260 2,175 604
Prepaid expenses 594 278 (596)
Other assets (291) (3,363) 1,305
Deferred interest - - 7,063
Accounts payable and accrued expenses:
Affiliate (433) 5,650 13,449
Unrelated parties 11,749 6,599 12,086
Customer service prepayments and deposits (70) 637 (1,630)
----------- ------------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 68,593 67,087 118,071
------------ ------------- -----------
</TABLE>
See accompanying notes. (continued)
F-7
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of cable systems $ - $ (604,032) $ (84,500)
Acquisition of the minority interest of South Jersey
Cablevision Associates (8,838) - -
Non cable acquisitions - (5,600) -
Purchases of property and equipment (44,144) (57,397) (94,519)
Purchases of marketable securities (2,678) (582) (3,091)
Purchases of other investments (71) - -
Proceeds from transfer of cable system - 4,500 -
Proceeds from sales of property and equipment 192 381 1,091
Proceeds from sales of marketable securities 16,545 1,952 45,223
Proceeds from sale of assets of discontinued operations - - 70,250
Discontinued operations (1,677) (255) (18,558)
Loans to Australis Media - (41,139) -
Proceeds from Australis Media note receivable 19,240 41,139 -
Investments in unconsolidated affiliates (19,492) (4,183) (9,346)
Distributions from unconsolidated affiliates 1,826 45,932 775
(Increase) in other intangible assets - investing (306) (4,539) (8,876)
Loans and advances to unconsolidated affiliates (726) (470) (4,849)
Loans and advances from unconsolidated affiliates 1,110 8,390 3,627
------------- ------------- -------------
NET CASH (USED IN)
INVESTING ACTIVITIES (39,019) (615,903) (102,773)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in debt 741,363 942,023 105,000
Early extinguishment of debt (91,118) (448,821) -
Other debt reduction:
Notes (515,528) (80,345) (122,000)
Obligations under capital leases (49) (256) (1,490)
(Increase) in other intangible assets - financing (4,110) (9,045) (347)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 130,558 403,556 (18,837)
------------- ------------- --------------
NET INCREASE
(DECREASE) IN CASH 160,132 (145,260) (3,539)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 4,290 164,422 19,162
-------------- -------------- ------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 164,422 $ 19,162 $ 15,623
============== ============== ============
</TABLE>
See accompanying notes.
F-8
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1996 and 1997
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 suburbs of Philadelphia, Pennsylvania, from
Harrisburg, Pennsylvania through Wilmington, Delaware and south through Atlantic
City, New Jersey. In addition, the Company, through its non-cable subsidiaries,
sells advertising for cable television systems and provides satellite delivered
cross channel tune-in promotional services for cable television. The Company's
ability to collect the amounts due from customers is primarily affected by
economic fluctuations in these geographic areas.
The Company maintains cash balances at several financial institutions located
primarily in the Philadelphia Area. Accounts at each institution are insured by
either the FDIC 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, Change in Reporting Entity and Restatement
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 eighty percent (80%) by the Company, are also included.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
During 1996, the Company acquired an additional 50% interest in Atlantic
Communication Enterprises, which increased its holdings to 100%. Accordingly,
the Company changed its method of accounting for this investment from the equity
method to consolidation as required by generally accepted accounting principles.
This change in consolidation policy had no effect on net loss for 1995 or 1996.
Since the amounts are not material and have no effect on net loss, the prior
period financial statements were not restated to reflect the change in
consolidation policy.
The prior period financial statements have been restated to reflect the
continuing operations of the Company. See Note 2 -- Discontinued Operations.
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 amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and reported amount 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.
F-9
<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 some of the
Company's non-cable wholly owned subsidiaries.
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 Self Constructed Assets
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.
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 and covenants not to
compete. 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.
Valuation of Long-Lived Assets
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 long-lived 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 value, net book value is
then reduced to the undiscounted cash flow estimate. The Company also evaluates
the depreciation and amortization periods of tangible and intangible assets to
determine whether events or circumstances warrant revised estimates of useful
lives. As of December 31, 1997, management believes that no revisions to the
remaining useful lives or writedowns of long-lived assets are required.
F-10
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
Investments
Investments in non-publicly traded entities that do not have a readily
ascertainable fair market value, in which the voting 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.
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 included with unrealized gain (loss) on marketable securities, 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.
Advertising
The Company follows the policy of charging the costs of advertising to expense
as incurred.
Interest Rate Swap Agreements
The amount of interest 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 days 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.
F-11
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
Recent Accounting Pronouncements
The Financial Accounting Standards Board (the "FASB") has recently issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 established standards for
reporting and display of comprehensive income and its components in the
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company is in the process of
determining its preferred format. The adoption of SFAS No. 130 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows.
The FASB has also recently issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also established standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's consolidated results of operations, financial position or cash
flows.
NOTE 2 - DISCONTINUED OPERATIONS
Effective October 31, 1997, MicroNet, Inc. and MicroNet Delmarva Associates, LP
(collectively "MicroNet"), each a wholly owned subsidiary of the Company, sold
substantially all of their assets and Suburban Cable TV Co. Inc., Lenfest
Atlantic, Inc. and Lenfest New Castle County sold certain of their towers. The
purchase price was approximately $70.3 million, subject to adjustments. The sale
resulted in a gain of $32.3 million, net of applicable income taxes of $17.7
million. The sale represents the disposition of the major segment of the
Company's tower rental, microwave service, video, voice and data service
businesses. The assets sold were not material to the cable television operations
of the Company.
The 1995 and 1996 consolidated financial statements and notes thereto have been
restated to reflect continuing operations of the Company. The net assets of
MicroNet have been separately classified in the accompanying consolidated
balance sheet under the caption "Net assets of discontinued operations" and
consist of the following at December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
Cash $ 1,471 $ -
Accounts receivable 2,916 2,660
Prepaid expenses 460 -
Property and equipment 16,642 -
Goodwill 4,120 -
Other intangible assets 1,168 -
Deferred federal tax asset 3,363 -
Other assets 60 -
Notes payable (7,000) -
Accounts payable and accrued expenses (1,596) -
Deferred state tax liability (99) -
Customer service prepayments (534) -
------------- --------------
$ 20,971 $ 2,660
============= ==============
</TABLE>
F-12
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 2 - DISCONTINUED OPERATIONS - (continued)
Operating results of MicroNet for the years ended December 31, 1995, 1996 and
1997, are shown separately in the accompanying consolidated statements of
operations under the caption "Income (loss) from discontinued operations of
MicroNet, Inc. and affiliates" and consist of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1996 1997
------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Revenues $ 12,024 $ 15,508 $ 15,496
Operating expenses (8,794) (9,961) (9,812)
Depreciation and amortization (3,428) (4,104) (2,862)
------------ ----------- -----------
OPERATING INCOME (LOSS) (198) 1,443 2,822
Interest expense (629) (715) (598)
Other income 61 23 42
Income tax (expense) benefit 371 (388) (797)
------------ ----------- -----------
NET INCOME (LOSS) $ (395) $ 363 $ 1,469
============ =========== ===========
</TABLE>
NOTE 3 - COMMON STOCK OWNERSHIP AND CONTROL
The 158,896 shares of common stock outstanding at December 31, 1996 and 1997,
are 50% owned by members of the Lenfest Family ("H.F. (Gerry) Lenfest,
Marguerite Lenfest, their issue and The Lenfest Foundation") and 50%
by LMC Lenfest, Inc., an indirect wholly owned subsidiary of
Tele-Communications, Inc. ("TCI"). All Lenfest Family members have granted
irrevocable proxies to H.F. Lenfest. These proxies expire March 30, 2000.
Pursuant to an agreement among H.F. Lenfest, the Lenfest Family and LMC Lenfest,
Inc. dated December 18, 1991, 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 until January 1, 2002, and has the right to
designate a majority of the Board of Directors of the Company until the earlier
of January 1, 2002, or Mr. Lenfest's death. 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.
NOTE 4 - SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1996 1997
------------ ------------ ------------
Cash paid during the year for: (Dollars in thousands)
<S> <C> <C> <C>
Interest:
Continuing operations $ 55,326 $ 103,836 $ 120,580
Discontinued operations 519 494 612
Income taxes:
Continuing operations $ 160 $ - $ 1,522
Discontinued operations - - -
</TABLE>
F-13
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 4 - SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOW - (continued)
Supplemental Schedules Relating to Acquisitions
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1996 1997
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Property and equipment $ 3,585 $ 170,085 $ 27,965
Deferred franchise costs 2,124 398,260 53,797
Minority interest in partnership equity 3,129 - -
Goodwill and other intangible assets - 32,543 2,738
Equity interests in affiliates - 2,877 -
Other asset - 5,867 -
------------ ------------ -------------
$ 8,838 $ 609,632 $ 84,500
============ ============ =============
</TABLE>
Noncash Investing and Financing Transactions
On December 16, 1997, The Box Worldwide, Inc. ("Box") merged with a subsidiary
of TCI Music, Inc. ("TCI Music"), an affiliate of TCI. As a result of the
merger, the Company's 7,111,319 shares of Box were converted into rights to
receive 501,290 shares of TCI Music preferred stock. A former employee of the
Company has an option to purchase 14,000 of these shares. This option will
expire on December 31, 1998. Each share of the TCI Music preferred stock is
convertible into three shares of TCI Music series A common stock.
On December 23, 1996, the Company received 18,000,000 shares of voting stock of
Australis Media Limited ("Australis") and 52,238,547 non-voting debentures of
Australis in connection with the termination of a technical services agreement
with Australis and also received 500,000 shares of voting stock for late
repayment of a loan to the Company by Australis. Also on December 23, 1996, the
Company converted 5,000,000 non-voting debentures of Australis into 5,000,000
shares of voting stock.
On October 31, 1996, the Company financed $80,000,000 used to acquire additional
debt and equity securities of Australis (See Note 12).
On September 30, 1996, the Company contributed the right to receive assets of a
cable television system for a partnership interest (See Note 5). Also, in
September 1996, the Company contributed the assets that comprise the business
known as "the Barker" to a newly formed joint venture (See Note 5).
On May 10, 1996, the Company entered into an agreement to guarantee up to
$75,000,000 of a new $125,000,000 Australis bank facility as part of
recapitalization plans pursued by Australis. On May 2, 1996, the Company entered
into a stand-by $75,000,000 senior subordinated credit facility in order to
provide any required funding under this guaranty. As of October 31, 1996, the
guaranty and stand-by facility were terminated.
In February 1996, the Company exchanged the assets of its cable television
systems in the East San Francisco Bay area, its 41.67% partnership interest in
Bay Cable Advertising, and the right to receive assets of a cable television
system located in Fort Collins, CO, for the assets of a cable television system
serving Wilmington, Delaware and the surrounding area. A gain of $7,210,000,
which represents the excess of the market value of the partnership interest over
its book value, has been included in the accompanying consolidated statement of
operations (See Note 5).
In 1996 and 1997, the Company incurred additional capital lease obligations of
$4,635,000 and $449,000, respectively.
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.
F-14
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 4 - SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOW - (continued)
During 1995 and 1997, the Company disposed of $4,231,000 and $5,972,000,
respectively of fully depreciated plant in connection with the rebuild of
certain of its systems.
NOTE 5 - NEW BUSINESS AND ACQUISITIONS
Domestic Cable
On January 10, 1997, the Company acquired a cable television system from Cable
TV Fund 14-A, Ltd., an affiliate of Jones Intercable, Inc., for approximately
$84,500,000, subject to certain adjustments. The system, located in
Turnersville, New Jersey, passed approximately 47,000 homes and served
approximately 36,900 basic customers. For financial reporting purposes, the
Company accounts for the acquisition of these assets under the purchase method.
This acquisition was funded in part by borrowings under the bank credit
facility.
On September 30, 1996, the Company through its newly formed subsidiary, Lenfest
Clearview, Inc. ("Clearview") completed the acquisition of a 30% general
partnership interest in a newly formed general partnership, Clearview Partners
(the "Partnership"). The Company contributed $500,000 and its right to receive
the assets of the Gettysburg, PA cable television system (see acquisition from
Sammons Communications, Inc. discussed below) and its right to exchange the
Gettysburg system for the assets of the Stewartstown, PA cable television system
owned by GS Communications, Inc. The Company received a payment of $4.5 million
from GS Communications, Inc. in connection with these transactions. No gain or
loss was recorded on the exchange. Clearview CATV, Inc., an unaffiliated
company, contributed the assets and certain liabilities of its cable television
system located in Maryland and Pennsylvania to the Partnership for a 70% general
partnership interest. The Partnership's systems passed approximately 13,400
homes and served approximately 9,650 basic customers. The Company reports its
proportionate share of partnership net income (loss) on the equity method. The
Company's cash contribution was made from available funds.
On April 30, 1996, the Company acquired from Tri-County Cable Television
Company, an affiliate of Time Warner, its Salem, NJ cable television system for
approximately $16,000,000. The system passed approximately 10,600 homes and
served approximately 7,700 basic customers. On the same date, the Company
acquired from Shore Cable Company of New Jersey its Ventnor, NJ cable television
system for approximately $11,000,000. The system passed approximately 6,100
homes and served approximately 5,000 basic customers. For financial reporting
purposes, the Company accounts for the acquisition of these assets under the
purchase method. These acquisitions were funded in part by borrowings under the
existing bank credit facility.
On February 29, 1996, the Company acquired four cable television systems and
equity interests in three affiliates 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., passed
approximately 358,000 homes and served approximately 282,000 basic customers.
The equity interests consist of a 50% partnership interest in Hyperion
Telecommunications of Harrisburg, a 50% partnership interest in Atlantic
Communication Enterprises and a 25% partnership interest in Cable Adcom. For
financial reporting purposes, the Company accounts for the acquisition of these
assets under the purchase method. The acquisition was funded in part by
$420,000,000 borrowed under the Company's bank credit facility existing at that
date, and the remaining proceeds from a public offering of debt securities in
November 1995. The purchase price included the assets of a fifth system, located
in Gettysburg, PA, to which the Company did not take title. The Company managed
the Gettysburg system from February 29, 1996, until the assets of the system
were transferred to GS Communications, Inc. on September 30, 1996.
F-15
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 5 - NEW BUSINESS AND ACQUISITIONS - (continued)
In February 1996, the Company completed an exchange transaction with a
subsidiary of TCI whereby the Company exchanged the assets of its cable
television systems in the East San Francisco Bay area with a book value of
$33,194,000, its 41.67% partnership interest in Bay Cable Advertising with a
book value of $3,545,000 and a fair market value of $10,755,000, and the right
to receive assets of a cable television system located in Fort Collins, CO,
which right was acquired for $54,385,000, less settlement adjustments of
$8,799,000, for the assets of a cable television system, serving Wilmington,
Delaware and the surrounding area. The assets of the Wilmington system have been
recorded at the net book value of the cable television system assets exchanged
and the market value of the partnership interest, less the settlement
adjustment. A gain of $7,210,000, which represents the excess of the market
value of the partnership interest over its book value, has been included in the
accompanying consolidated statement of operations. The acquisition of these
cable systems were financed with proceeds from the Company's public offering of
debt securities in November 1995.
On June 29, 1995, the Company, through its subsidiary, Lenfest Raystay Holdings,
Inc., exercised options 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 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 owned and operated
contiguous cable systems serving approximately 21,000 customers in southern New
Jersey. As of June 30, 1996, Lenfest South Jersey Investments, Inc. was merged
into Lenfest Atlantic, Inc., which became the 100% owner of South Jersey,
thereby terminating the partnership. The accounts of Lenfest Atlantic, Inc.
are included in these consolidated financial statements.
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. (See Note 8).
The accompanying consolidated financial statements include the results of
operations for these acquisitions since the dates of the acquisitions.
The following summarized pro forma (unaudited) information assumes the
acquisitions had occurred on January 1, 1995:
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C>
Revenues $ 382,389 $ 418,109 $ 447,848
------------ ------------ -------------
Loss from continuing operations $ (46,902) $ (143,619) $ (69,440)
------------ ------------ -------------
Net loss $ (54,036) $ (145,740) $ (35,702)
------------ ------------ -------------
</TABLE>
F-16
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 5 - NEW BUSINESS AND ACQUISITIONS - (continued)
Other
The Company, through its subsidiaries, StarNet, StarNet Interactive
Entertainment, Inc. and Suburban Cable TV Co. Inc., owned a total of 7,111,319
shares of Box. The Company used the equity method to account for this
investment. On December 16, 1997, Box merged with a subsidiary of TCI Music and
the Company's shares of Box were converted into rights to receive 501,290 shares
of TCI Music preferred stock. The investment in TCI Music is accounted for as
marketable securities. The Company's cost basis in the securities is
approximately $2.7 million. The fair value of the securities at December 31,
1997 was approximately $8.6 million.
Effective January 1, 1997, the Company, through its subsidiary, Lenfest
Philadelphia Interconnect, Inc., entered into a partnership with Comcast
Philadelphia Interconnect Partner for the purpose of representing regional and
national cable advertising sales in the Greater Philadelphia market. Under the
agreement, the percentage interests of the partners is determined on the basis
of the number of customers of the partners in the designated market area at the
beginning of the year. For 1997, the Company's partnership interest was 72%. The
partners have equal representation on the Executive Committee and the Company
will be the managing partner of the partnership for its first two years. Lenfest
Advertising, Inc., d/b/a Radius Communications ("Radius"), a wholly owned
subsidiary of the Company, will continue to provide local cable advertising
sales and insertion for the Company and sixteen other cable television system
operators. The Company uses the equity method to account for this investment.
On September 30, 1996, Radius acquired the assets of Metrobase Cable Advertising
from a subsidiary of Harron Communications Corp. for approximately $4,500,000.
For financial reporting purposes, the Company accounts for the acquisition of
these assets under the purchase method. This acquisition was funded from
available funds.
On September 11, 1996, StarNet, Inc. ("StarNet"), a wholly owned subsidiary of
the Company, entered into a joint venture with Prevue Networks, Inc. ("Prevue"),
a wholly owned subsidiary of United Video Satellite Group, Inc. ("UVSG"), to
combine the two companies' pay-per-view promotion services. StarNet contributed
its Barker service to the joint venture and received a 28% partnership interest.
The new joint venture, Sneak Prevue, L.L.C., is based in Tulsa, Oklahoma and is
managed and controlled by UVSG. The Company reports its proportionate share of
net income (loss) on the equity method.
In February 1996, Radius purchased the Philadelphia area assets of Cable AdNet
Partners, a subsidiary of TCI, for approximately $1,100,000.
The Company, through its wholly owned subsidiary, Lenfest International, Inc.,
is a partner in L-TCI Associates ("L-TCI"). UA-France, Inc. ("UAF"), an indirect
wholly owned subsidiary of TCI, is the only other partner. L-TCI was formed to
acquire 29% of the issued and outstanding 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.
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.
L-TCI was obligated to make additional capital contributions pursuant to its
stock subscription agreement. In 1995 through 1997, 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 L-TCI's
commitment. During 1995 through 1997, the Company invested an aggregate of
$19,233,000 to fund the L-TCI contributions. The additional investments
increased the Company's ownership percentage of L-TCI to approximately 80%. The
accounts of L-TCI are included in the Company's consolidated financial
statements. The Company uses the equity method to account for L-TCI's interest
in Videopole.
F-17
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 6 - INVENTORIES
The schedule of inventories at December 31, 1996 and 1997 are as follows:
1996 1997
------------ ------------
(Dollars in thousands)
Raw materials $ 2,285 $ 2,153
Finished goods and work-in process 472 -
------------ ------------
$ 2,757 $ 2,153
============ ============
At December 31, 1996 and 1997, inventories have been written down to estimated
net realizable value and the accompanying consolidated statements of operations
for 1996 and 1997 include corresponding charges of $1,047,000 and $948,000,
respectively, which have been included with direct costs - non-cable.
NOTE 7 - PROPERTY AND EQUIPMENT
The schedule of property and equipment of continuing operations at December 31,
1996 and 1997 is as follows:
<TABLE>
<CAPTION>
Estimated
Useful Lives
1996 1997 in Years
-------------- -------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C>
Land $ 2,993 $ 4,246 -
Building and improvements 25,462 30,779 10-39
Cable distribution systems 578,874 659,366 5-12
Computer hardware and software 11,283 25,325 3-5
Office equipment, furniture and
fixtures 9,726 12,609 7
Vehicles 12,571 15,758 5
Other equipment 10,580 15,560 5-7
Assets under capital leases 9,767 9,269 5-15
-------------- --------------
661,256 772,912
Accumulated depreciation 288,869 359,125
-------------- --------------
$ 372,387 $ 413,787
============== ==============
</TABLE>
NOTE 8 - INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P.
The Company, through several subsidiaries, owns non-controlling 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. Investments and advances in affiliates
accounted for under the equity method amounted to $41,333,000 and $46,471,000 at
December 31, 1996 and 1997, respectively. Net losses recognized under the equity
method for the years ended December 31, 1995, 1996 and 1997 were $10,682,000,
$17,870,000 and $7,334,000, 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.
F-18
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 8 - INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (continued)
The Company, through its subsidiary, Lenfest Jersey, Inc., owns a 10.005%
general partnership interest and a 39.995% limited partnership in Garden State
Cablevision L.P. (Garden State), a cable company serving approximately 208,000
customers in southern New Jersey at December 31, 1997. Under a consulting
agreement, the Company advises Garden State on various operational and financial
matters for a consulting fee that was equal to 1.5% of Garden State's gross
revenues. On January 10, 1995, in connection with the increase in ownership
described in Note 5, the consulting fee was changed to 3% of gross revenues. Due
to restrictions contained in Garden State's debt agreements, the payment of a
portion of these fees had been deferred. In December 1996, the Company received
a $50 million distribution from Garden State. The distribution received included
$8.1 million of prior accrued management fees that had 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, 1995, 1996 and 1997, the total programming obtained through the Company was
approximately $11,985,000, $13,659,000 and $14,650,000, 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 $72,454,000 and $77,880,000 at
December 31, 1996 and 1997, respectively.
Summarized audited financial information of Garden State, accounted for under
the equity method, at December 31, 1996 and 1997, is as follows:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
(Dollars in thousands)
Financial Position
<S> <C> <C>
Cash and cash equivalents $ 4,858 $ 5,271
Accounts receivable, net 2,683 3,551
Other current assets 1,033 666
Property and equipment, net 75,920 83,863
Deferred assets, net 85,204 55,938
-------------- --------------
TOTAL ASSETS $ 169,698 $ 149,289
============== ==============
Debt $ 333,000 $ 324,000
Liabilities to the Company 3,246 3,579
Accounts payable and accrued expenses 13,674 12,388
Customer prepayments and deposits 947 875
Other liabilities 1,098 1,523
Partners' deficit (182,267) (193,076)
-------------- --------------
TOTAL LIABILITIES AND DEFICIT $ 169,698 $ 149,289
============== ==============
</TABLE>
F-19
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 8 - INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (continued)
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
(Dollars in thousands)
Results of Operations
<S> <C> <C> <C>
Revenues $ 91,771 $ 100,756 $ 109,126
Operating expenses (40,595) (43,608) (45,902)
Depreciation and amortization (46,976) (48,524) (44,698)
------------- ------------- -------------
OPERATING INCOME 4,200 8,624 18,526
Interest expense (19,166) (16,405) (22,787)
Other expense (5,590) (6,045) (6,548)
------------- ------------- -------------
NET LOSS $ (20,556) $ (13,826) $ (10,809)
============= ============= =============
Cash Flows
Cash flows from operating activities $ 30,452 $ 26,132 $ 32,815
Cash flows from investing activities (14,794) (22,759) (23,308)
Cash flows from financing activities (17,009) (1,774) (9,094)
------------- ------------- -------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,351) 1,599 413
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 4,610 3,259 4,858
------------- ------------- -------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 3,259 $ 4,858 $ 5,271
============= ============= =============
Summarized financial information of affiliates other than Garden State, accounted for under the equity method, at
December 31, 1996 and 1997, is as follows:
1996 1997
--------------- ---------------
(Dollars in thousands)
Financial Position
Cash and cash equivalents $ 5,972 $ 6,595
Accounts receivable, net 11,071 16,793
Other current assets 13,071 31,658
Property and equipment, net 172,864 209,333
Due from related party (not the Company) 533 -
Deferred tax asset 8,730 550
Other assets, net 44,806 62,000
-------------- --------------
TOTAL ASSETS $ 257,047 $ 326,929
============== ==============
</TABLE>
F-20
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 8 - INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (continued)
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
(Dollars in thousands)
Financial Position - (continued)
<S> <C> <C>
Liabilities to the Company $ 2,375 $ 4,435
Accounts payable and accrued expenses 47,202 44,131
Debt 135,086 136,089
Deferred tax liability 11,943 12,343
Payable to related party (not the Company) 67,136 90,991
Other liabilities 9,195 29,985
Equity (deficit) (15,890) 8,955
-------------- --------------
TOTAL LIABILITIES
AND EQUITY $ 257,047 $ 326,929
============== ==============
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
(Dollars in thousands)
Results of Operations
<S> <C> <C> <C>
Revenues $ 124,171 $ 125,534 $ 156,405
Operating expenses (84,615) (96,909) (120,782)
Depreciation and amortization (15,876) (25,755) (32,357)
------------- ------------- -------------
OPERATING INCOME 23,680 2,870 3,266
Interest expense (8,988) (16,964) (18,284)
Other income and expense (net) (2,548) 1,054 9,565
------------- ------------- -------------
NET INCOME (LOSS) $ 12,144 $ (13,040) $ (5,453)
============= ============= =============
Cash Flows
Cash flows from operating activities $ 18,146 $ 6,070 $ 35,378
Cash flows from investing activities (24,598) (57,436) (74,331)
Cash flows from financing activities 4,289 46,450 34,153
------------- ------------- -------------
NET (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (2,163) $ (4,916) $ (4,800)
============= ============= =============
</TABLE>
F-21
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 8 - 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, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Susquehanna Cable Co. Subsidiaries ("SCC Subs")(Note 9) $ 10,880 $ 10,671
The Box Worldwide, Inc. ("Box") (Note 5) 4,161 -
Raystay Co. ("Raystay") (Note 5) 6,981 11,807
Videopole (Note 5) 9,015 11,117
MetroNet Communications and GlobeNet ("MetroNet") 1,674 1,086
Hyperion Telecommunications of Harrisburg ("Hyperion") 1,043 217
Sneak Prevue, L.L.C. ("Sneak Prevue") (Note 5) 3,091 2,512
Clearview Partners ("Clearview") (Note 5) 1,825 1,825
Cable Adcom ("Adcom") 1,481 1,533
Philadelphia Interconnect ("Interconnect") (Note 5) - 3,843
Others 1,182 1,860
-------------- --------------
$ 41,333 $ 46,471
============== ==============
</TABLE>
Lenfest York, Inc., a subsidiary of the Company, owns a 30% equity interest in
five subsidiaries of Susquehanna Cable Co. Suburban Cable TV Co. Inc., a wholly
owned subsidiary of the Company, owns a 50% general partnership interest in
Cable Adcom. Cable Adcom is a cable advertising interconnect that serves the
Harrisburg, Pennsylvania, Area of Dominant Influence ("ADI"). 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 international call back telephone service for
its customers located in foreign countries. The Company's wholly owned
subsidiary, Lenfest Telephony, Inc., owned a 50% partnership interest in
Hyperion Telecommunications of Harrisburg (See Note 26).
The following table reflects the Company's share of earnings or losses of Garden
State and each of the aforementioned affiliates:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Garden State $ (8,527) $ (5,068) $ (3,340)
SCC Subs (1,263) (1,010) (208)
Box 132 (2,671) (1,414)
Raystay (886) (1,575) 4,826
Videopole (2,644) (7,408) (7,200)
BCA 1,711 50 -
MetroNet 190 (92) 81
Hyperion - (734) (826)
Sneak Prevue - (326) (426)
Clearview - (100) -
Adcom 530 1,070 851
Interconnect - - 359
Other 75 (6) (37)
------------- ------------- -------------
$ (10,682) $ (17,870) $ (7,334)
============= ============= =============
</TABLE>
F-22
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 8 - INVESTMENTS IN AFFILIATES INCLUDING GARDEN STATE
CABLEVISION L.P. - (continued)
CAH, Inc., a subsidiary of the Company, owned a 41.67% general partnership
interest in Bay Area Interconnect d/b/a Bay Cable Advertising ("BCA"), a cable
advertising interconnect serving the San Francisco, California, ADI (See Note
5).
NOTE 9 - OTHER INVESTMENTS
Other investments, accounted for under the cost method, are summarized as
follows:
1996 1997
--------------- ---------------
(Dollars in thousands)
Susquehanna Cable Co., Inc. (a) $ 10,359 $ 10,359
Other 51 51
-------------- --------------
$ 10,410 $ 10,410
============== ==============
(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 10 - GOODWILL
The excess of the purchase price paid over the acquired net assets has been
allocated to goodwill. Accumulated amortization at December 31, 1996 and 1997,
was $25,202,000 and $28,594,000, respectively.
F-23
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 11 - DEFERRED FRANCHISE COSTS AND OTHER INTANGIBLE ASSETS
A schedule of deferred franchise costs and other intangible assets and
accumulated amortization of continuing operations at December 31, 1996 and 1997,
is as follows:
<TABLE>
<CAPTION>
Accumulated
Amount Amortization Net
------------- ----------------- --------------
(Dollars in thousands)
December 31, 1996
<S> <C> <C> <C>
Deferred franchise costs $ 639,131 $ 144,563 $ 494,568
============== ============== ==============
Debt acquisition costs $ 12,572 $ 3,157 $ 9,415
Covenants not to compete 12,500 5,867 6,633
Other deferred assets 11,368 2,508 8,860
-------------- -------------- --------------
$ 36,440 $ 11,532 $ 24,908
============== ============== ==============
December 31, 1997
Deferred franchise costs $ 693,050 $ 186,027 $ 507,023
============== ============== ==============
Debt acquisition costs $ 12,589 $ 4,735 $ 7,854
Covenants not to compete 12,500 7,117 5,383
Other deferred assets 19,920 4,816 15,104
-------------- -------------- --------------
$ 45,009 $ 16,668 $ 28,341
============== ============== ==============
</TABLE>
NOTE 12 - MARKETABLE SECURITIES
The Company's investment in the securities of Australis Media Limited
("Australis") consists of 77,982,000 shares of voting common stock and
269,427,000 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 debentures 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 aggregate cost and market values of the securities at December 31, 1996 and
1997 are as follows:
<TABLE>
<CAPTION>
Gross
Aggregate Unrealized Fair
Cost Gain (Loss) Value
-------------- ----------------- --------------
(Dollars in thousands)
December 31, 1996
<S> <C> <C> <C>
Australis Media Limited convertible debentures $ 33,687 $ (7,952) $ 25,735
Australis Media Limited common stock 10,885 (2,505) 8,380
Australis Media Limited discount notes 41,026 - 41,026
Other marketable equity securities 3,781 908 4,689
-------------- ------------- --------------
$ 89,379 $ (9,549) $ 79,830
============== ============= ==============
December 31, 1997
Other marketable equity securities $ 6,366 $ 8,086 $ 14,452
============== ============= ==============
</TABLE>
F-24
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 12 - MARKETABLE SECURITIES - (continued)
In December 1993, the Company acquired 11,000,000 shares of the voting stock and
173,000,000 non-voting debentures of Australis for $90,972,000. As of August 12,
1996, the Australis securities held by the Company had a market value of
approximately $24.0 million. Due to uncertainty regarding the long-term
financing of Australis, the Company determined that the decline in market value
was other than temporary and, accordingly, the Company recognized a loss of
$66.9 million, as of June 30, 1996, resulting from a write-down of the Australis
investment from cost in the accompanying consolidated statement of operations.
The write-down established a new cost basis in the Australis investment.
On October 31, 1996, the Company purchased senior subordinated discount notes of
Australis Holding Pty Limited, with a face value of $71,339,000, and 71,339
warrants for an aggregate of $40 million. These discount notes and warrants were
sold in May 1997, for $41.5 million. In connection with the long-term financing,
the Company purchased 43,482,000 shares of voting stock and 49,188,779
non-voting debentures for an aggregate of $40 million. At the time of the
transaction, these securities had a fair value of $13.6 million, and the Company
recognized a loss of $26.4 million in the accompanying statement of operations.
On December 23, 1996, the Company received 18,000,000 shares of voting stock and
52,238,547 non-voting debentures of Australis in connection with the termination
of a technical services agreement with Australis and also received 500,000
shares of voting stock for late repayment of a loan to the Company by Australis.
The securities were recorded at the fair value when received, which was $7.0
million and the income recognized has been offset against the recognized losses
on the decline in market value. On December 23, 1996, the Company converted
5,000,000 non-voting debentures of Australis into 5,000,000 shares of voting
stock.
At December 31, 1997, the Australis securities were no longer listed on the
Australian Stock Exchange and were considered to be worthless. The Company
determined that the decline in market value was other than temporary and,
accordingly, recognized a loss of $44.6 million, resulting from a write-down of
the Australis investment.
In accordance with the Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", all of the
Company's securities are considered to be available for sale. Net realized gains
from the sale of marketable securities, in the amount of $13,517,000, $342,000
and $468,000 are included in other income and expense (net) in 1995, 1996 and
1997, respectively. The 1995 net realized gains includes a net gain of
approximately $13,100,0000 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.
NOTE 13 - NOTES PAYABLE
Notes payable of continuing operations consisted of the following at
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
(Dollars in thousands)
<S> <C> <C>
8-3/8% senior notes due November 1, 2005 (a) $ 685,970 $ 687,082
10-1/2% senior subordinated notes due June 15, 2006 (b) 293,105 293,781
Bank credit facility (c) 230,000 240,000
11.30% senior promissory notes due September 1, 2000 (d) 60,000 45,000
11.84% senior promissory notes due May 15, 1998 (e) 21,000 10,500
9.93% senior promissory notes due September 30, 2001 (f) 13,125 11,625
-------------- --------------
$ 1,303,200 $ 1,287,988
============== ==============
</TABLE>
F-25
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 13 - NOTES PAYABLE - (continued)
(a) These notes, which are stated net of an unamortized discount of
$12,918,000 at December 31, 1997, 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 5) and
to provide partial funding for the cable television systems acquired from
Sammons Communications, Inc. (Note 5).
(b) These notes, which are stated net of an unamortized discount of
$6,219,000 at December 31, 1997, were issued through a private placement
in June 1996 and were later exchanged for publicly traded notes in a
public offering in September 1996. The notes require semi-annual interest
payments. The notes are general unsecured obligations of the Company
subordinate in right of payment to all present and future senior
indebtedness of the Company. The net proceeds were used, together with
$150 million from initial borrowings under the term loan portion of the
new bank credit facility described in (c) to prepay all amounts
outstanding under the Company's old bank credit facility. The Company
incurred extraordinary charges from the write-off of the unamortized loan
costs associated with the old bank credit facility. These charges
increased net loss by $2,484,000, net of income tax benefit of $1,337,000
in 1996.
(c) On June 27, 1996, the Company entered into a bank credit facility
consisting of a $150 million term loan and a $300 million revolving
credit facility. 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 facility on September 30, 2003. Loans outstanding
under the facility 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 effective weighted
average interest rate at December 31, 1997 was 7.37%.
(d) 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 agreed to amend the terms thereof,
which included increasing the interest rate from 10.15% to 11.30% per
annum. Interest is payable quarterly.
(e) 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 agreed to amend the terms thereof, which included
increasing the interest rate from 10.69% to 11.84% per annum. Interest is
payable quarterly.
(f) This consists of a note payable to an insurance company. The 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. Additional notes payable to a group consisting of several
insurance companies 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 the
net loss by $6,739,000, net of income tax benefit of $3,629,000 in 1995.
The above debt agreements place certain financial restrictions on the
Company and its restricted subsidiaries which, among others, require
meeting certain ratios relating to interest coverage and debt coverage.
F-26
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 13 - NOTES PAYABLE - (continued)
Maturities of notes payable, excluding the unamortized discount of $19,137,000
are as follows:
(Dollars in thousands)
Year Ending December 31,
1998 $ 27,450
1999 43,800
2000 44,250
2001 37,875
2002 63,750
Thereafter 1,090,000
---------------
$ 1,307,125
===============
The Company had entered into interest rate cap agreements to reduce the impact
of changes in interest rates on its floating rate long-term debt. The three
interest rate cap agreements with commercial banks, having notional principal
amounts of $50,000,000, $25,000,000 and $25,000,000, terminated on July 18,
1996, November 8, 1996 and February 28, 1997, respectively. No gain or loss was
realized upon the termination of these interest rate cap agreements.
The Company had also entered into four interest rate swap agreements. These
agreements effectively changed the Company's interest rate on $300,000,000 of
its fixed rate debt to a floating rate based on LIBOR. On October 31, 1997, the
Company terminated all four interest rate swap agreements and received
$8,750,000 in consideration of early termination. The Company has recorded the
gain as "Deferred interest" on its consolidated balance sheet and is amortizing
the gain as a reduction in interest expense to June 15, 2006, which is the
maturity date of the fixed rate debt obligation.
NOTE 14 - LEASES
Subsidiaries of the Company have entered into three 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, 1997, two
of the leases provide for an aggregate minimum monthly payment of $31,000. On
each anniversary date of these two leases, the monthly payment will increase by
a minimum of 6%. At December 31, 1997, the minimum monthly payment of the third
lease is $24,000. On each anniversary date of the third lease, the minimum
monthly payment will increase by $957.
The Company has entered into various capital lease agreements. The agreements
are for the financing of equipment. The economic substance of the leases is that
the Company is financing the acquisition of the assets through the leases and,
accordingly, they are recorded in the Company's assets and liabilities.
F-27
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 14 - LEASES - (continued)
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, 1997:
<TABLE>
<CAPTION>
Capital Capital
Leases - Leases -
Principal Unrelated Operating
Stockholder Parties Leases
----------------- ---------------- ---------------
(Dollars in thousands)
Year Ending December 31,
<S> <C> <C> <C>
1998 $ 680 $ 1,338 $ 3,858
1999 714 1,338 3,830
2000 750 975 3,772
2001 788 422 2,603
2002 826 1 1,285
Thereafter 2,562 - 834
-------------- -------------- --------------
TOTAL MINIMUM LEASE PAYMENTS 6,320 4,074 $ 16,182
==============
LESS AMOUNT REPRESENTING
INTEREST (2,598) (478)
-------------- --------------
PRESENT VALUE OF MINIMUM
LEASE PAYMENTS $ 3,722 $ 3,596
============== ==============
</TABLE>
Property and equipment under capitalized leases at December 31, 1996 and 1997,
are summarized as follows:
1996 1997
--------------- ---------------
(Dollars in thousands)
Buildings - related party $ 5,132 $ 3,893
Equipment 4,635 5,376
-------------- --------------
9,767 9,269
Accumulated depreciation 2,406 3,174
-------------- --------------
$ 7,361 $ 6,095
============== ==============
Rental expense for all operating leases, principally office and warehouse
facilities, pole rent and satellite transponders from continuing operations,
amounted to $6,867,000, $8,561,000 and $8,085,000 for the years ended December
31, 1995, 1996 and 1997, respectively. In addition, the Company made total
payments to a principal stockholder for buildings under capitalized leases of
$584,000, $615,000 and $647,000 in 1995, 1996 and 1997, 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 1998.
On April 8, 1996, the Company entered into a five year agreement with GE
American Communications, Inc. requiring monthly payments of $190,000 to lease a
transponder on the GE-1 communications satellite.
F-28
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 15 - RESEARCH AND DEVELOPMENT
The Company, through its subsidiaries CAM Systems, Inc., StarNet Development,
Inc., Suburban Connect, Inc. and StarNet, Inc., incurred research and
development costs of $1,037,000, $2,427,000 and $1,139,000 for the years ended
December 31, 1995, 1996 and 1997, respectively, in connection with the
development of new equipment and computer software. These costs have been
included with direct costs - non-cable 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, 1995, 1996 and 1997,
the Company matched contributions of $777,000, $1,190,000 and $1,393,000,
respectively, in its continuing operations.
NOTE 18 - CORPORATE INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes
in accordance with Financial Accounting Standards Board Statement (SFAS) No.
109, "Accounting for Income Taxes". 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 statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences 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 reorganization. Deferred income tax expense is measured by the change in
the net deferred income tax asset or liability during the year.
The provisions for income tax benefit (expense) from continuing operations
consist of the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Current
Federal $ - $ (211) $ 15,013
State - (686) (265)
-------------- ------------- -------------
- (897) 14,748
Deferred
Federal 1,213 3,581 (1,359)
State 2,994 769 (514)
Benefit of operating loss carryforward 6,420 10,746 25,699
Decrease in valuation allowance 97 130 166
-------------- ------------- -------------
10,724 15,226 23,992
-------------- ------------- -------------
$ 10,724 $ 14,329 $ 38,740
============== ============= =============
</TABLE>
F-29
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 18 - CORPORATE INCOME TAXES - (continued)
The current tax benefit from continuing operations for 1997 represents tax
savings resulting from utilization of current losses to eliminate the tax
expense incurred by the current income and gain from discontinued operations.
The categories of temporary differences that give rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
Federal State
------------------------------- ------------------------------
1996 1997 1996 1997
------------- -------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts $ 619 $ 985 $ 186 $ 290
Deferred start-up costs 187 27 - -
Net operating loss carryforward 75,515 105,139 - -
Investments in affiliates, principally
due to differences in taxable income 2,704 3,570 - 280
Investments and other tax credits 1,719 1,553 249 249
------------ ------------ ------------- ------------
Gross Deferred Tax Asset 80,744 111,274 435 819
Deferred Tax Liabilities:
Property and equipment, principally
due to differences in depreciation (13,818) (21,246) (4,246) (6,414)
Investments in affiliates, principally
due to differences in taxable income - - (881) -
Property and equipment and intangible
assets arising from purchase
accounting adjustments (13,934) (12,695) (4,374) (3,985)
Unrealized gain on marketable
securities (317) (2,830) - -
----------- ----------- ------------ -----------
Gross Deferred Tax Liability (28,069) (36,771) (9,501) (10,399)
----------- ----------- ------------ -----------
Net deferred tax asset (liability)
before valuation allowance 52,675 74,503 (9,066) (9,580)
Valuation allowance (418) (252) - -
----------- ----------- ------------ -----------
Net Deferred Tax Asset (Liability) $ 52,257 $ 74,251 $ (9,066) $ (9,580)
=========== =========== ============ ===========
</TABLE>
The difference between the income tax benefit (net) 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>
1995 1996 1997
--------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Federal income tax benefit at statutory rates $ 7,638 $ 50,040 $ 37,826
Nondeductible amortization of goodwill and
other intangibles (949) (949) (949)
Nondeductible loss on marketable securities - (30,240) -
Net operating losses applied towards
prior years audit adjustments - (6,306) -
Provision for state income taxes, net of
Federal income tax benefit 1,946 54 (506)
Other 2,089 1,730 2,369
-------------- -------------- --------------
$ 10,724 $ 14,329 $ 38,740
============== ============== ==============
</TABLE>
F-30
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 18 - CORPORATE INCOME TAXES - (continued)
The Company has a net operating loss carryforward of approximately $300,000,000
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 $1,123,000 for carryover to
subsequent years. The general business tax credits expire as follows:
(Dollars in thousands)
Year Ending December 31,
1998 $ 252
1999 361
2000 485
2001 5
2002 5
2003-2006 15
-------
$ 1,123
=======
NOTE 19 - OTHER INCOME AND EXPENSE
The schedules of other income and expense from continuing operations for the
years ended December 31, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
(Loss) on disposal of assets upon rebuild of
cable systems $ (282) $ (846) $ -
Gain (loss) on sales of property and equipment 115 326 (694)
Gain on sales of marketable securities 13,517 342 468
Gain on disposition of partnership interest (See Note 4) - 7,210 -
Interest and dividend income 2,051 4,699 1,242
Minority interest in net loss of South Jersey Cablevision 212 - -
Minority interest in net loss of L-TCI Associates 1,135 2,492 945
Litigation settlements (1,900) - (282)
Miscellaneous income (expense) 79 (314) 157
-------------- -------------- --------------
$ 14,927 $ 13,909 $ 1,836
============== ============== ==============
</TABLE>
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.
F-31
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 20 - COMMITMENTS AND CONTINGENCIES
Mr. Lenfest, on behalf of the Company, and TCI have jointly and severally
guaranteed an aggregate of $67 million obligation of Australis incurred in
connection with the purchase of program licenses in April 1995. The terms of the
guarantees provide that the amount of the guarantees will be reduced on a
dollar-for-dollar basis with payments made by Australis under the licenses. The
Company has agreed to indemnify Mr. Lenfest against loss from such guaranty to
the fullest extent permitted under the Company's debt obligations. Under the
terms of its bank credit facility, however, Mr. Lenfest's claims for
indemnification are limited to $33.5 million. Effective March 6, 1997, as
subsequently amended, Mr. Lenfest released the parent Company and its cable
operating subsidiaries from their indemnity obligation until the last to occur
of January 1, 1999 and the last day of any fiscal quarter during which the
Company could incur the indemnity obligation without violating the terms of its
bank credit facility. Certain of the Company's non-cable subsidiaries have
agreed to indemnify Mr. Lenfest for his obligations under the guarantee under an
agreement dated June 5, 1997. At December 31, 1997, the amount subject to
guarantee under the license agreements was approximately $47.5 million.
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 Mr. Lenfest,
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 A$718 million (approximately U.S. $467 million as of
December 31, 1997). The Plaintiff also alleges that Australis and Mr. 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. They are
defending this action vigorously.
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.
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, 1995 and 1996,
franchise fees in the amount of $9,166,000 and $10,824,000, respectively were
paid. For the year ended December 31, 1997, franchise fees in the amount of
$12,764,000 will be paid.
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 with programming services at
a rate which is not more than the Company could obtain independently. For the
years ended December 31, 1995, 1996 and 1997, the Company recorded programming
expenses of $37,685,000, $57,344,000 and $62,892,000, respectively, under this
agreement.
The Company, through its subsidiaries, StarNet and StarNet Development, Inc.,
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, 1995, 1996 and 1997, the Company has generated revenues of
$3,900,000, $4,789,000 and $1,945,000 respectively, from affiliates of TCI.
F-32
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 21 - RELATED PARTY TRANSACTIONS - (continued)
Cable AdNet Partners, an affiliate of TCI, paid Suburban approximately
$2,637,000 for the year ended December 31, 1995, for Suburban's share of
advertising revenue under certain advertising agreements. In 1996, Radius
purchased the Philadelphia area assets of Cable AdNet for approximately
$1,100,000. (See Note 5).
The Company incurred pay-per-view order placement fees to TelVue Corporation,
an affiliate of Mr. Lenfest, of $190,000, $325,000 and $470,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.
During 1996, the Company loaned a total of $41,139,000 to Australis. All loans
were repaid with interest.
In January 1995, Mr. 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.
In January 1995, the Company advanced $19,240,000 to Australis. 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 under its bank credit facility
dated June 24, 1994. The loan was repaid on April 20, 1995.
Subsidiaries of the Company have entered into various leasing arrangements with
a principal stockholder for office and warehouse facilities. (See Note 14).
John C. Malone, a director of the Company, is a director of The Bank of New
York, which is the trustee under the indentures for the Company's senior notes
and senior subordinated notes and a lender under the bank credit facility.
NOTE 22 - SEGMENT INFORMATION
The Company operates primarily in the cable television industry. Certain
subsidiaries of the Company operate in other industries which provide
promotional, cable advertising traffic and billing services. Information
concerning continuing operations by industry segment as of and for each of the
three years ended December 31, was as follows:
<TABLE>
<CAPTION>
Cable Other Total
--------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Year Ended December 31, 1995
Revenues $ 232,155 $ 22,070 $ 254,225
============== ============== ==============
Operating income (loss) $ 44,199 $ (9,359) $ 34,840
============== ============== ==============
Depreciation and amortization $ 71,054 $ 3,218 $ 74,272
============== ============== ==============
Capital expenditures, including
acquisitions $ 47,658 $ 5,324 $ 52,982
============== ============== ==============
Identifiable assets $ 576,855 $ 254,590 $ 831,445
============== ============== ==============
</TABLE>
F-33
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 22 - SEGMENT INFORMATION - (continued)
<TABLE>
<CAPTION>
Cable Other Total
--------------- --------------- ---------------
(Dollars in thousands)
Year Ended December 31, 1996
<S> <C> <C> <C>
Revenues $ 354,561 $ 27,249 $ 381,810
============== ============== ==============
Operating income (loss) $ 70,135 $ (15,543) $ 54,592
============== ============== ==============
Depreciation and amortization $ 107,115 $ 4,162 $ 111,277
============== ============== ==============
Capital expenditures, including
acquisitions $ 655,735 $ 11,294 $ 667,029
============== ============== ==============
Identifiable assets $ 1,026,116 $ 174,701 $ 1,200,817
============== ============== ==============
Year Ended December 31, 1997
Revenues $ 413,792 $ 33,598 $ 447,390
============== ============== ==============
Operating income (loss) $ 75,577 $ (12,793) $ 62,784
============== ============== ==============
Depreciation and amortization $ 124,973 $ 4,966 $ 129,939
============== ============== ==============
Capital expenditures, including
acquisitions $ 172,010 $ 7,009 $ 179,019
============== ============== ==============
Identifiable assets $ 1,090,563 $ 126,497 $ 1,217,060
============== ============== ==============
</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:
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.
F-34
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 23 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (continued)
Other Investments
The Company's investment in Susquehanna Cable Co., Inc. is carried at cost. (See
Note 9). 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 Note 8). 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 of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on current rates at which the
Company could borrow funds with similar remaining maturities.
The estimated fair values of the Company's financial instruments as of December
31, 1997 are as follows:
Carrying Fair
Amount Value
----------------- -----------
(Dollars in thousands)
Balance Sheet Financial Instruments
Cash and cash equivalents $ 15,623 $ 15,623
Marketable securities 14,452 14,452
Long-term debt (1,287,988) (1,371,625)
Deposits on converters (3,878) (3,878)
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.
F-35
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 24 - REGULATORY MATTERS
The Federal Communications Commission ("FCC") has adopted regulations under The
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") governing rates charged to customers for basic and tier service and
for equipment and installation charges (the "Regulated Services"). The 1992
Cable Act placed the Company's basic service, equipment and installation rates
under the jurisdiction of local franchising authorities and its tier service
rates under the jurisdiction of 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 rate regulations adopt a benchmark price cap system
for measuring the reasonableness of existing basic and tier service rates.
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 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. In addition, new product
tiers consisting of services new to the cable 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. There is also a streamlined cost-of-service
methodology available to justify a rate increase on basic and regulated nonbasic
tiers for "significant" system rebuilds or upgrades.
The Company believes that it 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 the complaint. Any refunds of the excess portion of
all other Regulated Service rates would be retroactive to 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 of continuing operations consist of the
following as of December 31:
1996 1997
--------------- ---------------
(Dollars in thousands)
Accounts payable - unrelated parties $ 8,930 $ 11,619
Accounts payable - affiliate 12,855 26,304
Accrued copyright fees 1,460 1,318
Accrued franchise fees 7,011 7,898
Accrued interest 13,995 14,101
Accrued payroll and fringe benefits 1,680 2,407
Accrued rate refund liability - 1,625
Accrued sales taxes 553 424
Accrued other 5,152 11,475
-------------- --------------
$ 51,636 $ 77,171
============== ==============
F-36
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (continued)
NOTE 25 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES - (continued)
Accrued payroll and fringe benefits includes $610,000 for severance packages for
customer satisfaction specialists that are anticipated to be paid in 1998. In
May 1997, the Company opened a customer satisfaction center in New Castle
County, Delaware and proceeded to migrate inbound telephone customer service to
that location. By year-end, approximately 55% of the Company's customer base was
supported by that location. Specialists who elected not to migrate to the new
center were entitled to receive severance pay and benefits. This total expense
amounted to approximately $797,000 and is included in selling, general and
administrative expenses in the accompanying consolidated statement of
operations.
NOTE 26 - SUBSEQUENT EVENTS
On February 5, 1998, the Company issued $150,000,000 7-5/8% Senior Notes due
2008 and $150,000,000 8-1/4% Senior Subordinated Notes due 2008, through a
private offering. The proceeds of the notes are net of estimated issuance costs
of $3,575,000. The notes require semi-annual interest payments. The Senior Notes
are not redeemable by the Company prior to maturity. The Senior Subordinated
Notes may be redeemed, in whole or in part, at the option of the Company, on or
after February 15, 2003. 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 for the early extinguishment of
existing debt.
On February 12, 1998, the Company's wholly owned subsidiary, Lenfest Telephony,
Inc., exchanged its 50% general partnership interest in Hyperion for a warrant
to purchase 225,115 shares of Class A common stock of Hyperion
Telecommunications, Inc., the other 50% general partner in Hyperion. No exercise
price is payable in connection with the exercise of the warrant.
F-37
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
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, 1996 and 1997, 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, 1997, and have issued our
report thereon dated March 4, 1998 (except as to the first paragraph of Note 20,
as to which the date is March 26, 1998), which is included in the December 31,
1997, annual report on Form 10-K. 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 statement taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Pressman Ciocca Smith LLP
Hatboro, Pennsylvania
March 4, 1998
F-38
<PAGE>
LENFEST COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, 1996 and 1997
<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)
RESERVES AND ALLOWANCES
DEDUCTED FROM ASSET
ACCOUNTS:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31, 1995 $ 775 $ 3,512 $ 3,347 $ 940
============== ============== ============== ==============
Year ended December 31, 1996 $ 940 $ 4,674 $ 3,629 $ 1,985
============== ============== ============== ==============
Year ended December 31, 1997 $ 1,985 $ 9,715 $ 8,777 $ 2,923
============== ============== ============== ==============
</TABLE>
F-39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LENFEST COMMUNICATIONS
DATE: March 27, 1998 By: /s/ H. F. Lenfest
----------------------------
H. F. Lenfest
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/ H. F. Lenfest Chairman of the Board, Director March 27, 1998
- - ------------------------- and President
H. F. Lenfest (Principal Executive Officer)
/s/ H. Chase Lenfest Director March 27, 1998
- - -------------------------
H. Chase Lenfest
/s/ Brook J. Lenfest Director March 27, 1998
- - -------------------------
Brook J. Lenfest
/s/ John C. Malone Director March 27, 1998
- - -------------------------
John C. Malone
/s/ William R. Fitzgerald Director March 27, 1998
- - -------------------------
William R. Fitzgerald
/s/ Harry F. Brooks Executive Vice President March 27, 1998
- - ------------------------- (Principal Financial Officer)
Harry F. Brooks
/s/ Maryann V. Bryla Assistant Treasurer March 27, 1998
- - ------------------------- (Principal Accounting Officer)
Maryann V. Bryla
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- - -------
<S> <C>
1. Purchase Agreement, dated January 30, 1998, between the Company, Salomon Brothers
Inc. and NationsBanc Montgomery Securities LLC.
4.7 Registration Agreement, dated January 30, 1998, between the Company, Salomon Brothers
Inc. and NationsBanc Montgomery Securities LLC.
4.7 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York
relating to the $150,000,000 7-5/8% Senior Notes due 2008.
4.9 Form of $150,000,000 7-5/8% Senior Notes due 2008. (In accordance with Item 601 of
Regulation S-K similar notes between the same parties which reference CUSIP No. 526055
AF 5 and CUSIP No. U52547 AA 1 have not been filed because they are identical in all
material respects to the filed exhibit.)
4.10 Indenture, dated as of February 5, 1998, between the Company and The Bank of New York
relating to the $150,000,000 8-1/4% Senior Subordinated Notes due 2008.
4.11 Form of $150,000,000 8-1/4% Senior Subordinated Notes due 2008. (In accordance with
Item 601 of Regulation S-K similar notes between the same parties which referennnce CUSIP
No. U52547 AB 9 and CUSIP No. 526055 AH 1 have not been filed because they are identical
in all material respects to the filed exhibit.)
10.44 Letter, dated March 26, 1998 (effective September 30, 1997), from H. F. Lenfest to the Company.
27. Financial Data Schedule
</TABLE>
<PAGE>
EXECUTION COPY
LENFEST COMMUNICATIONS, INC.
$150,000,000 7.625% Senior Notes due 2008
$150,000,000 8.250% Senior Subordinated
Notes due 2008
PURCHASE AGREEMENT
New York, New York
January 30, 1998
To: SALOMON BROTHERS INC
NATIONSBANC MONTGOMERY SECURITIES LLC
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Lenfest Communications, Inc., a Delaware corpora tion (the
"Company"), proposes to issue and sell to you (the "Purchasers") $150,000,000
principal amount of its 7.625% Senior Notes due 2008 (the "Senior Securities")
and $150,000,000 principal amount of its 8.250% Senior Subordinated Notes due
2008 (the "Senior Subordinated Securities" and, together with the Senior
Securities, the "Securities"), to be issued under separate Indentures (the
"Indentures") to be dated as of February 5, 1998, 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
[NYCORP3:548835.3:4575D:02/02/98--1:30p]
<PAGE>
2
Company that you will make an offering of the Securities purchased by you
hereunder in accordance with Section 4 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 final offering memorandum, dated as of January 30, 1998 and delivered
thereafter (the "Final Memorandum"). 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 Final Memorandum in connection
with the offering and resale by the Purchasers of the Securities. Any references
herein to 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.
The holders of the Securities will be entitled to the benefits
of the Registration Agreement dated the date hereof, between the Company and the
Purchasers (the "Registration Agreement").
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Purchasers as set forth below in this Section
1.
(a) 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 Final Memorandum in reliance upon and in conformity
with information furnished in writing to the Company by the Purchasers
specifically for
<PAGE>
3
inclusion in the Final Memorandum (and any amendment or supplement
thereof or thereto). All documents incorporated by reference in the
Final Memorandum which were filed under the Exchange Act on or before
the Execution Time 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 Regulation M 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 Indentures 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 affili ates 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.
<PAGE>
4
(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 Securi ties 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
<PAGE>
5
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.
(j) The Indentures have 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 Indentures
will be duly executed, authenticated, issued and delivered and will
conform to the description thereof contained in the Final Memorandum
and the Indentures 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
or the Registration 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 Indentures,
this Agreement and the Registration Agreement, and the issuance and
sale of the Securities and compliance with the terms and provisions
thereof and hereof 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
<PAGE>
6
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 and the Registration Agreement have 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 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.
<PAGE>
7
(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 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, any of their respective properties or any of
the Company's directors or executive officers 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
<PAGE>
8
Indentures, this Agreement or the Registration 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.
(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, severally
and not
<PAGE>
9
jointly, to purchase from the Company, (a) at a purchase price of 99.000% of the
principal amount thereof, plus accrued interest, if any, from February 5, 1998,
to the Closing Date, the principal amount of Senior Securities set forth
opposite each Purchaser's name in Schedule I hereto and (b) at a purchase price
of 98.892% of the principal amount thereof, plus accrued interest, if any, from
February 5, 1998, to the Closing Date, the principal amount of Senior
Subordinated Securities set forth opposite each Purchaser's name in Scedule I
hereto.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 AM, New York City time, on February 5, 1998,
or such later date (not later than February 12, 1998) 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"). Deliv ery 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 wire transfer in same day funds to an account designated by the
Company no less than two business days prior to the Closing Date. 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 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 avail able for
inspection, checking and packaging by the Purchasers in New York, New York, not
later than 1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities. Each Purchaser severally and not
jointly (i) acknowledges that the Securities have not been registered under the
Act and may not be offered or sold except pursuant to, the registration
requirements of the Act or pursuant to an effective registration statement under
the Securities Act and (ii) represents and warrants to and agrees with the
Company that:
<PAGE>
10
(a) It has not offered or sold, and will not offer or sell,
any Securities except (i) to those it reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the Act)
and that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such Securities is
aware that such sale is being made in reliance on Rule 144A under the
Act or (ii) in accordance with the restrictions set forth in Exhibit A
hereto.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Securities in the United States by
means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States, except
pursuant to a registered public offering, whether an exchange offer or
shelf registration, as provided in the Registration Agreement.
5. Agreements. The Company agrees with the Purchasers that:
(a) The Company will furnish to the Purchasers, without
charge, during the period mentioned in para graph (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 the Securities by the
Purchasers, any document filed
<PAGE>
11
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 Pur chasers pursuant to paragraph (a)
of this Section 5 an amendment or supplement which will correct such
state ment 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 qualifica tion 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. The Company
promptly will advise the Purchasers of the receipt by it 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
<PAGE>
12
or general advertising (within the meaning of Regulation D).
(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) So long as any of the Securities are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act, the
Company shall, during any period 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
under the Act 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 use its best efforts in cooperation with
the Purchasers to permit the Securities to be eligible for clearance
and settlement through The Depository Trust Company.
(l) 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
<PAGE>
13
indirectly, or announce the offering of, any debt securities issued or
guaranteed by the Company (other than the Securities).
(m) The Company will apply the net proceeds from the sale of
the Securities 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 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
<PAGE>
14
been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the
Final Memorandum, all 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 Indentures have been duly authorized,
executed and delivered, and constitute legal, valid and
binding instruments enforceable against the Company in
accordance with their respective 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 Indentures 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 Indentures;
(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
state ments therein not misleading or that the Final
Memorandum includes any untrue statement of a material fact or
omits to state a material fact
<PAGE>
15
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading;
(vi) this Agreement and the Registration Agreement
have been duly authorized, executed and delivered by the
Company;
(vii) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transac tions contemplated herein or in
the Registration Agreement, 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, such as are required under the Act, the Exchange
Act and such blue sky laws in connection with the transactions
contemplated by the Registration Agreement 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 Indentures, this Agreement
or the Registration Agreement the consummation of any other of
the transactions herein or therein contemplated nor the
fulfillment of the terms hereof or thereof 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
<PAGE>
16
qualify the Indentures 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. Refer ences to the Final
Memorandum in this paragraph (a) include any amendments or supplements
thereof or thereto at the Closing Date.
(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
judgment, injunction, order or decree of the FCC relating
specifically to the Company or its subsidiaries or
<PAGE>
17
to any properties of the Company or its subsidiaries 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;
(iii) the execution and delivery of this Agreement,
the Registration Agreement and the Securities by the Company,
and the performance by the Company of its obligations under
this Agreement, the Registration 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:
(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 or the Registration 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
<PAGE>
18
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, any of its subsidiaries or any of the Company's directors
or executive officers 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
Company's Form 10-K for the fiscal year ended December 31, 1996, under
the heading "Legal Proceedings" fairly summarize the matters therein
described.
(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 Indentures, the Final Memorandum (together with any amendment or
supplement thereof or thereto) and other related matters as the
Purchasers may reasonably re quire, 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 vice president, finance of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Final
<PAGE>
19
Memorandum, any amendment or supplement to the Final Memorandum and
this Agreement and the Registration 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 finan cial
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 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 Exchange Act and the applicable published rules and regulations
thereunder and that they have performed a review of the unaudited
interim financial information of the Company for the nine-month period
ended September 30, 1997, 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
<PAGE>
20
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 account-
ing matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 1996,
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
(2) with respect to the period subsequent to
September 30, 1997, there were any changes, at a
specified date not more than five business days prior
to the date of the letter, in the Notes Payable or
decreases in the Stockholders' Equity (Deficit) or
Total Assets of the Company as compared with the
amounts shown on the September 30, 1997, consolidated
balance sheet included or incorporated in the Final
Memorandum, or for the period from October 1, 1997,
to such
<PAGE>
21
specified date there were any decreases, as compared
with the corresponding period in the preceding year,
in Net Income (Loss), Income (Loss) Before Income
Taxes, Operating Income or Revenues, 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 or incorporated 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 para graph (f)
include any amendment or supplement thereof or thereto at the date of
the letter.
The Purchasers shall have also received from Pressman, Ciocca
& Smith LLP 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, 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, con
firming that they are independent accountants within the meaning of the
Act and the applicable published
<PAGE>
22
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 nine-month period ended and as of September
30, 1997, 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. who have
responsibility for financial and accounting matters of Garden
State Cablevision L.P. as to transactions and events
subsequent to December 31, 1996, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements of
Garden State Cablevision L.P. included or
incorporated 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 gener ally
accepted accounting principles applied on a basis
substantially consistent with that
<PAGE>
23
of the audited financial statements included
in the Final Memorandum; or
(2) with respect to the period subsequent to
September 30, 1997, 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 September 30, 1997, consolidated balance sheet
included or incorporated in the Final Memorandum, or
for the period from October 1, 1997, to such
specified date there were any decreases, as compared
with the corresponding period in the preceding year
in Net Loss, Operating Income or Service 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 (g)
include any amendment or supplement thereof or thereto at the date of
the letter.
(h) 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) or (g) 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).
<PAGE>
24
(i) 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.
(j) Prior to the Closing Date, the Company shall have
furnished to the Purchasers such further informa tion, certificates and
documents as the Purchasers may reasonably request.
(k) On or prior to the Closing Date, the Company shall have
furnished to the Purchasers a Consent or Waiver under the Bank Credit
Facility (as defined in the Final Memorandum) in order to permit the
Company to enter into the transactions contemplated by this Agreement.
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 con summated 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
<PAGE>
25
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, 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 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 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
<PAGE>
26
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 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 Final Memorandum
constitute the only information furnished in writing by or on behalf of the
several Purchasers for inclusion in the Final Memorandum, and you, as the
Purchasers, confirm that such statements are correct.
(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 writ ing 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 indemni fying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indem nified 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
<PAGE>
27
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.
The indemnifying parties will not be liable under this
Agreement for any amount paid by the indemnified parties to settle any claims or
actions if the settlement is entered into without their consent, which may not
be withheld unless such settlement is unreasonable in light of such claims or
actions against, and defenses available to the indemnified parties. If the
indemnifying parties do withhold their consent to a proposed settlement, and the
claim or action against the indemnified parties is not settled as proposed, the
indemnifying parties will then indemnify the indemnified parties in accordance
with the previous paragraph, or if such indemnity is unavailable for any reason,
contribute in accordance with clause (d) below.
(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)
<PAGE>
28
(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
unavail able 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 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).
<PAGE>
29
9. 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 (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).
10. 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.
11. 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, Pennsylvania,
19456, attention of Samuel W. Morris, Jr., Esq.
12. 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.
<PAGE>
30
13. Applicable Law. This Agreement will be gov erned by and
construed in accordance with the laws of the State of New York (without regard
to principles of conflicts of law).
<PAGE>
31
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: /s/ Maryann V. Bryla
----------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
NATIONSBANC MONTGOMERY SECURITIES LLC
By: SALOMON BROTHERS INC
By: /s/ Christopher Clipper
------------------------------
Name:
Title:
<PAGE>
32
SCHEDULE I
Principal Amount
of Senior
Securities
Initial Purchaser to be Purchased
----------------- ---------------
Salomon Brothers Inc......................................... $75,000,000
NationsBanc Montgomery Securities LLC........................ 75,000,000
-----------
Total............................................... $150,000,000
============
Principal Amount
of Senior
Subordinated
Securities
Initial Purchaser to be Purchased
----------------- ---------------
Salomon Brothers Inc......................................... $75,000,000
NationsBanc Montgomery Securities LLC........................ 75,000,000
-----------
Total............................................... $150,000,000
<PAGE>
1
EXHIBIT A
Selling Restrictions for Offers and
Sales outside the United States
(1)(a) The Securities have not been and will not be registered
under the Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S or pursuant to an exemption from the registration requirements of the Act.
Each Purchaser represents and agrees that, except as otherwise permitted by
Section 4(a)(i) of the Agreement to which this is an Exhibit, it has offered and
sold the Securities, and will offer and sell the Securities, (i) as part of
their distribution at any time and (ii) otherwise until 40 days after the later
of the commencement of the offering and the Closing Date, only in accordance
with Rule 903 of Regulation S. Accordingly, each Purchaser represents and agrees
that neither it, nor any of its affiliates nor any person acting on its or their
behalf has engaged or will engage in any directed selling efforts with respect
to the Securities, and that it and they have complied and will comply with the
offering restrictions requirement of Regulation S. Each Purchaser agrees that,
at or prior to the confirmation of sale of Securities (other than a sale of
Securities pursuant to Section 4(a)(i) of the Agreement to which this is an
Exhibit), it shall have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the "Act")
and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons (i) as part of
their distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering, except in
either case in accordance with Regulation S, Rule 144A under
the Act or another available exemption from registration under
the Act. Terms used above have the meanings given to them by
Regulation S."
<PAGE>
2
(b) Each Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
with respect to the distribution of the Securities, except with its affiliates
or with the prior written consent of the Company.
(c) Terms used in this Exhibit but not defined in the
Agreement to which this Exhibit is attached have the meanings given to them by
Regulation S.
(2) Each Purchaser represents and agrees that (i) it has 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 as agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985 of Great Britain), (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who is
of a 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.
<PAGE>
1
EXECUTION COPY
LENFEST COMMUNICATIONS, INC.
7.625% Senior Notes due 2008
8.250% Senior Subordinated Notes due 2008
REGISTRATION AGREEMENT
New York, New York
January 30, 1998
To: SALOMON BROTHERS INC
NATIONSBANC MONTGOMERY SECURITIES LLC
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 you (the "Purchasers"), upon the terms
set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), its 7.625% Senior Notes due 2008 (the "Senior Securities") and its
8.250% Senior Subordinated Notes due 2008 (the "Senior Subordinated Securities",
and together with the Senior Securities, the "Securities") (the "Initial
Placement"). As an inducement to you 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 (ii) for the benefit of the holders from time
to time of the Securities, including yourself (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:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
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2
"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.
"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.
"Holder" has the meaning set forth in the preamble
hereto.
"Indentures" mean the Indentures relating to the Securities
and the New Securities dated as of February 5, 1998, 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.
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3
"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 the Senior Securities or the Senior Subordinated
Securities, as applicable, 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 Senior Subordinated
Securities and the Senior Securities, as applicable, and the transfer
restrictions will be modified or eliminated, as appropriate), to be issued under
the Indentures. 1/
"Prospectus" means the prospectus included in any Registration
Statement (including 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.
"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
- - --------
1/ It is intended that the interest rate step-up provisions be included in
the form of security and not in this Agreement.
<PAGE>
4
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 Indentures.
"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 90 days following the Closing Date, shall file with the Commission
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 150 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
<PAGE>
5
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 or cause to be mailed 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;
(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
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6
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 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
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7
150 days following the Closing Date or the Registered Exchange Offer is not
consummated within 180 days after the Closing Date, (iii) either Purchaser so
requests with respect to Securities held by it following consummation of the
Registered Exchange Offer or, in the case of any Purchaser that participates in
any Registered Exchange Offer, such Purchaser does not receive freely tradable
New Securities, (iv) any Holder (other than a Purchaser) is not eligible to
participate in the Registered Exchange Offer or (v) in the case of a 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 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
<PAGE>
8
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 two 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 shall cause to be
furnished 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.
(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
<PAGE>
9
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;
(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
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10
(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,
any documents incorporated by reference therein and all exhibits
thereto (including those incorporated by reference therein).
(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.
(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
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11
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.
(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
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12
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 or any successor thereto
under the Indentures.
(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 Indentures 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 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
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13
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 (other than by a
Holder) 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 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
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14
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 each
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 such 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
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
(other than by a Holder) or through a third party
<PAGE>
15
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 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
<PAGE>
16
counsel for the Holders in connection therewith, and, in the case of any
Exchange Offer Registration Statement, will reimburse the Purchasers 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 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
<PAGE>
17
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 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
<PAGE>
18
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.
The indemnifying parties will not be liable under this
Agreement for any amount paid by the indemnified parties to settle any claims or
actions if the settlement is entered into without their consent, which may not
be withheld unless such settlement is unreasonable in light of such claims or
actions against, and defenses available to the indemnified parties. If the
indemnifying parties do withhold their consent to a proposed settlement, and the
claim or action against the indemnified parties is not settled as proposed, the
indemnifying parties will then indemnify the indemnified parties in accordance
with the previous paragraph, or if such indemnity is unavailable for any reason,
contribute in accordance with clause (d) below.
(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
<PAGE>
19
benefits received by such indemnifying party, on the one hand, and such
indemnified party, on the other hand, from the Initial Placement and the
Registration Statement which resulted in such Losses; provided, however, that in
no case shall either 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
<PAGE>
20
fraudulent misrepresentation. For purposes of this Section 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 either 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
<PAGE>
21
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 Indentures, 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
<PAGE>
22
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.
<PAGE>
23
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
LENFEST COMMUNICATIONS, INC.
By: /s/ Maryann V. Bryla
--------------------------
Name:
Title:
Accepted in New York, New York
January 30, 1998
SALOMON BROTHERS INC
NATIONSBANC MONTGOMERY SECURITIES LLC
By: SALOMON BROTHERS INC
By: /s/ Christopher Clipper
------------------------------
Name:
Title:
<PAGE>
1
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>
1
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>
1
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
<PAGE>
2
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 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.]
<PAGE>
1
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>
EXECUTION COPY
===========================================================
LENFEST COMMUNICATIONS, INC.
7 5/8% Senior Notes due 2008
INDENTURE
Dated as of February 5, 1998
THE BANK OF NEW YORK,
Trustee
===========================================================
<PAGE>
i
TABLE OF CONTENTS
ARTICLE 1 Page
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 18
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 19
SECTION 1.04. Rules of Construction .................. 19
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 20
SECTION 2.02. Execution and Authentication ........... 20
SECTION 2.03. Registrar and Paying Agent ............. 21
SECTION 2.04. Paying Agent To Hold Money in Trust..... 21
SECTION 2.05. Securityholder Lists ................... 21
SECTION 2.06. Replacement Securities ................. 22
SECTION 2.07. Outstanding Securities ................. 22
SECTION 2.08. Temporary Securities ................... 23
SECTION 2.09. Cancellation ........................... 23
SECTION 2.10. Defaulted Interest ..................... 23
SECTION 2.11. Record Date ............................ 25
SECTION 2.12. CUSIP Numbers .......................... 25
ARTICLE 3
Covenants
SECTION 3.01. Certain Covenants Suspended ............ 25
SECTION 3.02. Payment of Securities .................. 26
SECTION 3.03. SEC Reports ............................ 26
SECTION 3.04. Limitation on Indebtedness ............. 27
SECTION 3.05. Limitation on Restricted Payments ...... 27
SECTION 3.06. Limitation on Liens .................... 28
SECTION 3.07. Limitation on Transactions with
Affiliates............................ 28
SECTION 3.08. Designation of Restricted and
Unrestricted Subsidiaries........... 30
SECTION 3.09. Change of Control Offer ................ 30
SECTION 3.10. Compliance Certificate ................. 32
<PAGE>
ii
ARTICLE 4
Successor Company
SECTION 4.01. When Company May Merge or Transfer
Assets .............................. 33
ARTICLE 5
Defaults and Remedies
SECTION 5.01. Events of Default ...................... 34
SECTION 5.02. Acceleration ........................... 36
SECTION 5.03. Other Remedies ......................... 37
SECTION 5.04. Waiver of Past Defaults ................ 37
SECTION 5.05. Control by Majority .................... 37
SECTION 5.06. Limitation on Suits .................... 38
SECTION 5.07. Rights of Holders To Receive Payment ... 38
SECTION 5.08. Collection Suit by Trustee ............. 38
SECTION 5.09. Trustee May File Proofs of Claim ....... 38
SECTION 5.10. Priorities ............................. 39
SECTION 5.11. Undertaking for Costs .................. 39
SECTION 5.12. Waiver of Stay or Extension Laws ....... 40
ARTICLE 6
Trustee
SECTION 6.01. Duties of Trustee ...................... 40
SECTION 6.02. Rights of Trustee ...................... 41
SECTION 6.03. Individual Rights of Trustee ........... 42
SECTION 6.04. Trustee's Disclaimer ................... 42
SECTION 6.05. Notice of Defaults ..................... 42
SECTION 6.06. Reports by Trustee to Holders .......... 42
SECTION 6.07. Compensation and Indemnity ............. 43
SECTION 6.08. Replacement of Trustee ................. 44
SECTION 6.09. Successor Trustee by Merger ............ 45
SECTION 6.10. Eligibility; Disqualification .......... 45
SECTION 6.11. Preferential Collection of Claims
Against Company ...................... 46
<PAGE>
iii
ARTICLE 7
Discharge of Indenture; Defeasance
SECTION 7.01. Discharge of Liability on Securities;
Defeasance ........................... 46
SECTION 7.02. Conditions to Defeasance ............... 47
SECTION 7.03. Application of Trust Money ............. 48
SECTION 7.04. Repayment to Company ................... 48
SECTION 7.05. Indemnity for Government
Obligations .......................... 49
SECTION 7.06. Reinstatement .......................... 49
ARTICLE 8
Amendments
SECTION 8.01. Without Consent of Holders ............. 49
SECTION 8.02. With Consent of Holders ................ 50
SECTION 8.03. Compliance with Trust Indenture Act .... 51
SECTION 8.04. Revocation and Effect of Consents
and Waivers .......................... 51
SECTION 8.05. Notation on or Exchange of
Securities ........................... 52
SECTION 8.06. Trustee To Sign Amendments ............. 52
SECTION 8.07. Payment for Consent .................... 53
ARTICLE 9
Miscellaneous
SECTION 9.01. Trust Indenture Act Controls ........... 53
SECTION 9.02. Notices ................................ 53
SECTION 9.03. Communication by Holders with Other
Holders ............................. 54
SECTION 9.04. Certificate and Opinion as to
Conditions Precedent ................ 54
SECTION 9.05. Statements Required in Certificate
or Opinion .......................... 55
SECTION 9.06. Rules by Trustee, Paying Agent and
Registrar ........................... 55
SECTION 9.07. Legal Holidays ......................... 55
SECTION 9.08. Governing Law .......................... 55
SECTION 9.09. No Recourse Against Others ............. 55
SECTION 9.10. Successors ............................. 56
<PAGE>
iv
SECTION 9.11. Multiple Originals ..................... 56
SECTION 9.12. Table of Contents; Headings ............ 56
SECTION 9.13. Severability ........................... 56
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>
1
INDENTURE dated as of February 5, 1998,
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 7
5/8% Senior Notes due 2008 (the "Initial Securities") and, if and when issued
pursuant to a registered exchange for Initial Securities, the Company's 7 5/8%
Senior Notes due 2008 (the "Exchange Securities", and 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.
"Asset Sale" means the sale, transfer or other
disposition (other than to the Company or any of its
<PAGE>
2
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).
"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 9.07).
"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 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
<PAGE>
3
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 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
<PAGE>
4
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 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
<PAGE>
5
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.
"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
<PAGE>
6
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 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
<PAGE>
7
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 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 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 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
<PAGE>
8
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 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 Ratings Group, a division of McGraw Hill, 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,
<PAGE>
9
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), 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, principal financial officer or Vice
President-Finance 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
<PAGE>
10
(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 incurred by the Company or
any Restricted Subsidiary if, after giving effect to such incurrence on a pro
forma basis, the amount of the total Indebtedness or other obligations of the
Company and its Restricted Subsidiaries that is secured by a Lien does not
exceed the product of the Annualized Pro Forma EBITDA of the Company multiplied
by 3.00; (ii) Liens on the Property of the Company or any Restricted Subsidiary
existing on the Issue Date; (iii) 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), (ii), (vii) or (x); 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),
(ii), (vii) and (x) 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; (iv) 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; (v) 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; (vi) Liens on the Property of the
Company or any Restricted Subsidiary in favor of issuers of
<PAGE>
11
performance bonds and surety or appeal bonds; (vii) 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; (viii) 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; (ix) 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, (x) 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
<PAGE>
12
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 Secu rity which is due or overdue or is
to become due at the relevant time.
"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 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
<PAGE>
13
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 & Poor's Ratings
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 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.
"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
<PAGE>
14
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.
"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 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 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
<PAGE>
15
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 Commis
sion.
"Securities" means the Securities issued under
this Indenture.
"Securities Act" means the Securities Act of 1933.
"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 recognized by the United States of America having capital,
<PAGE>
16
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. ss.ss.
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, when used with respect to the Trustee,
any officer (a) within the corporate trust department of the Trustee, including
any vice president, assistant vice present, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and
<PAGE>
17
familiarity with the particular subject and (b) who shall have direct
responsibility for the administration of this Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"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 obliga tions (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.
<PAGE>
18
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction" ................ 3.07
"Bankruptcy Law" ....................... 5.01
"Change of Control Offer" .............. 3.10
"Change of Control Payment Date" ....... 3.10
"Change of Control Purchase Price" ..... 3.10
"covenant defeasance option" ........... 7.01(b)
"Custodian" ............................ 5.01
"Defaulted Interest" ................... 2.10
"Event of Default" ..................... 5.01
"incorporated provision"................ 9.01
"incur"................................. 3.04
"legal defeasance option" .............. 7.01(b)
"Legal Holiday" ........................ 9.07
"Paying Agent" ......................... 2.03
"Registrar"............................. 2.03
"Surviving Person" ..................... 4.01
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.
<PAGE>
19
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 limita tion;
(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 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
<PAGE>
20
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 Secu
rities 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 authenti cates the Security, the Security
shall be valid neverthe less.
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 clusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities for original issue in an aggregate principal amount of $150,000,000,
upon a written order of the Company signed by two Officers. 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 shall further
provide instructions concerning amounts for each Holder and delivery. The
aggregate principal amount of Securities outstanding at any time may not exceed
that amount except as provided in Section 2.06.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appoint ment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authen tication 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
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21
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 Secur ities 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 addi
tional 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
provi sions 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 Regis trar 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 Securi ties.
SECTION 2.04. Paying Agent To Hold Money in Trust. By 10:00
a.m. on 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 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 prac
ticable the most recent list available to it of the names
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22
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 Secur ity.
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 outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Sec tion 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.
<PAGE>
23
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 Secur ities. 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 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
<PAGE>
24
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 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.
<PAGE>
25
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.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the "CUSIP"
numbers.
ARTICLE 3
Covenants
SECTION 3.01 Certain Covenants Suspended. The covenants set
forth in this Article 3 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
(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
<PAGE>
26
in Section 3.04, Section 3.05, Section 3.07 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 princi pal 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 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).
<PAGE>
27
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 or its Restricted Subsidiaries 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 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
<PAGE>
28
(other than by a Subsidiary) subsequent to the Issue Date 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 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) upon any of its Property,
whether now owned or hereafter acquired, or any interest therein or any income
or profits therefrom, unless it has made or will make effective provision
whereby the Securities will be secured by such Lien equally and ratably with (or
prior to) all other Indebtedness of the Company or any Restricted Subsidiary
secured by such Lien for so long as any such other Indebtedness of the Company
or any Restricted Subsidiary shall be so secured.
SECTION 3.07. Limitation on Transactions with
Affiliates. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly,
<PAGE>
29
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 the consideration to be paid or
received in connection with such Affiliate Transaction is fair from a financial
point of view, to the Company or such Restricted Subsidiary, as the case may be,
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 3.07.
(b) Notwithstanding Section 3.07(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 such Restricted
Subsidiary 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.
<PAGE>
30
SECTION 3.08. 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 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 3.06 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 3.09. 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 (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof plus accrued and unpaid interest (if any)
to the Change of Control Payment Date (as hereinafter defined), subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date, in accordance with the procedures set
forth in this Section 3.09.
(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 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 3.09 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;
<PAGE>
31
(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;
(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
<PAGE>
32
(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 3.09. 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 3.09 by
virtue thereof.
SECTION 3.10. 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 ss. 314(a)(4).
<PAGE>
33
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 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, transfer or
other disposition 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.
<PAGE>
34
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, 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, or (ii) fails
to purchase Securities when required pursuant to this Indenture or the
Securities;
(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 or 3.09 (other than a failure to purchase
Securities when required under Section 3.09) 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;
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35
(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 Custo dian of it
or for any substantial part of its property; or
(D) makes a general assignment for the bene fit of
its creditors;
or takes any comparable action under any foreign laws
relating to insolvency;
(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.
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36
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 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
<PAGE>
37
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 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 proceed ing 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 indemni fication
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
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38
SECTION 5.06. Limitation on Suits. A Security
holder may not pursue any remedy with respect to this Inden
ture 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;
(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 Inden ture, the right of any Holder
to receive payment of princi pal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Secu rities, 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 speci fied 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
<PAGE>
39
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, disburse ments and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.07.
SECTION 5.10. Priorities. If the Trustee col
lects 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 Sec
tion 6.07;
SECOND: 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 Securi
ties for principal and interest, respectively; and
THIRD: 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 Inden ture 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 rea sonable 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
<PAGE>
40
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 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 liabil ity 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
<PAGE>
41
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.
(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 genu
ine and to have been signed or presented by the proper per
son. 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 Opin ion 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.
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42
(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.
(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 Secur ities, 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 Inden ture 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
<PAGE>
43
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 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 rea sonable 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 reim burse 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.
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44
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 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 Secur ities 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 (at the
expense of the Company) 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.
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45
If the Trustee fails to comply with Section 6.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appoint ment 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 busi ness or assets to, another corporation or banking
associa tion, 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 ss. 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 TIAss. 310(b); provided, however, that
-------- -------
there shall be excluded from the operation of
TIAss. 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or
participation in other securities of the Company are out
standing if the requirements for such exclusion set forth in
TIAss. 310(b)(1) are met.
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46
SECTION 6.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 7
Discharge of Indenture; Defeasance
SECTION 7.01. Discharge of Liability on Securi ties;
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 obliga tions 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, 3.08 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 not withstanding 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 specified in Sections 5.01(4),
5.01(6), 5.01(7) (with
<PAGE>
47
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 cer tificate from a
nationally recognized firm of indepen dent accountants expressing their
opinion that the pay ments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obliga tions 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 the deposit does not
constitute, or is qualified as, a
<PAGE>
48
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 Security holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such cove nant 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 Offi cers'
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 Obliga tions 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.
Subject to any applicable abandoned property law,
the Trustee and the Paying Agent shall pay to the Company
<PAGE>
49
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, restrain ing 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 Security
holder:
(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
Sec tion 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
<PAGE>
50
(4) to add guarantees with respect to the Secur ities or to
secure the Securities;
(5) 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;
(6) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA; or
(7) to make any change that does not adversely affect the
rights of any Securityholder.
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;
(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;
<PAGE>
51
(6) subordinate in right of payment, or otherwise subordinate,
the Securities to any other obligations of the Company; 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.
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.
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 subse quent 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 subse quent 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 Security holder.
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
<PAGE>
52
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 sign ing 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 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
<PAGE>
53
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
Miscellaneous
SECTION 9.01. 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 9.02. Notices. Any notice or communica
tion 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
<PAGE>
54
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 subse quent notices or
communications.
Any notice or communication mailed to a Security holder shall
be mailed to the Securityholder at the Secu rityholder's address as it appears
on the registration books 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 9.03. 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 9.04. 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.
<PAGE>
55
SECTION 9.05. 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 condi tion;
(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;
(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 opin ion of such
individual, such covenant or condition has been complied with.
SECTION 9.06. 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 9.07. Legal Holidays. A "Legal Holiday" is a Saturday,
a Sunday or a day on which banking institu tions 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 9.08. 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 9.09. 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
<PAGE>
56
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 lia bility. The waiver and release shall be part of the consi deration
for the issue of the Securities.
SECTION 9.10. 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 9.11. Multiple Originals. The parties
may sign any number of copies of this Indenture. Each
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 9.12. 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 9.13. 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.
<PAGE>
57
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
LENFEST COMMUNICATIONS, INC.
by /s/ Maryann V. Bryla
------------------------
Name:
Title:
THE BANK OF NEW YORK, as
Trustee
by /s/ Lucille Firrincieli
------------------------
Name: Lucille Firrincieli
Title: Vice President
<PAGE>
1
LENFEST COMMUNICATIONS, INC.
7 5/8% Senior Notes due 2008
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 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 SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR A 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 AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
<PAGE>
2
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY)
THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE
TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) 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. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES 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 IT 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 (O)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT.
<PAGE>
1
CUSIP No. 526055 AE 8
No. C-01 $150,000,000
7 5/8% Senior Notes due 2008
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promised
to pay to CEDE & CO., or registered assigns, the principal sum as set forth in
the Schedule of Increases or Decreases in Global Securities attached hereto on
February 15, 2008.
Interest Payment Dates: February 15 and August 15,
commencing August 15, 1998.
Record Dates: February 1 and August 1.
Additional provisions of this Security are set forth on the
other side of this Security.
LENFEST COMMUNICATIONS, INC.
by
----------------------------
----------------------------
<PAGE>
2
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated: February 5, 1998
THE BANK OF NEW YORK, as Trustee, certifies that this is one of the
Securities referred to in the Indenture.
by
--------------------------
Authorized Signatory
<PAGE>
1
[REVERSE SIDE OF INITIAL SECURITY]
7 5/8% Senior Note due 2008
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 February 15 and August 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 January 30, 1998, among the Company and the Initial
Purchasers (the "Registration Agreement"), and terms defined in the following
two paragraphs that are otherwise not defined shall have the meanings assigned
to such terms in the Registration Agreement.
In the event that (i) neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the Commission
on or prior to the 90th day following the Issue Date, (ii) neither the Exchange
Offer Registration Statement nor a Shelf Registration Statement has been
declared effective prior to the 150th day following the Issue Date or (iii)
neither the Exchange Offer has been consummated nor a Shelf Registration
Statement with respect to the Securities has been declared effective on or prior
to the 180th 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 90-day period in the case of clause (i) above and (b) such 150-day
period in the case of clause (ii) above and (c) such 180-day period in the case
of clause (iii) above. In each case such additional interest (the "Special
Interest") will be payable in cash semiannually in arrears each February 15 and
August 15 commencing August 15, 1998, at a rate per
<PAGE>
2
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 or a Shelf Registration
Statement after the 90-day period described in clause (i) above, (y) the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement after the 150-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 180-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 such Shelf Registration Statement is again deemed effective, (ii) the date
that is the second anniversary of the Closing or (iii) the date as of which all
of the Securities are sold pursuant to a 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 February 15 and August 15, commencing August 15, 1998.
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 February 1 or August 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
<PAGE>
3
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 payment 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 February 5, 1998 ("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 $150,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). 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
<PAGE>
4
Restricted Subsidiaries, the sale of assets and transactions with Affiliates.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. 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 (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption.
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
<PAGE>
5
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 4 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 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
<PAGE>
6
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 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.
<PAGE>
7
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TENENT
(=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.
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.
20. 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.
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.
<PAGE>
8
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
<PAGE>
9
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) |_| to an institutional "accredited investor" (as
defined in Rule 501(a)(2), (2), (3) or (7)
under the Securities Act of 1933) that has
furnished to the trustee a signed letter
containing certain representations and
agreements (the form of which letter can be
obtained from the trustee of the Company); or
(6) |_| 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), (5) or
(6) 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 if 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) 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
<PAGE>
10
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>
11
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is
$150,000,000. The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Signature of
Principal amount of authorized
Amount of decrease Amount of increase this Global signatory of
in Principal Amount in Principal Amount Security following Trustee or
Date of of this Global of this Global such decrease or Securities
Exchange Security Security increase Custodian
</TABLE>
<PAGE>
12
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>
1
EXECUTION COPY
===========================================================
LENFEST COMMUNICATIONS, INC.,
Issuer
8 1/4% Senior Subordinated Notes due 2008
INDENTURE
Dated as of February 5, 1998
THE BANK OF NEW YORK,
Trustee
===========================================================
<PAGE>
1
TABLE OF CONTENTS
ARTICLE 1 Page
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 18
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 18
SECTION 1.04. Rules of Construction .................. 19
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 19
SECTION 2.02. Execution and Authentication ........... 20
SECTION 2.03. Registrar and Paying Agent ............. 21
SECTION 2.04. Paying Agent To Hold Money in Trust..... 21
SECTION 2.05. Securityholder Lists ................... 22
SECTION 2.06. Replacement Securities ................. 22
SECTION 2.07. Outstanding Securities ................. 22
SECTION 2.08. Temporary Securities ................... 23
SECTION 2.09. Cancellation ........................... 23
SECTION 2.10. Defaulted Interest ..................... 23
SECTION 2.11. Record Date ............................ 25
SECTION 2.12. CUSIP Numbers .......................... 25
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ..................... 25
SECTION 3.02. Selection of Securities To be
Redeemed ............................ 25
SECTION 3.03. Notice of Redemption.................... 26
SECTION 3.04. Effect of Notice of Redemption.......... 26
SECTION 3.05. Deposit of Redemption
Price ............................... 26
SECTION 3.06. Securities Redeemed in
Part ................................ 26
<PAGE>
2
ARTICLE 4
Covenants
SECTION 4.01. Certain Covenants Suspended ............ 26
SECTION 4.02. Payment of Securities .................. 28
SECTION 4.03. SEC Reports ............................ 28
SECTION 4.04. Limitation on Indebtedness ............. 29
SECTION 4.05. Limitation on Restricted Payments ...... 29
SECTION 4.06. Limitation on Transactions with
Affiliates........................... 30
SECTION 4.07. Designation of Restricted and
Unrestricted Subsidiaries............ 31
SECTION 4.08. Change of Control Offer ................ 32
SECTION 4.09. Limitation on Layered
Indebtedness......................... 34
SECTION 4.10. Limitation on Subordinated
Liens ............................... 34
SECTION 4.11. Compliance Certificate ................. 35
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets .............................. 35
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ...................... 36
SECTION 6.02. Acceleration ........................... 38
SECTION 6.03. Other Remedies ......................... 39
SECTION 6.04. Waiver of Past Defaults ................ 39
SECTION 6.05. Control by Majority .................... 39
SECTION 6.06. Limitation on Suits .................... 40
SECTION 6.07. Rights of Holders To Receive Payment ... 40
SECTION 6.08. Collection Suit by Trustee ............. 40
SECTION 6.09. Trustee May File Proofs of Claim ....... 40
SECTION 6.10. Priorities ............................. 41
SECTION 6.11. Undertaking for Costs .................. 41
SECTION 6.12. Waiver of Stay or Extension Laws ....... 42
<PAGE>
3
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee ...................... 42
SECTION 7.02. Rights of Trustee ...................... 43
SECTION 7.03. Individual Rights of Trustee ........... 44
SECTION 7.04. Trustee's Disclaimer ................... 44
SECTION 7.05. Notice of Defaults ..................... 44
SECTION 7.06. Reports by Trustee to Holders .......... 44
SECTION 7.07. Compensation and Indemnity ............. 45
SECTION 7.08. Replacement of Trustee ................. 46
SECTION 7.09. Successor Trustee by Merger ............ 47
SECTION 7.10. Eligibility; Disqualification .......... 47
SECTION 7.11. Preferential Collection of Claims
Against Company ..................... 47
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance .......................... 48
SECTION 8.02. Conditions to Defeasance ............... 49
SECTION 8.03. Application of Trust Money ............. 50
SECTION 8.04. Repayment to Company ................... 50
SECTION 8.05. Indemnity for Government
Obligations ......................... 50
SECTION 8.06. Reinstatement ............................. 50
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders ............. 51
SECTION 9.02. With Consent of Holders ................ 52
SECTION 9.03. Compliance with Trust Indenture Act .... 53
SECTION 9.04. Revocation and Effect of Consents
and Waivers ......................... 53
SECTION 9.05. Notation on or Exchange of
Securities .......................... 54
SECTION 9.06. Trustee To Sign Amendments ............. 54
SECTION 9.07. Payment for Consent .................... 55
<PAGE>
4
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate ................. 55
SECTION 10.02. Liquidation, Dissolution,
Bankruptcy .......................... 55
SECTION 10.03. Default on Senior Indebtedness ........... 56
SECTION 10.04. Acceleration of Payment of
Securities .......................... 57
SECTION 10.05. When Distribution Must Be Paid Over ...... 57
SECTION 10.06. Subrogation .............................. 57
SECTION 10.07. Relative Rights .......................... 57
SECTION 10.08. Subordination May Not Be Impaired
by Company .......................... 58
SECTION 10.09. Rights of Trustee and Paying Agent ....... 58
SECTION 10.10. Distribution or Notice to
Representative ...................... 59
SECTION 10.11. Article 9 Not To Prevent Events of
Default of Limit Right To
Accelerate ........................... 59
SECTION 10.12. Trust Moneys Not Subordinated ............ 59
SECTION 10.13. Trustee Entitled To Rely ................. 59
SECTION 10.14. Trustee To Effectuate Subordination ...... 60
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness .............. 60
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions .......................... 60
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls ............. 61
SECTION 11.02. Notices .................................. 62
SECTION 11.03. Communication by Holders with Other
Holders ............................. 62
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent ................ 62
SECTION 11.05. Statements Required in Certificate
or Opinion .......................... 63
SECTION 11.06. Rules by Trustee, Paying Agent and
Registrar ............................ 63
SECTION 11.07. Legal Holidays ........................... 63
SECTION 11.08. Governing Law ............................ 63
SECTION 11.09. No Recourse Against Others ............... 63
SECTION 11.10. Successors ............................... 63
<PAGE>
5
SECTION 11.11. Multiple Originals ....................... 63
SECTION 11.12. Table of Contents; Headings .............. 63
SECTION 11.13. 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>
1
INDENTURE dated as of February 5,
1998, 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 8
1/4% Senior Subordinated Notes due 2008 (the "Initial Securities") and, if and
when issued pursuant to a registered exchange for Initial Securities, the
Company's 8 1/4% Senior Subordinated Notes due 2008 (the "Exchange Securities"
and, 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 4.06 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
<PAGE>
2
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
dated as of 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 11.07).
"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 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.
<PAGE>
3
"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 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
<PAGE>
4
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 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
<PAGE>
5
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
6.01).
"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 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
<PAGE>
6
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 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
<PAGE>
7
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 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 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 GAAP, and shall also include, to the extent not otherwise included,
<PAGE>
8
(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 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
<PAGE>
9
Standard & Poor's Ratings Group, a division of McGraw Hill,
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), 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, principal financial officer or Vice
President-Finance of the Company.
<PAGE>
10
"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
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
<PAGE>
11
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 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.
<PAGE>
12
"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 Secu rity which is due or
overdue or is to become due at the relevant time.
"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 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.
<PAGE>
13
"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 & Poor's Ratings
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 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.
"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.
<PAGE>
14
"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
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 Section
4.07; and (c) an Unrestricted Subsidiary which is redesignated as a Restricted
Subsidiary as permitted pursuant to Section 4.07.
"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.
<PAGE>
15
"SEC" means the Securities and Exchange Commis
sion.
"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 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
<PAGE>
16
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 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.
<PAGE>
17
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 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, when used with respect to the
Trustee, any officer (a) within the corporate trust department of the Trustee,
including any vice president, assistant vice present, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject and (b) who shall have direct responsibility for the
administration of this Indenture.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"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 4.07 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.
<PAGE>
18
"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" ................ 4.06
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"Change of Control Offer" .............. 4.08
"Change of Control Payment Date" ....... 4.08
"Change of Control Purchase Price" ..... 4.08
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Defaulted Interest" ................... 2.10
"Event of Default" ..................... 6.01
"incorporated provision"................ 11.01
"incur"................................. 4.04
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.07
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.03
"Registrar"............................. 2.03
"Surviving Person" ..................... 5.01
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.
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19
"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 limita tion;
(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 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
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20
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 Secu
rities 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 conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for
delivery Securities for original issue in an aggregate principal amount of
$150,000,000, upon a written order of the Company signed by two Officers. 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 shall
further provide instructions concerning amounts for each Holder and delivery.
The aggregate principal amount of Securities outstanding at any time may not
exceed that amount except as provided in Section 2.06.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appoint ment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authen tication by such agent. An
authenticating agent has the
<PAGE>
21
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 Secur ities 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 addi tional 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 7.07. 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 Securi ties.
SECTION 2.04. Paying Agent To Hold Money in Trust. By 10:00
a.m. on 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 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.
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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 Secur ity.
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 outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Sec tion 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.
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23
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 Secur ities. 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 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
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24
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 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
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25
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
6.04, 6.05 and 10.06. 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.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the "CUSIP"
numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 6 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of securities to
be redeemed and that such redemption is being made pursuant to paragraph 6 of
the Securities.
The Company shall give each notice to the Trustee provided
for in this Section at least 45 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate and an Opinion of Counsel from the Company to the effect
that such redemption will comply with the conditions herein.
SECTION 3.02. Selection of Securities To Be
Redeemed. If fewer than all the Securities are to be
redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by a method that complies
<PAGE>
26
with applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
call and for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from making such
payment pursuant to the terms of this Indenture, interest on Securities
(or portions thereof) called for redemption ceases to accrue after the
redemption date; and
(7) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
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27
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section at least 45 days before the redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. By 10:00 a.m. on
the redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Restricted Subsidiary is the Paying Agent, shall segregate and hold
in trust) money sufficient to pay the redemption price of and accrued interest
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date that is on or prior to
the date of redemption) on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by the Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of
a Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Certain Covenants Suspended. The
covenants set forth in this Article 4 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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28
(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 4.04, Section
4.05, Section 4.06 and clause (iv) of Section 5.01 (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 4.05 as if such covenant had been in effect during the
entire period of time from the date of this Indenture.
SECTION 4.02. 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 4.03. 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 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
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29
information. The Company also shall comply with the other
provisions of TIA ss. 314(a).
SECTION 4.04. 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 4.04(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 4.04(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 or its Restricted Subsidiaries 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 4.05. 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 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
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30
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 4.04(a).
(b) Notwithstanding Section 4.05(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 4.05(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 4.05(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 4.05(b)(iii)
shall not constitute Capital Stock Sale Proceeds for purposes of Section
4.05(a)(ii)(B).
SECTION 4.06. 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, (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
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31
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 the
consideration to be paid or received in connection with such Affiliate
Transaction is fair from a financial point of view, to the Company or such
Restricted Subsidiary, as the case may be, 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 4.06
(b) Notwithstanding Section 4.06(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 4.05; (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 such Restricted
Subsidiary 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 4.07. 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 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 4.09 and 4.10 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),
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32
which Officers' Certificate shall state the effective date
of such designation.
SECTION 4.08. 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 (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof plus accrued and unpaid interest(if any) to
the Change of Control Payment Date (as hereinafter defined), subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date, in accordance with the procedures set
forth in this Section 4.08. 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 4.08(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 4.08(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 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 4.08 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
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33
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;
(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.
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34
(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 4.08. 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 4.08 by
virtue thereof.
SECTION 4.09. 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 or
is expressly subordinated in right of payment to Senior Subordinated
Indebtedness.
SECTION 4.10. 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, 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 passu 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.
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35
SECTION 4.11. 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 ss. 314(a)(4).
ARTICLE 5
Successor Company
SECTION 5.01. 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 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 4.04(a).
In connection with any consolidation, merger, transfer or
other disposition contemplated by this Section 5.01, 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,
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36
merger or transfer and the supplemental indenture in respect thereto comply with
this Section 5.01 and that all conditions precedent herein provided for relating
to such transaction or transactions have been complied with.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. 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 10, 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 10, 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 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Sec tion 4.01, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to
purchase Securities when required under Section 4.08) 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
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37
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;
(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,
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38
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 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 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(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 6.01(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
<PAGE>
39
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 6.03. 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 cence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. 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 9.02 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 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceed ing 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 7.01, 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 indemni fication
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
<PAGE>
40
SECTION 6.06. Limitation on Suits. A Security
holder 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;
(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 6.07. 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 6.08. Collection Suit by Trustee. If an Event of
Default in payment of interest or principal specified in Section 6.01(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 7.07.
SECTION 6.09. 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,
<PAGE>
41
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, disburse ments and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee col
lects any money or property pursuant to this Article 6, it
shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under
Section 7.07;
SECOND: to holders of Senior Indebtedness of
the Company to the extent required by Article 10;
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 Securi
ties 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 6.11. 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 6.07
or a
<PAGE>
42
suit by Holders of more than 10% in principal amount of the
Securities.
SECTION 6.12. 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 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 7
Trustee
SECTION 7.01. 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
<PAGE>
43
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 6.05.
(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 7.02. 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;
<PAGE>
44
provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(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 7.03. 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 7.10 and 7.11.
SECTION 7.04. 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 7.05. 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 7.06. 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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45
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 7.07. 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 8 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 6.01(7) or (8) with
respect to the Company, the expenses are intended to constitute expenses of
administration under Bankruptcy Law.
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46
SECTION 7.08. 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 Secur ities 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
7.10;
(2) the Trustee is adjudged bankrupt or insol vent;
(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 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee (at the
expense of the Company) 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 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appoint ment of a successor Trustee.
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47
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust busi ness or assets to, another corporation or banking
associa tion, 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 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA ss. 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 ss. 310(b); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are out standing if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
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48
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securi ties;
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 8.01(c) and 8.06, 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 8.01(c), 8.02 and 8.06, the Company
at any time may terminate (i) all its obliga tions under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.01, 4.03 (to the extent that failure to comply with such Section 4.03 shall
not violate the TIA), 4.04, 4.05, 4.06, 4.07, 4.09, 4.10 and 5.01(iv) and the
related operation of Section 6.01(4) and the operation of Sections 6.01(6),
6.01(7) (with respect to Restricted Subsidiaries), 6.01(8) (with respect to
Restricted Subsidiaries) and 6.01(9) ("covenant defeasance option"). The Company
may exercise its legal defeasance option not withstanding 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 specified in
Sections 6.01(4), 6.01(6), 6.01(7) (with respect to Restricted Subsidiaries),
6.01(8) (with respect to Restricted Subsidiaries) and 6.01(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.
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49
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. 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 Secu rities to maturity or redemption, as
the case may be;
(2) the Company delivers to the Trustee a cer tificate from
a nationally recognized firm of indepen dent accountants expressing
their opinion that the pay ments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obliga tions 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 6.01(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 result ing from the deposit does
not constitute, or is quali fied 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
<PAGE>
50
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 Security holders will not recognize income, gain or
loss for Federal income tax purposes as a result of such cove nant
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 Offi cers'
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 8 have been complied with.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obliga tions deposited with it pursuant
to this Article 8. 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 8.04. 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.
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 8.05. 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 8.06. Reinstatement. If the Trustee or
Paying Agent is unable to apply any money or U.S. Government
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51
Obligations in accordance with this Article 8 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 8 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 8.
ARTICLE 9
Amendments
SECTION 9.01. 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 5;
(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 uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 that would limit or
terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article 10;
(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.
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52
An amendment under this Section that makes any
change that adversely affects the rights under Article 10 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 9.02. 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;
(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 10 that adversely affects the
rights of any Securityholder under Article 10;
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section; or
(8) reduce the premium payable upon the redemption of any
Securities, or change the time at which
<PAGE>
53
any Securities may be redeemed, as set forth under Article 3.
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 10 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 9.03. Compliance with Trust Indenture
Act. Every amendment to this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. 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 subse quent 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 subse quent 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 Security holder.
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
<PAGE>
54
after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.
SECTION 9.05. 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 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 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 7.01) shall be fully
protected in 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.
<PAGE>
55
SECTION 9.07. 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 10
Subordination
SECTION 10.01. 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 extent
and in the manner provided in this Article 10, 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 10 shall be subject to Section 10.12.
SECTION 10.02. 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 10 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 10.03. Default on Senior Indebtedness. The Company
may not pay the principal of or interest on the Securities or make any deposit
pursuant to Section 8.01 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
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
<PAGE>
56
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
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. 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 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 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 10.06. 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 10.07. 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 Secu rityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and
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57
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.
SECTION 10.08. 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 10.09. 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 10.03, 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 10. 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 capa city 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 10 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 8 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
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58
SECTION 10.10. 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).
SECTION 10.11. Article 10 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 10 shall not be construed
as pre venting the occurrence of a Default. Nothing in this Article 10 shall
have any effect on the right of the Secu rityholders or the Trustee to
accelerate the maturity of the Securities.
SECTION 10.12. 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 8 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 10, 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 10.13. Trustee Entitled To Rely. Upon
any payment or distribution pursuant to this Article 10, the Trustee and the
Securityholders shall be entitled to rely (i) upon any order or decree of a
court of competent juris diction in which any proceedings of the nature referred
to in Section 10.02 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 Security holders 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 10. 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 10, 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
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59
the rights of such Person under this Article 10, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordina tion. Each
Securityholder by accepting a Security author izes 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 10 and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 10.15. 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 10 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 10 and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.
SECTION 10.16. 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 conclu sively 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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60
ARTICLE 11
Miscellaneous
SECTION 11.01. 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 11.02. 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 of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
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61
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 11.03. 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 11.04. 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 11.05. 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 condi tion;
(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;
(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
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62
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. 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 11.07. 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 11.08. 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 11.09. 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 11.10. 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 11.11. Multiple Originals. The parties
may sign any number of copies of this Indenture. Each
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 11.12. 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
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63
to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
SECTION 11.13. 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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64
IN WITNESS WHEREOF, the parties have caused this Indenture
to be duly executed as of the date first written above.
LENFEST COMMUNICATIONS, INC.
by /s/ Maryann V. Bryla
-----------------------
Name:
Title:
THE BANK OF NEW YORK, as
Trustee
by /s/ Lucille Firrincieli
------------------------
Name: Lucille Firrincieli
Title: Vice President
<PAGE>
LENFEST COMMUNICATIONS, INC.
8 1/4% Senior Subordinated Notes due 2008
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 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 SECOND ANNIVERSARY
OF THE ISSUANCE THEREOF (OR A 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 AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE)
UNDER THE SECURITIES ACT, OR (6) 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. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES 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 IT 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 (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
CUSIP No. 526055 AJ 7
$150,000,000
No. C-01
8 1/4% Senior Subordinated Notes due 2008
LENFEST COMMUNICATIONS, INC., a Delaware corporation, promises
to pay to CEDE & CO., or registered assigns, the principal sum as set forth in
the Schedule of Increases or Decreases in Global Securities attached hereto on
February 15, 2008.
Interest Payment Dates: February 15 and August 15,
commencing August 15, 1998.
Record Dates: February 1 and August 1.
Additional provisions of this Security are set forth on the
other side of this Security.
LENFEST COMMUNICATIONS, INC.
By
<PAGE>
LENFEST COMMUNICATIONS, INC.
8 1/4% SENIOR SUBORDINATED NOTES DUE 2008
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION Dated: February 5, 1998
THE BANK OF NEW YORK, as Trustee, certifies that this is one of the
Securities referred to in the Indenture.
By:
Authorized Signatory
<PAGE>
[REVERSE SIDE OF INITIAL SECURITY]
8 1/4% Senior Subordinated Note due 2008
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 February 15 and August 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 January 30, 1998 among the Company and the Initial
Purchasers (the "Registration Agreement"), and defined terms in the following
two paragraphs that are not otherwise defined have the meanings assigned to such
terms in the Registration Agreement.
In the event that (i) neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the Commission
on or prior to the 90th day following the Issue Date, (ii) neither the Exchange
Offer Registration Statement nor a Shelf Registration Statement has been
declared effective prior to the 150th day following the Issue Date or (iii)
neither the Exchange Offer has been consummated nor a Shelf Registration
Statement with respect to the Securities has been declared effective on or prior
to the 180th 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 90th-day period in the case of clause (i) above and (b) such 150-day
period in the case of clause (ii) above and (c) such 180-day period in the case
of clause (iii) above. In each case such additional interest (the "Special
Interest") will be payable in cash semiannually in arrears each February 15 and
August 15 commencing August 15, 1998, 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 or a Shelf Registration Statement after the 90-day
period described in clause (i) above, (y) the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement after the 150-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 180-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 such Shelf
Registration Statement is no longer effective until the earlier of (i) the date
that such Shelf Registration Statement is again deemed effective, (ii) the date
that is the second anniversary of the Closing or (iii) the date as of which all
of the Securities are sold pursuant to such 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 February 15 and August 15, commencing August
15, 1998.
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 February 1 or August 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.
<PAGE>
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 February 5, 1998 ("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 $150,000,000 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.
6. Optional Redemption
The Securities may not be redeemed prior to February 15, 2003.
After that date, the Company may redeem the Securities in whole at any time or
in part from time to time at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the date of
redemption (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date that is on or
prior to the date of redemption), if redeemed during the 12-month period
beginning on or after February 15 of each of the years set forth below:
Redemption
Period Price
2003.................................................... 104.125%
2004.................................................... 102.750%
2005.................................................... 101.375%
2006 and thereafter..................................... 100.000%
Sinking Fund
The Securities are not subject to any sinking fund.
8. Notice of Redemption
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, after such date interest ceases
to accrue on such Securities (or such portions thereof) called for redemption.
9. 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 (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption).
10. 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>
11. 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.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
13. 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.
14. 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.
15. 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.
16. 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 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.
17. 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.
18. 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>
19. 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.
20. 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).
21. 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.
22. 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.
23. 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.
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.
<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) |_| to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) that has furnished to the
trustee a signed letter containing certain
representations and agreements (the form of which
letter can be obtained form the trustee of the
Company); or
(6) |_| 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), (5) or (6) 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
<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
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $0.
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount of Signature of authorized
Exchange in Principal Amount in Principal Amount this Global Security signatory of Trustee
of this Global Security of this Global Security following such or Securities Custodian
decrease or increase
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.08 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 4.08 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>
[The Lenfest Group Letterhead]
March 26, 1998
(Effective September 30, 1997)
Samuel W. Morris, Jr., Esquire
Vice President - General Counsel
Lenfest Communications, Inc.
200 Cresson Boulevard
Oaks, Pa 19456-0989
Re: LCI Indemnity of H. F. Lenfest on Australis Movie Studio Agreements
Dear Sam:
In consideration of the continuing indemnity provided by Lenfest New
Jersey, Inc., Lenfest York, Inc., Lenfest Raystay, Inc. and Lenfest MCN, Inc.
(formerly MicroNet, Inc.), pursuant to the Agreement, dated June 6, 1997,
between those companies and me, with respect to any loss I may suffer in making
good my personal guarantee to the movie studios under their license agreements
with Australis Media Limited, I hereby amend my Letter Agreement, dated March 6,
1997, and release LCI and the Restricted Subsidiaries from their indemnification
obligation to me under the AML Movie Studio Guaranty Liability until the last to
occur of January 1, 1999 or the last day of any fiscal quarter when the funding
of such indemnity would not cause LCI to be in default under the Credit
Agreement, dated as of June 27, 1996 (as the same may be amended from time to
time, the "Credit Agreement"), among LCI and the banks parties thereto. The
effective date of this amendment is September 30, 1997.
Capitalized terms not defined herein have the meaning given in the
Credit Agreement.
Sincerely yours,
/s/ H. F. Lenfest
----------------------------
H. F. (Gerry) Lenfest
cc: H. Brooks
M. Bryla
T. K. Pasch, Esq.
M. Glass, Toronto Dominion Bank
B. Collins, Toronto Dominion Bank
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997, AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 15,623
<SECURITIES> 14,452
<RECEIVABLES> 26,129
<ALLOWANCES> 2,923
<INVENTORY> 2,153
<CURRENT-ASSETS> 0
<PP&E> 772,912
<DEPRECIATION> 359,125
<TOTAL-ASSETS> 1,219,720
<CURRENT-LIABILITIES> 0
<BONDS> 1,295,306
0
0
<COMMON> 2
<OTHER-SE> (254,266)
<TOTAL-LIABILITY-AND-EQUITY> 1,219,720
<SALES> 447,390
<TOTAL-REVENUES> 447,390
<CGS> 0
<TOTAL-COSTS> 384,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,715
<INTEREST-EXPENSE> 120,788
<INCOME-PRETAX> (108,074)
<INCOME-TAX> 38,740
<INCOME-CONTINUING> (69,334)
<DISCONTINUED> 33,738
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,596)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
