<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from n/a to n/a
Commission File Number 0-27192
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1930707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address of principle executive office)
(303) 626-7000
(Registrant's telephone number, including area code)
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 twelve (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 _____
The number of shares outstanding of the Registrant's Common Stock as of
June 30, 1997 was 29,755,600 shares.<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASCENT ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . $ 14,807 $ 3,963
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . 40,614 54,695
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . 3,410 3,580
Income taxes receivable (Note 7) . . . . . . . . . . . . . . . . . 21,157 12,623
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 7,649 11,247
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 1,533 2,759
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 89,170 88,867
-------- --------
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . 308,174 301,498
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,770 132,805
Franchise rights, net. . . . . . . . . . . . . . . . . . . . . . . . 99,781 102,189
Film inventory, net (Note 5) . . . . . . . . . . . . . . . . . . . . 83,850 76,234
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,376 9,150
Other assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . 26,553 31,899
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $740,674 $742,642
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 6) . . . . . . . . . . . . . . . . . . $176,000 $143,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 25,668 19,992
Payable to COMSAT (Note 7) . . . . . . . . . . . . . . . . . . . . -- 4,662
Deferred income. . . . . . . . . . . . . . . . . . . . . . . . . . 76,519 81,942
Income taxes payable (Note 7). . . . . . . . . . . . . . . . . . . 2,477 6,970
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . 46,653 38,629
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 327,317 295,195
Long-term debt (Note 6). . . . . . . . . . . . . . . . . . . . . . . 50,000 50,000
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . 14,021 14,645
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . 6,726 5,742
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 398,064 365,582
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . 100,229 107,475
STOCKHOLDERS' EQUITY (NOTE 9):
Preferred stock, par value $0.1 per share,
5,000,000 shares authorized, none outstanding. . . . . . . . . . -- --
Common stock, par value $.01 per share,
60,000,000 shares authorized 29,755,600 and 29,754,000
issued and outstanding . . . . . . . . . . . . . . . . . . . . . 297 297
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 307,586 307,569
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . (67,026) (39,633)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524 1,352
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 242,381 269,585
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . $740,674 $742,642
-------- --------
-------- --------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
2
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . $87,604 $56,045 $177,453 $128,385
------- ------- -------- --------
OPERATING EXPENSES:
Cost of services . . . . . . . . . . . . . . . . 70,020 44,017 155,991 102,350
Depreciation and amortization. . . . . . . . . . 25,183 15,966 50,548 31,698
General and administrative . . . . . . . . . . . 1,154 2,904 3,152 5,124
------- ------- -------- --------
Total operating expenses . . . . . . . . . . . . 96,357 62,887 209,691 139,172
------- ------- -------- --------
Operating loss . . . . . . . . . . . . . . . . . . (8,753) (6,842) (32,238) (10,787)
Other income (expense), net. . . . . . . . . . . . 203 71 399 (237)
Interest expense . . . . . . . . . . . . . . . . . (5,557) (1,990) (10,286) (3,622)
------- ------- -------- --------
Loss before taxes and minority
interest . . . . . . . . . . . . . . . . . . . . (14,107) (8,761) (42,125) (14,646)
Income tax benefit . . . . . . . . . . . . . . . . 2,158 2,627 7,389 4,379
------- ------- -------- --------
Loss before minority interest. . . . . . . . . . . (11,949) (6,134) (34,736) (10,267)
Minority interest in (income)
loss of subsidiary . . . . . . . . . . . . . . . 2,202 (122) 7,343 (264)
------- ------- -------- --------
NET LOSS . . . . . . . . . . . . . . . . . . . . . $(9,747) $(6,256) $(27,393) $(10,531)
------- ------- -------- --------
------- ------- -------- --------
NET LOSS PER COMMON SHARE. . . . . . . . . . . . . $ (.33) $ (.21) $ (.92) $ (.35)
------- ------- -------- --------
------- ------- -------- --------
Weighted average number of
common shares outstanding. . . . . . . . . . . . 29,755 29,754 29,754 29,754
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
3
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Ended June 30,
1997 1996
-------- --------
OPERATING ACTIVITIES:
Net loss.............................................. $(27,393) $(10,531)
Adjustments for non-cash expenses:....................
Depreciation and amortization....................... 50,548 31,698
Amortization of film inventory...................... 7,866 5,072
Changes in operating assets and liabilities......... (8,990) (25,023)
Other............................................... 129 (11)
-------- --------
Net cash provided by operating activities........ 22,160 1,205
-------- --------
INVESTING ACTIVITIES:
Proceeds from note receivable......................... 1,444 1,405
Proceeds from sale of investment...................... 1,920 -
Purchase of property and equipment.................... (45,071) (48,584)
Net expenditures for film production costs............ (3,064) (7,883)
Investments in unconsolidated business................ - (4,125)
Other................................................. 455 -
-------- --------
Net cash used in investing activities............ (44,316) (59,187)
-------- --------
FINANCING ACTIVITIES:
Repayment of long-term debt........................... - (172)
Net short-term borrowings............................. 33,000 50,000
Other................................................. - 15
-------- --------
Net cash provided by financing activities........ 33,000 49,843
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. 10,844 (8,139)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 3,963 11,012
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 14,807 $ 2,873
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid......................................... $ 7,383 $ 2,403
-------- --------
-------- --------
Income taxes paid..................................... $ 265 $ 224
-------- --------
-------- --------
See accompanying notes to these condensed consolidated financial statements.
4
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. GENERAL
The accompanying unaudited condensed consolidated financial statements
have been prepared by Ascent Entertainment Group, Inc. ("Ascent" or the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). These financial statements should be read in the
context of the financial statements and notes thereto filed with the Commission
in the Company's 1996 Annual Report on Form 10-K. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such regulations. The accompanying condensed consolidated
financial statements reflect all adjustments and disclosures which are, in the
opinion of management, necessary for a fair presentation. All such adjustments
are of a normal recurring nature. The results of operations for the interim
periods are not necessarily indicative of the results of the entire year.
Certain December 31, 1996 balance sheet amounts have been reclassified to
conform with the June 30, 1997 presentation.
2. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Ascent and its majority-owned subsidiaries which include On Command
Corporation ("OCC"), the Denver Nuggets Limited Partnership (the "Nuggets"),
the Colorado Avalanche LLC ("the Avalanche") and Beacon Communications Corp.
("Beacon"). Ascent Network Services, Inc. ("ANS"), formerly a wholly owned
subsidiary of Ascent, was merged into Ascent and became an operating division
of Ascent on May 30, 1997. Intercompany transactions have been eliminated.
Ascent executed an initial public offering (the "Offering") of its
common stock on December 18, 1995. Prior to the Offering, Ascent was a
wholly owned subsidiary of COMSAT Corporation ("COMSAT"). Until June 27,
1997 COMSAT continued to own a majority (80.67%) of Ascent's common stock and
control Ascent. In addition, Ascent's relationship with COMSAT was governed
by three agreements entered into in connection with the Offering; an
Intercompany Services Agreement, a Corporate Agreement and a Tax Sharing
Agreement.
On June 27, 1997, COMSAT consummated the distribution of its 80.67%
ownership interest in Ascent to the COMSAT shareholders on a pro-rata basis
in a transaction that was tax-free for federal income tax purposes (the
"Distribution"). Ascent and COMSAT entered into a Distribution Agreement and
a Tax Disaffiliation Agreement, both dated as of June 3, 1997 (see Note 7) in
connection with the Distribution. Ascent and COMSAT also terminated the
Intercompany Services Agreement and Corporate Agreement entered into in
connection with the Offering, resulting in, among other things, the
termination of the restriction on Ascent's incurring indebtedness without the
consent of COMSAT. As a result of the Distribution, Ascent became an
independent publicly held corporation. All costs incurred by Ascent which
are directly associated with the Distribution have been charged to expense.
3. BUSINESS COMBINATION
As discussed in Note 2 to the Company's 1996 consolidated financial
statements, effective October 8, 1996, Ascent through its newly formed
subsidiary, OCC, acquired the assets, properties and certain liabilities of
SpectraVision, Inc., a leading provider of in-room entertainment services to
the lodging industry. Prior to the acquisition of SpectraVision, On Command
Video Corporation ("OCV"), formerly an 84% owned subsidiary of Ascent, was
merged with a subsidiary of OCC and became a wholly owned subsidiary of OCC
pursuant to an Agreement and Plan of Merger. Ascent owns approximately 57.1%
of the common stock of OCC as of June 30, 1997. The acquisition of
SpectraVision has been accounted for under the purchase method and,
accordingly, the results of operations of SpectraVision are included in the
consolidated financial statements from the date of the acquisition.
4. DENVER ARENA PROJECT
5
<PAGE>
As discussed in Note 4 to the Company's 1996 consolidated financial
statements, on March 28, 1996, the Company entered into an agreement with The
Anschutz Corporation ("TAC") pursuant to which the Company purchased all of
TAC's interests in the proposed arena development project in Denver and
related goodwill, rights, plans, specifications, drawings, contracts,
relationships, approvals, permits and other work product of every kind that
had been generated by the efforts of TAC and Ascent with respect to the
proposed arena (the "Arena Assets"), and TAC agreed to use reasonable efforts
to facilitate the development and construction of the proposed arena. Ascent
and TAC had worked together on the proposed arena development from early 1994
until September 1995. In consideration for TAC's interest in the Arena
Assets and its agreement to facilitate development of the proposed arena,
Ascent paid TAC $6,600,000 in cash. On a contingent and non-interest bearing
basis Ascent agreed to pay an additional $5,000,000 and grant a paid-up suite
license, both linked to the construction and occupancy of the proposed arena.
On May 7, 1997, the Company entered into a Land Purchase Agreement (the
"Agreement") with Southern Pacific Transportation Company ("SPT") pursuant to
which the Company would purchase approximately 49 acres in Denver as the site
for the proposed arena for $20,000,000. The Agreement is similar to the
previously expired agreement between SPT and the Company. Pursuant to the
Agreement, the closing of the land purchase needs to occur on or before
August 31, 1997 and consummation of the transaction is subject to several
conditions, including obtaining satisfactory financing. The Agreement also
provides for SPT to effect a state-approved environmental clean-up plan on
the site, and to provide continuing partial indemnification with regard to
certain environmental liabilities. Management believes the Company will
consummate the land purchase prior to August 31, 1997 or, obtain an extension
of the closing date of the land purchase.
In connection with the Denver arena project, on August 13, 1997, the
Company entered into a memorandum of understanding (the "Memorandum) with the
City and County of Denver (the "City"). The Memorandum outlines the major
terms of a proposed agreement between the parties whereby Ascent will
construct, own and manage the new arena. The Memorandum also provides for
the release of the Nuggets and Avalanche from their existing leases at the
City's current arena, McNichols Arena, upon the completion of the new arena.
In addition, upon completion of the new arena, Ascent would transfer to the
City the land associated with the arena and the City will lease the land back
to Ascent for a 25 year term. At the end of such term the city will sell the
land back to Ascent at no cost to Ascent. The Memorandum outlines the major
points with respect to the new arena, however it is not binding and the
parties will not be bound until entering in definitive agreements subject to
the approval of the City Council of the City and County of Denver and the
Board of Directors of Ascent.
On August 12, 1997, the Company and Liberty Media Corporation
("Liberty") entered into a term sheet pursuant to which Liberty would invest
$15,000,000 in the Denver arena project. The agreement is subject to the
parties entering definitive documentation subject to the approval of Ascent's
lender and Board of Directors and Liberty's Board of Directors.
5. FILM INVENTORY
Film inventory consists of the following at June 30, 1997 and December 31,
1996:
1997 1996
------- -------
(in thousands)
Films released, less amortization........ $2,831 $ 3,382
Films in process and development......... 76,675 69,732
Development.............................. 4,344 3,120
------- -------
Total film inventory................ $83,850 $76,234
------- -------
------- -------
During the first half of 1997, the Company increased film inventory and
deferred revenues by approximately $12,200,000 in connection with the
distribution rights relating to certain films under development at June 30,
1997.
6
<PAGE>
6. NOTES PAYABLE AND LONG-TERM DEBT
On March 23, 1997, OCC entered into an amendment to its revolving credit
facility with a bank (the "OCC Amendment"). Under the OCC Amendment, the
amount available under the OCC revolving credit facility was increased from
$125.0 million to $150.0 million, and certain other terms were amended to
clarify such terms. At June 30, 1997, $50.0 million was outstanding as a
long-term revolving loan payable in 2001 while $65.0 million is considered a
short-term borrowing under the amended OCC credit facility. At June 30,
1997, there was $35.0 million of available borrowings under the amended OCC
credit facility, subject to certain covenant restrictions.
On March 23, 1997, Ascent entered into an amendment and restatement of its
revolving credit facility with a bank (the "Ascent Amendment"). The Ascent
Amendment provides, among other things, that the Ascent revolving credit
facility will only be renewable for two additional one year options beyond
October 7, 1997 if, prior thereto, Ascent has received not less than $50.0
million in proceeds from a new debt financing which is subordinated to the
Ascent revolving credit facility; for the maximum amount available to be
borrowed under the facility to be reduced from $200.0 million to $140.0 million;
for the elimination of the $125.0 million limit on available borrowings under
the facility prior to the receipt of NBA and NHL consents; that those financial
covenants contained in the Ascent revolving credit facility related to the
financial results of OCC will not be measured until year end 1997; for the
$140.0 million of availability to be divided into a term loan of $50.0 million
and a revolving facility of $90.0 million; and for amendments to certain other
financial covenants. In addition, the failure of Ascent to commence
construction on the Denver arena project (see Note 4) prior to August 31, 1997
is an event of default under the Ascent revolving credit facility.
On August 12, 1997, Ascent obtained the bank's consent to (i) extend the
time for the commencement of construction on the Denver arena project from
August 31, 1997 to October 31, 1997 and (ii) extend the maturity date for the
revolving credit facility from October 7, 1997 to October 31, 1997, still
subject to Ascent obtaining not less than $50.0 million in subordinated
indebtedness by October 9, 1997. Based on current market conditions, management
of Ascent currently believes that Ascent will be successful in obtaining the
additional subordinated debt by October 9, 1997. In addition, management
currently believes that they will commence construction on the Denver arena
project prior to October 31, 1997. However, there can be no assurances that
other contingencies will not arise which could impact Ascent's ability to obtain
this additional subordinated financing, that such financing will be available on
terms acceptable to Ascent or that a final Arena Agreement (see note 4) with the
City and County of Denver on the Denver arena project will have been reached or
that Ascent will be able to commence construction on the Denver arena project by
October 31, 1997. If Ascent were not able to obtain the additional subordinated
financing or commence construction on the arena, Ascent could be required to
refinance the Ascent Credit Facility which could require Ascent to sell assets.
At June 30, 1997, there was $29.0 million of available borrowings under the
Ascent revolving credit facility, subject to certain covenant restrictions.
7. RELATED PARTY TRANSACTIONS AND AGREEMENTS WITH COMSAT
During the three-month periods ended June 30, 1997 and 1996, Ascent paid
COMSAT $245,000 and $0 respectively, in interest relating to intercompany
obligations between the two entities. In addition, COMSAT has provided
administrative services to Ascent pursuant to an Intercompany Services
Agreement (the "Services Agreement"). The Services Agreement, which was amended
in December 1996 to reflect a reduced level of services to be provided effective
January 1, 1997, was terminated on June 27, 1997 in connection with the
Distribution. Total charges incurred under this agreement were $90,000 and
$1,000,000 for the six months ending June 30, 1997 and 1996, respectively.
For the periods presented in these financial statements, Ascent has been a
member of COMSAT's consolidated tax group for federal income tax purposes.
Accordingly, Ascent has prepared its tax provision based on Ascent's inclusion
in COMSAT's consolidated tax return pursuant to the tax sharing agreement
entered into in connection with the Offering (see note 2). In conjunction with
the SpectraVision transaction, Ascent's ownership in OCC decreased to
approximately 57% and OCC began filing a separate return commencing on October
9, 1996. Taxes payable or receivable are settled with COMSAT annually. At
June 30, 1997 and December 31, 1996, Ascent's federal income tax receivable from
7
<PAGE>
COMSAT was $21,157,000 and $12,623,000, respectively. In conjunction with the
Distribution (see note 2), the Company will no longer be part of COMSAT's
consolidated tax group and accordingly, it may be unable to recognize tax
benefits and will receive no cash payments from COMSAT for operating losses to
be incurred subsequent to June 27, 1997.
In connection with the Distribution, Ascent and COMSAT executed the
Distribution Agreement, dated as of June 3, 1997. The Distribution Agreement
provides, among other things, that COMSAT will distribute all of its holdings
of Ascent common stock to COMSAT shareholders on a pro-rata basis. In
addition, while COMSAT has received a ruling from the IRS that the
Distribution will not be taxable to COMSAT or its shareholders, such a ruling
is based on the representations made by COMSAT in the IRS ruling documents.
Accordingly, in order to maintain the tax-free status of the Distribution,
Ascent will be subject to the following restrictions under the Distribution
Agreement: (i) Ascent shall not take any action, nor fail or omit to take any
action, that would cause the Distribution to be taxable or cause any
representation made in the ruling documents to be untrue in a manner which
would have an adverse effect of the tax-free status of the Distribution; (ii)
until the second anniversary of the Distribution, Ascent will continue the
active conduct of its ANS satellite distribution, service and maintenance
business; (iii) until the first anniversary of the Distribution, Ascent will
not sell or otherwise issue to any person, or redeem or otherwise acquire
from any person, any Ascent stock or securities exercisable or convertible
into Ascent stock or any instruments that afford any person the right to
acquire stock of Ascent; (iv) for six months after the Distribution, Ascent
will not solicit any person to make a tender offer for stock of Ascent,
participate in or support any unsolicited tender offer for stock of Ascent,
or approve any proposed business combination or any transaction which would
result in any person owning 20% or more of the stock of Ascent; (v) until the
second anniversary of the Distribution, Ascent will not sell, transfer or
otherwise dispose of assets that, in the aggregate, constitute more than 60%
of its gross assets as of the Distribution, other than in the ordinary course
of business; (vi) until the second anniversary of the Distribution, Ascent
will not voluntarily dissolve or liquidate or engage in any merger,
consolidation or other reorganization; and (vii) until the second anniversary
of the Distribution, Ascent will not unwind the merger of ANS with and into
Ascent in any way.
The restrictions noted in items (ii) through (vii) above will be waived
with respect to any particular transaction if either COMSAT or Ascent have
obtained a ruling from the IRS in form and substance reasonably satisfactory to
COMSAT that such transaction will not adversely affect the tax-free status of
the Distribution, or COMSAT has determined in its sole discretion, exercised in
good faith solely to preserve the tax-free status of the Distribution that such
transaction could not reasonably be expected to have a material adverse effect
on the tax-free status of Distribution, or, with respect to a transaction
occurring at least one year after the Distribution, Ascent obtains an
unqualified tax opinion in form and substance reasonably acceptable to COMSAT
that such transaction will not disqualify the Distribution's tax-free status.
Pursuant to the Distribution Agreement, Ascent will indemnify COMSAT
against any tax related losses incurred by COMSAT to the extent such losses are
caused by any breach by Ascent of its representations, warranties or covenants
made in the Distribution Agreement. In turn, COMSAT will indemnify Ascent
against any tax related losses incurred by Ascent to the extent such losses are
caused by any COMSAT action causing the Distribution to be taxable. To the
extent that tax related losses are attributable to subsequent tax legislation or
regulation, such losses will be borne equally by COMSAT and Ascent.
8. LITIGATION
The Company and its subsidiaries are defendants, and may be potential
defendants, in lawsuits and claims arising in the ordinary course of their
businesses. While the outcomes of such claims, lawsuits, or other
proceedings cannot be predicted with certainty, management expects that such
liability, to the extent not provided for by insurance or otherwise, will
not have a material adverse effect on the financial condition of the Company.
8
<PAGE>
9. STOCKHOLDERS' EQUITY
STOCKHOLDERS' RIGHTS' PLAN - On June 27, 1997 the Company's Board of
Directors adopted a Rights Plan (the "Plan") and, in accordance with the Plan,
declared a dividend of one preferred share purchase right for each outstanding
share of Common stock, payable July 10, 1997 to stockholders of record on that
date. The Plan is intended to enable all Ascent stockholders to realize the
long term value of their investment in the Company. The Plan will not prevent a
takeover, but should encourage anyone seeking to acquire the Company to
negotiate with the Board of Directors prior to attempting a takeover.
The rights become exercisable after a person or group acquires 15%, or
more of the Company's common stock or announces an offer, the consummation of
which would result in the ownership of 15% or more of the Company's common
stock. Once exercisable, each right will entitle the holder (other than the
person or group that has acquired 15% of the Company's shares) to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $.01, at a price of $40.00, subject to adjustment. If a person or group
acquires 15% or more of Ascent's outstanding Common stock, each right will
entitle its holder to purchase a number of shares of the Company's Common stock
having a market value of two times the exercise price of the right. In the
event a merger or other business combination transaction is effected after a
person or group has acquired 15 percent or more of the Company's Common shares,
each right will allow its holder to purchase a number of the resulting company's
common shares having a market value of two times the exercise price of the
right.
Following the acquisition by a person or group of 15% or more of the
Company's common stock but prior to the acquisition of a 50% ownership interest,
the Company may exchange the rights at an exchange ratio of one Common share per
right. The Company may also redeem the rights at $.01 per right at any time
prior to a 15% acquisition. The rights, which do not have voting power and are
not entitled to dividends until such time as they become exercisable, expire on
July 2007.
STOCK OPTION PLANS - As discussed in Note 10 to the Company's 1996
financial statements, the Company had two stock incentive plans, the 1995 Key
Employee Stock Plan (the "Key Employee Plan") and the 1995 Non-employee
Directors Stock Plan. In order for the Distribution to be tax-free, the
Distribution Agreement required Ascent to cancel substantially all of the
outstanding options, and not to have any plans or agreements to issue stock.
Therefore, in connection with the Distribution, the 1995 Non-employee Director's
Stock Plan was terminated as it only provided for the issuance of stock and
stock options. In addition, stock options previously granted under the Key
Employee Plan (1,273,750 options) were canceled and, in exchange, option holders
were issued stock appreciation rights ("SARs"), payable only in cash, with an
exercise price equal to $9.53, based on the average trading price of the Ascent
stock for five days commencing with the date of the Distribution. In addition,
under the Key Employee Plan, 120,000 SARs were granted to certain officers and
key employees of the Company in June 1997. The SAR's permit the optionee to
surrender the SAR, in whole or in part, on any date that the fair market value
of the Company's common stock exceeds the exercise price for the SAR and receive
payment in cash. Payment would be equal to the excess of the fair market value
of the shares reflected by the surrendered SAR over the exercise price for such
shares. The change in value of SARs will be reflected in the Company's
statement of operations based upon the market value of the stock. No expense
was recorded for the SARs during the three months ended June 30, 1997. The SARs
will vest over either a three year or five year period from the date of grant of
the option for which they were exchanged. In June 1997, the Company also
adopted the 1997 Non-employee Directors Stock Appreciation Rights Plan (subject
to stockholder approval) pursuant to which each non-employee director was
granted a SAR with respect to 100,000 shares of Ascent stock with a three year
vesting period. The exercise price for the non-employee directors SARs is
$8.27, the market price on the date of the Distribution.
10. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(EPS). This Statement establishes standards for computing and presenting
earnings per share. This Statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods; early
application is not permitted. The Company will adopt this Statement in the
fourth quarter of 1997 and will restate all prior period earnings per share data
presented as required.
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SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to nonredeemable common stock by the
weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
If SFAS 128 had been in effect during the three and six-month periods ended June
30, 1997 and 1996, basic and diluted EPS would not have been different than
fully diluted EPS currently reported for the periods.
11. SUBSEQUENT EVENTS
On July 24, 1997, OCC entered into an agreement with Skylink Cinema
Corporation for the assignment of operating rights and the sale of assets
associated with up to approximately 70,000 hotel rooms in the U.S. and Canada.
On August 11, 1997, the Company entered in a license agreement with Fox
Sports Rocky Mountain ("Fox Sports"), a partnership between Liberty Media
Corporation and Fox News Corporation, for the local television rights
(over-the-air and cable television) for the Nuggets and Avalanche. The
license agreement with Fox Sports has a term of seven years, commencing with
the 1997-1998 playing seasons, and significantly increases revenues to the
Company from these rights over prior years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL:
Certain of the statements in this report are forward-looking and relate to
anticipated future operating results. Statements which look forward in time are
based on management's current expectations and assumptions, which may be
affected by subsequent developments and business conditions, and necessarily
involve risks and uncertainties. Therefore, there can be no assurance that
actual future results will not differ materially from anticipated results.
Although the Company has attempted to identify some of the important factors
that may cause actual results to differ materially from those anticipated, those
factors should not be viewed as the only factors which may affect future
operating results. Accordingly, the following should be read in conjunction
with the Consolidated Financial Statements (unaudited) included in this filing,
and with the Consolidated Financial Statements, notes thereto, and Management
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-K for 1996, as previously
filed with the Commission.
SEASONALITY AND VARIABILITY:
The Company's businesses are subject to the effects of both seasonality
and variability. Consequently, the operating results for the quarter and six
months ended June 30, 1997 for each segment and line of business, and for the
Company as a whole, are not necessarily indicative of the results for the full
year.
The MultiMedia Distribution segment revenues and primarily those of OCC
are influenced principally by hotel occupancy rates, with higher revenues
realized during the summer months and lower revenues realized during the winter
months due to business and vacation travel patterns.
The Entertainment segment revenues are influenced by various factors.
Revenues for the Nuggets and Avalanche correspond to the NBA and NHL playing
seasons, which extend from the fall to late spring depending on the extent of
each team's post-season playoff participation. Accordingly, the Company
realizes the vast majority of its revenues from the Nuggets and the Avalanche
during such period. Conversely, Beacon's revenues fluctuate based upon the
delivery and/or availability of the films it produces, the timing of theatrical
and home video releases and seasonal consumer purchasing behavior. Release and
delivery dates for theatrical products are determined by several factors,
including the distributor's schedule, the timing of vacation and holiday periods
and competition in the market. Specifically, Beacon will deliver and release
three motion pictures in the second half of 1997; AIR FORCE ONE, starring
Harrison Ford, released on July 25, 1997; A THOUSAND ACRES, starring Michelle
Pfeiffer and Jessica Lange is scheduled for delivery to its distributor and
subsequent release in September 1997; and PLAYING GOD starring David Duchovny
which has been
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delivered to certain of its distributors and is scheduled for release in October
1997. Accordingly, Beacon's revenues will significantly increase during the
third and fourth quarters of 1997 as compared to the comparable periods of 1996
and prior years.
ANALYSIS OF OPERATIONS
CONSOLIDATED OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Revenues for the second quarter of 1997 were $87.6 million, an increase of
$31.6 million or 56%, as compared to $56.0 million in revenues for the second
quarter of 1996. This increase is primarily attributable to a $24.9 million
increase in revenues at OCC within the Multimedia Distribution segment. The
increase in revenues at OCC was due to a larger number of hotel rooms served,
resulting primarily from the acquisition of SpectraVision assets in October
1996. The Entertainment segment reflected an increase in revenues of $6.7
million during the second quarter of 1997 from the comparable period in 1996.
During the second quarter of 1997, Beacon generated revenues of $6.8 million
primarily from the delivery of the motion picture "PLAYING GOD" to certain of
its distributors. During the second quarter of 1996, Beacon had no movie
releases and generated minimal revenues from prior movie releases. In addition,
while the Colorado Avalanche realized increased revenues from their
participation in the 1997 Stanley Cup playoffs in spite of two fewer home
playoff games, these increases were substantially offset by declining revenues
from the Denver Nuggets, primarily due to a decrease in attendance and two fewer
home games during the quarter compared to the same period last year.
Costs of services for the second quarter of 1997 were $70.0 million, an
increase of $26.0 million or 59% compared to the second quarter of 1996. This
increase is primarily attributable to an increase in cost of services at OCC due
to the overall increase in the number of hotel rooms served by OCC, costs
associated with the integration of SpectraVision and OCV and the increased
expenses to operate OCC as a public company and, to a lesser degree, increased
film amortization costs at Beacon and higher costs at the Denver Nuggets.
Depreciation and amortization for the second quarter of 1997 was $25.2
million, an increase of $9.2 million or 57.5% compared to the second quarter of
1996. This increase is attributable to a higher installed room base and the
resulting increase in depreciation at OCC combined with the incremental
depreciation and amortization resulting from the assets acquired in connection
with the SpectraVision acquisition in October 1996.
General and administrative expenses for the second quarter of 1997 were
$1.2 million, a decrease of $1.7 million or 58.6% compared to the second quarter
of 1996. This decrease primarily reflects the reduction of approximately $.5
million in certain general and administrative service charges from COMSAT and
the non-recurrence of moving, relocation and other travel costs incurred during
the second quarter of 1996 of approximately $.7 million. Since January 1997,
COMSAT has provided only limited administrative and support services to the
Company.
Other income increased by $.1 million in the second quarter of 1997 as
compared to the same period last year. The increase in other income during the
quarter is primarily attributable to the Company's recognition of operating
losses of $.2 million during the second quarter of 1996 from its limited
partnership investment in Elitch Gardens. Elitch Gardens, a Denver amusement
park, was sold in October 1996.
Interest expense increased $3.6 million in the second quarter of 1997 as
compared to the second quarter of 1996. This increase is attributable to the
additional borrowings incurred during 1996 and the first half of 1997 for
capital expenditures, investment requirements (primarily the assumption of debt
in the SpectraVision transaction) and the funding of operating requirements of
Ascent and its subsidiaries.
The Company recorded an income tax benefit of $1.9 million in the second
quarter of 1997 as compared to an income tax benefit of $2.6 million in the
second quarter of 1996. The Company's effective rate declined to 13.5% in the
second quarter of 1997 from 30.0% during the second quarter of 1996. The
decline in the Company's effective tax rate is attributable to the losses
incurred by OCC during the second quarter of 1997, in which no tax benefit was
recognized
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due to uncertainties regarding OCC's ability to realize a portion of the
benefits associated with future deductible temporary differences (deferred
tax assets) and net operating loss carry forwards, prior to their expiration.
Minority interest reflects the losses attributable to the minority
interest in the Company's 57.1% owned subsidiary, OCC.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues for the six months ended June 30, 1997 were $177.5 million, an
increase of $49.1 million or 38.2%, as compared to $128.4 million in revenues
for the six months ended June 30, 1996. This increase is primarily attributable
to a $46.8 million increase in revenues at OCC in the Multimedia Distribution
segment. The increase in revenues at OCC was due to a larger number of hotel
rooms served, resulting primarily from the acquisition of SpectraVision assets
in October 1996. The Entertainment segment reflected an increase in revenues of
$2.3 million during the six months ended June 30, 1997 from the comparable
period in 1996. During the six months ended June 30, 1997, Beacon generated
revenues of $6.8 million from the delivery of a motion picture to a distributor
in contrast to revenues of $4.3 million generated in the first half of 1996 from
the home video release of the motion picture, THE BABYSITTER'S CLUB. While the
Avalanche realized increased revenues from regular season ticket and sponsorship
sales as well as increased playoff revenues in spite of playing fewer home
games, these increases were offset by declining revenues from the Denver
Nuggets.
Cost of services for the six months ended June 30, 1997 were $156.0
million, an increase of $53.6 million or 52.3% compared to the six months ended
June 30, 1996. This increase is primarily attributable to an increase in cost
of services at OCC due to the overall increase in the number of hotel rooms
served by OCC, costs associated with the integration of SpectraVision and OCV
and the increased expenses to operate OCC as a public company and, to a lesser
degree, increased film amortization costs at Beacon and higher costs at the
Colorado Avalanche and the Denver Nuggets.
Depreciation and amortization for the six months ended June 30, 1997 was
$50.5 million, an increase of $18.8 million or 59.3% compared to the six months
ended June 30, 1996. This increase is attributable to a higher installed room
base and the resulting increase in depreciation at OCC combined with the
incremental depreciation and amortization of the intangible assets acquired in
connection with the SpectraVision acquisition in October, 1996. In addition,
the Colorado Avalanche had an increase in amortization of $.6 million from
amortization of intangible assets acquired in the Team's acquisition in 1995.
General and administrative expenses for the six months ended June 30, 1997
were $3.2 million, a decrease of $1.9 million or 37.3% compared to the six
months ended June 30, 1996. This decrease primarily reflects the reduction of
approximately $.8 million in certain general and administrative service charges
from COMSAT, the non-recurrence of moving, relocation and other travel costs
incurred during the second quarter of 1996 of approximately $.7 million offset
by an increase in corporate personnel costs of $.3 million. Since January 1997,
COMSAT has provided only limited administrative and support services to the
Company.
Other income (expense) improved by $.6 million in the six months ended
June 30, 1997 as compared to the same period last year. The improvement in
other income during the quarter is primarily attributable to the Company's
recognition of net operating losses of $.8 million during the six months ended
June 30, 1996 from its limited partnership investment in Elitch Gardens. Elitch
Gardens, a Denver amusement park, was sold in October 1996.
Interest expense increased $6.7 million during the six months ended June
30, 1997 as compared to the six months ended June 30, 1996. This increase is
attributable to the additional borrowings incurred during 1996 and in the first
half of 1997 for capital expenditures, investment requirements (primarily the
assumption of debt in the SpectraVision transaction) and the funding of
operating requirements of Ascent and its subsidiaries and an increase in
financing costs as a result of the amendment to the Ascent credit facility in
March 1997 (see Note 6 of Notes to the Condensed Consolidated Financial
Statements.)
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The Company recorded an income tax benefit of $7.1 million during the six
months ended June 30, 1997 as compared to an income tax benefit of $4.4 million
in the six months ended June 30, 1996. The Company's effective rate declined to
16.9% in the six months ended June 30, 1997 from 29.9% during the six months
ended June 30, 1996. The decline in the Company's effective tax rate is
attributable to the losses incurred by OCC during the six months ended June 30,
1997, in which no tax benefit was recognized due to uncertainties regarding
OCC's ability to realize a portion of the benefits associated with future
deductible temporary differences (deferred tax assets) and net operating loss
carry forwards, prior to their expiration.
Minority interest reflects the losses attributable to the minority
interest in the Company's 57.1% owned subsidiary, OCC.
SEGMENT OPERATING RESULTS
As discussed in Note 13 to the Company's 1996 Consolidated Financial
Statements, Ascent reports operating results in two segments: multimedia
distribution and entertainment. Results by segment and certain information
regarding the pay-per-view customer base are as follows:
<TABLE>
THREE MONTHS SIX-MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
----- ------ ------ ------
INCOME STATEMENT DATA: (dollars in millions)
<S> <C> <C> <C> <C>
Revenues:
Multimedia Distribution (1)......................... $61.2 $36.3 $118.3 $ 71.5
Entertainment....................................... 26.4 19.7 59.2 56.9
----- ------ ------ ------
Total Revenues...................................... $87.6 $56.0 $177.5 $128.4
----- ------ ------ ------
----- ------ ------ ------
Operating Income (Loss):
Multimedia Distribution............................. $(3.4) $ 1.9 $(13.0) $ 4.1
Entertainment....................................... (4.2) (6.0) (16.0) (9.9)
General & Administrative............................ (1.2) (2.7) (3.2) (5.0)
----- ------ ------ ------
Total............................................ $(8.8) $(6.8) $(32.2) $(10.8)
----- ------ ------ ------
----- ------ ------ ------
OTHER DATA:
EBITDA (2):
Multimedia Distribution............................. $18.7 $15.1 $ 30.4 $ 29.8
Entertainment ...................................... (1.1) (3.2) (8.9) (3.9)
General & Administrative............................ (1.2) (2.8) (3.2) (5.0)
----- ------ ------ ------
Total EBITDA..................................... $16.4 $ 9.1 $ 18.3 $ 20.9
----- ------ ------ ------
----- ------ ------ ------
Capital Expenditures:
Multimedia Distribution............................. $24.4 $17.9 $ 44.5 $ 39.9
Entertainment....................................... .4 1.8 .6 8.7
----- ------ ------ ------
Total Capital Expenditures.......................... $24.8 $19.7 $ 45.1 $ 48.6
----- ------ ------ ------
----- ------ ------ ------
Room Data:
Number of guest-pay rooms (at end of period):
On Demand........................................... 733,000 419,000
Schedule Only....................................... 188,000 --
------- -------
Total.......................................... 921,000 419,000
------- -------
------- -------
</TABLE>
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(1) Includes $20.1 million and $38.2 million in movie revenues from
SpectraVision for the three and six month periods ended June 30, 1997,
respectively. The results of operations for the three and six month
periods ended June 30, 1997 include the results from SpectraVision assets
which were acquired on October 8, 1996. See Note 3 of Notes to the
Condensed Consolidated Financial Statements.
(2) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. The most significant difference between
EBITDA and cash provided from operations is changes in working capital.
EBITDA is presented because it is a widely accepted financial indicator
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance. In addition, management believes
EBITDA provides an important additional perspective on the Company's
operating results and the Company's ability to service its long-term debt
and fund the Company's continuing growth. EBITDA is not intended to
represent cash flows for the period, or to depict funds available for
dividends, reinvestment or other discretionary uses. EBITDA has not been
presented as an alternative to operating cash flow or as an indicator of
operating performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles, which are presented and discussed
in Liquidity and Capital Resources.
MULTIMEDIA DISTRIBUTION
The Multimedia Distribution segment includes the results of OCC and ANS.
The segment's second quarter revenues for 1997 increased $24.9 million, or 69%
over last year's second quarter. Year-to-date revenues for the Multimedia
Distribution segment increased $46.8 million over the first half of 1996. OCC's
revenues grew $46.8 million during the first half of 1997 due to the growth in
total rooms served by OCC from approximately 419,000 rooms on June 30, 1996 to
921,000 rooms on June 30, 1997. This growth in rooms is primarily attributable
to the acquisition of the SpectraVision assets as well as the continued growth
of the OCV installed room base. Movie revenues from the SpectraVision acquired
assets were approximately $20.1 million during the second quarter of 1997 and
approximately $38.2 million during the six months ended June 30, 1997. ANS's
revenues for the second quarter of 1997 and six months ended June 30, 1997 were
similar to the comparable periods in 1996.
Operating losses for this segment increased by $5.3 million and $17.1
million for the second quarter and first half of 1997, respectively. The
increase in the operating loss during the second quarter of 1997 is attributable
to increased depreciation expense due to the significant capital expenditures
made by OCV during the past twelve months as it increased its installed room
base, the increased depreciation of SpectraVision in-room assets due to the
planned conversion to OCV equipment and amortization of goodwill arising from
the SpectraVision transaction. The increase in operating losses for the first
half of 1997 is impacted by the unexpected failure on January 11, 1997 of the
Telstar 401 Satellite, which delivered pay-per-view programming to approximately
970 SpectraVision hotel customers. While service was restored to all hotels
within a month, the loss of revenue and costs associated with this loss of
service resulted in a decrease in operating income of approximately $3.0 to $4.0
million during the first quarter of 1997.
EBITDA of the Multimedia Distribution segment for the second quarter of
1997 increased by $3.6 million and $.6 million for the second quarter and first
half of 1997, respectively as compared to the same periods last year. This
increase in EBITDA in the second quarter of 1997 is primarily attributable to
the higher installed room base at OCV combined with the conversion of
SpectraVision rooms to OCV equipment, which has lower operating costs. The
minimal increase in EBITDA for the first half of 1997 is primarily attributable
to the losses arising from the satellite failure during the first quarter of
1997 as discussed above.
Capital expenditures for the segment increased by $6.5 million and $4.6
million for the second quarter and first half of 1997 as compared to the same
periods last year. This increase in capital expenditures is primarily
attributable to conversions of SpectraVision customer rooms to OCV systems and
to a lesser extent, the installation of OCV equipment for new hotel customers.
ENTERTAINMENT
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The Entertainment segment includes the results of the Nuggets, the
Avalanche, and Beacon. Revenues of the Entertainment segment for the second
quarter of 1997 increased by $6.7 million, or 34%, over the same quarter last
year. This increase in revenues is attributable to higher revenues from Beacon.
During the second quarter of 1997, Beacon generated revenues of $6.8 million
from the delivery of the motion picture "PLAYING GOD" to certain of its
distributors. During the second quarter of 1996, Beacon had no movie releases
and generated minimal revenues from prior movie releases. While the Avalanche
realized increased revenues from ticket, corporate and arena sales of $.9
million in the second quarter of 1997 as compared to the same period in 1996 in
spite of two fewer home playoff games, these increases were offset by declining
revenues of $1.1 million from the Nuggets during this same period. Year-to-date
revenues for the Entertainment segment increased $2.3 million over the first
half of 1996. This increase is primarily attributable to a net increase in
Beacon year-to-date 1997 revenues of $2.6 million. Whereas, in the first
quarter of 1996, Beacon generated revenues of $4.3 million from the home video
release of the motion picture, "THE BABYSITTERS CLUB", no such revenues were
realized during the first half of 1997. This decrease partially offsets the
revenues of $6.8 million recognized from the delivery of "PLAYING GOD" in the
second quarter of 1997. While the Avalanche realized increased revenues from
regular season ticket and sponsorship sales as well as increased playoff
revenues in spite of playing fewer home games, these increases were offset by
declining revenues from the Denver Nuggets.
Operating losses for this segment decreased by $1.8 million during the
second quarter of 1997 as compared to the same period last year. The decreased
loss is primarily attributable to the improved operating margins from the
Avalanche's 1997 playoff participation partially offset at the Nuggets by higher
operating costs and lower revenues. The year-to-date operating loss has
increased by $6.1 million as compared to the first half of 1996. The increased
loss is attributable to the operating losses incurred by the Avalanche and the
Nuggets caused by higher operating costs (principally players' salaries) at the
Avalanche and lower revenues and higher operating costs (principally coaches'
salaries) at the Nuggets.
EBITDA for the Entertainment segment increased by $2.1 million during the
second quarter of 1997 as compared to the same period last year. Once again,
this increase primarily reflects the increased playoff operating margins
realized by the Avalanche offset by the higher costs and lower revenue at the
Nuggets. The year-to-date EBITDA for Entertainment has decreased by $5.0 million
as compared to the first half of 1996. This decrease is primarily attributable
to the increased operating losses incurred by the Avalanche and the Nuggets as
previously discussed.
Capital expenditures for the Entertainment segment decreased by $1.4
million and $8.1 million for the second quarter and first half of 1997 as
compared to the same periods last year. These decreases are primarily
attributable to lower spending on the Arena project.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of cash during the six months ended June 30, 1997 were
cash from operating activities of $22.2 million, borrowings under the Company's
credit facilities of $33.0 million and the collection of $1.4 million on notes
and other long-term receivables. Cash was expended primarily for property and
equipment as the Company continued to make investments to support business
growth, primarily at OCC. Specifically, capital expenditures of $43.9 million
were made by OCC for the continuing installation of on-demand systems. In
addition, $3.1 million of film expenditures was incurred by Beacon to develop,
produce and acquire rights for film properties.
The Company's negative working capital position increased by $31.8 million
from December 31, 1996 to June 30, 1997. This is primarily attributable to an
increase in short-term debt of $33.0 million used mainly for the acquisition of
long-term assets of $45.1 million.
The Company and OCC have access to short-term financing under their
respective amended credit facilities. (See Note 6 of Notes to the Condensed
Consolidated Financial Statements). Based on the borrowings outstanding at June
30, 1997, Ascent has $29.0 million available under the Ascent Credit Facility
and OCC has $35.0 million in available borrowings under the OCC Credit Facility,
subject to certain covenant restrictions.
The Amended Ascent Credit Facility, as modified by the bank consent dated
August 12, 1997 (see Note 6 of notes to the Condensed Consolidated Financial
Statements) provides, among other things, that (i) the facility will
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only be renewable for two additional one year options beyond October 31, 1997
if Ascent has received not less than $50.0 million in proceeds from a new debt
financing which is subordinated to the Ascent Credit Facility prior to October
9, 1997, and (ii) that Ascent has commenced construction on the Denver arena
project by October 31, 1997. Based on current market conditions, management
of Ascent currently believes that Ascent will be successful in obtaining the
additional subordinated debt by October 9, 1997. In addition, management
currently believes that the Company will commence construction on the Denver
arena project prior to October 31, 1997. However, there can be no assurances
that other contingencies will not arise which could impact Ascent's ability to
obtain the additional subordinated financing, that such financing will be
available on terms acceptable to Ascent or that Ascent will commence
construction on the arena by October 31. If Ascent were not able to obtain
the additional subordinated financing or commence construction on the arena,
Ascent may be required to refinance the Ascent credit facility which could
require Ascent to sell assets.
The Company's cash requirements through the remainder of 1997 are expected
to include (i) the continuing installation by OCC of on-demand systems, (ii) an
investment in the new arena and entertainment complex in Denver for use by the
Nuggets and Avalanche, (iii) funding the development, production and/or
acquisition of rights for motion pictures at Beacon, (iv) funding the operating
requirements of Ascent and its subsidiaries, and (v) the payment of interest
under the Ascent and OCC credit facilities. The Company anticipates that OCC's
funding for its operating requirements and capital expenditures for the
continued installation by OCC of on-demand services will be funded primarily
through cash flows from OCC's operations and financed under the OCC Credit
Facility. The Company anticipates capital expenditures in connection with the
continued installation by OCC of on-demand service will be approximately $38-$40
million during the remainder of 1997. In connection with the construction of
the new arena in Denver, the Company plans to limit its equity participation in
the project to expenditures totaling approximately $20-$25 million, of which
approximately $13.1 million has been incurred through June 30, 1997. However,
depending upon the timing of the closing of the arena financing and the ground
breaking for construction, the Company may fund additional expenditures in the
second half of 1997 in excess of its anticipated equity participation. Beacon's
cash requirements with respect to the funding of its current movie productions
are expected to consist of expenditures totaling approximately $17 to $19
million during the third and fourth quarters of 1997, $15.1 million of which
was incurred during July. Cash requirements with respect to the funding of
additional productions at Beacon will be dependent upon the number, nature and
timing of the projects that the Company determines to pursue during the second
half of 1997. To fund Beacon's productions, the Company expects to utilize
Beacon's domestic distribution agreement with Universal Pictures when
appropriate, and/or pre-sell a portion of the international distribution rights
to help fund motion picture costs.
Management of the Company believes that available cash and funds
available under the amended Ascent and OCC credit facilities together with
the anticipated $50.0 million in proceeds from the subordinated debt
financing, the anticipated proceeds from the $15.0 million investment from
Liberty in the Denver arena project (see Note 4 of Notes to the Condensed
Consolidated Financial Statements), and anticipated operating lease financing
at OCC will be sufficient for the Company and its subsidiaries to satisfy
their growth and finance working capital requirements through the remainder
of 1997.
A number of factors could cause Ascent's funding requirements to differ
materially from those projected, including, but not limited to, the ability of
Ascent to obtain the $50.0 million in additional subordinated debt financing by
October 9, 1997, the availability of the $15.0 million investment in the arena
by Liberty, the operating performance of Ascent's subsidiaries, the level of
ticket sales and other revenues by Ascent's professional sports franchises, the
timing of film productions and releases, the timing of payments under the
Company's television rights agreement with Fox Sports Rocky Mountain, the timing
of distributions from SONY Pictures Entertainment and Walt Disney Company from
the movie "AIR FORCE ONE" and other movies scheduled to be delivered and/or
released during the second half of 1997 and other market conditions.
As previously discussed, on June 27, 1997, COMSAT completed the
Distribution of the Ascent common stock held by COMSAT as a tax-free dividend to
COMSAT's shareholders. The Distribution was intended, among other things, to
afford Ascent more flexibility in obtaining debt financing to meet its growing
needs. The Distribution Agreement between Ascent and COMSAT, (see Note 7 of
Notes to Condensed Consolidated Financial Statements) terminated the Corporate
Agreement between Ascent and COMSAT which imposed restrictions on Ascent to
ensure compliance with certain capital structure and debt financing restrictions
imposed on COMSAT by the Federal Communications Commission. As a result,
Ascent's financial leverage may increase in the future for numerous reasons,
including the proposed financing of the Denver arena project. Such an increase
in debt is subject to the resolution of the bank financing issues discussed
above. In addition, pursuant to the Distribution Agreement, certain
restrictions have been put in place to protect the tax-free status of the
Distribution. Among the restrictions, Ascent will not be allowed to sell,
purchase or otherwise acquire stock or instruments which afford a person the
right to acquire the stock of Ascent
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until one year after the date of the Distribution. Finally, as a result of
the Distribution, Ascent is no longer part of COMSAT's consolidated tax group
and accordingly, Ascent may be unable to recognize tax benefits and will not
receive cash payments from COMSAT resulting from Ascent's anticipated
operating losses during the second half of 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants and may be potential
defendants in lawsuits and claims arising in the ordinary course of
its business. While the outcomes of such claims, lawsuits, or other
proceedings cannot be predicted with certainty, management expects
that such liability, to the extent not provided for by insurance or
otherwise, will not have a material adverse effect on the financial
condition of the Company.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. An annual meeting of stockholders of Ascent was held on May 13,
1997 for the following purposes:
1. Election of two Class II directors, one Class I director
and one Class III director.
2. Appointment of independent public accountants.
3. Action on such other matters as may properly come before the
meeting.
b. The directors which were elected at the meeting are as follows:
CLASS II
Charles M. Neinas
Robert G. Schwartz
CLASS I
Allen E. Flower
CLASS III
Charles M. Lillis
Other directors, of the Company, whose term of office continued after
the meeting are as follows:
Edwin I. Colodny
Charles Lyons
c. In connection with matters voted on at the Annual meeting, the
following results were obtained:
17
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1. ELECTION OF DIRECTORS
For Against Withheld Abstentions
---------- ------- -------- -----------
Charles M. Neinas 29,232,894 0 908 0
Robert G. Schwartz 29,232,894 0 908 0
Allen E. Flower 29,227,794 0 6,008 0
Charles M. Lillis 29,232,794 0 1,008 0
APPOINTMENT OF DELOITTE & TOUCHE, LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
29,233,01 0 682 107
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT
No. 3.1 Amended and Restated Bylaws of Ascent Entertainment Group,
Inc. as of June 27, 1997. (Incorporated by reference to
Exhibit 3.1 to the Company's current report on Form 8-K
filed on July 8, 1997 as amended by a Form 8-K/A filed on
July 11, 1997).
No. 4.1 Rights Agreement, dated as of June 27, 1997, between Ascent
Entertainment Group, Inc. and The Bank of New York.
(Incorporated by reference to Exhibit 4.1 to the Company's
current report on Form 8-K filed on July 8, 1997 as amended
by a Form 8-K/A filed on July 11, 1997).
No. 10.1 Amended and Restated Employment Agreement by and between
Ascent Entertainment Group, Inc. and Charles Lyons.
(Incorporated by reference to Exhibit 10.1 to the Company's
current report on Form 8-K filed on July 8, 1997 as amended
by a Form 8-K/A filed on July 11, 1997).*
No. 10.2 Amended and Restated Employment Agreement by and between
Ascent Entertainment Group, Inc. and James A. Cronin, III.
(Incorporated by reference to Exhibit 10.2 to the Company's
current report on Form 8-K filed on July 8, 1997 as amended
by a Form 8-K/A filed on July 11, 1997).*
No. 10.3 Employment Agreement by and between Ascent Entertainment
Group, Inc. and Arthur M. Aaron. (Incorporated by reference
to Exhibit 10.3 to the Company's current report on Form 8-K
filed on July 8, 1997 as amended by a Form 8-K/A filed on
July 11, 1997).*
No. 10.4 Employment Agreement by and between Ascent Entertainment
Group, Inc. and David A. Holden. (Incorporated by reference
to Exhibit 10.4 to the Company's current report on Form 8-K
filed on July 8, 1997 as amended by a Form 8-K/A filed on
July 11, 1997).*
No. 10.5 Distribution Agreement between Ascent and COMSAT dated June
3, 1997. (Incorporated by reference to Exhibit 10(a) to the
Company's current report on Form 8-K filed on June 18,
1997).
No. 10.6 Tax Disaffiliation Agreement between Ascent and COMSAT dated
June 3, 1997. (Incorporated by reference to Exhibit 10(b) to
the Company's current report on Form 8-K filed on June 18,
1997).
No. 10.7 Purchase and Sale Agreement dated May 7, 1997, between
Denver Arena Company, LLC and Southern Pacific
Transportation Company relating to the purchase of land for
the construction of the arena.
18
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No. 10.8 Ascent Entertainment Group, Inc. 1997 Directors and
Executives Deferred Compensation Plan.*
No. 27.0 Financial Data Schedule
No. 99.1 Ascent Entertainment Group, Inc. Press Release dated August
13, 1997 concerning the Memorandum of Understanding between
Ascent and the City and County of Denver regarding the
Denver arena project.
No. 99.2 Ascent Entertainment Group, Inc. Press Release dated August
13, 1997 concerning an investment in the arena project by
Liberty and a television rights agreement with Fox Sports
Rocky Mountain.
-------------------
* Indicates compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K:
1. The Registrant filed with the Commission on June 18, 1997 a Form
8-K describing its issuance of a press release reporting the
announcement that COMSAT Corporation (COMSAT) would complete its
distribution of its ownership interest in Ascent to COMSAT
shareholders.
2. The Registrant filed with the Commission on July 8, 1997 a Form
8-K (as amended by a Form 8-KA filed on July 11, 1997) which (i)
confirmed the consummation of COMSAT Corporation's distribution
of its 80.67% ownership interest in Ascent (ii) the resignation
of two COMSAT directors from the Ascent Board and the election of
three new Board Members, (iii) the adoption of a Rights Agreement
and the declaration of dividend of a preferred share purchase
right and (iv) disclosed certain employment agreements with
certain officers of the Company.
3. The Registrant filed with the Commission on July 28, 1997 a Form
8-K which (i) described its issuance of a press release reporting
its second quarter 1997 financial results and (ii) described a
financial model that could be used to estimate Ascent's possible
financial results from the film AIR FORCE ONE.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ David A. Holden
David A. Holden
Controller
Date: August 14, 1997
19
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PURCHASE AND SALE AGREEMENT
BETWEEN
SOUTHERN PACIFIC TRANSPORTATION COMPANY
AND
THE DENVER ARENA COMPANY, LLC
MAY 7, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
PURCHASE AND SALE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURCHASE AND SALE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1: PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price; Earnest Money Deposit . . . . . . . . . . . . . 2
1.3 Adjustments and Costs . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2: TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Permitted Exceptions. . . . . . . . . . . . . . . . . . . . . . 4
2.2 Title Report and Documents; Title Policy. . . . . . . . . . . . 5
2.3 Title Conveyed. . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3: INFORMATION, INSPECTION, AND DEVELOPMENT APPROVALS . . . . . . . 7
3.1 Information . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Buyer's Rights to Enter the Property. . . . . . . . . . . . . . 7
3.3 Zoning and Development Approvals. . . . . . . . . . . . . . . . 10
3.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4: CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . 11
4.1 Buyer's Conditions. . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Seller's Conditions . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Termination for Failure of Condition. . . . . . . . . . . . . . 13
4.4 Effect of Default . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Environmental Responsibility Agreement. . . . . . . . . . . . . 14
ARTICLE 5: REPRESENTATIONS AND WARRANTIES; COVENANTS. . . . . . . . . . . . 14
5.1 Seller's Representations and Warranties . . . . . . . . . . . . 14
5.2 No Other Warranties . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Buyer's Representations and Warranties. . . . . . . . . . . . . 17
5.4 Pre-Closing Covenants of Seller . . . . . . . . . . . . . . . . 18
5.5 Compliance with NCP . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Insurance; Indemnities. . . . . . . . . . . . . . . . . . . . . 20
5.7 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6: CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Closing Obligations of the Parties. . . . . . . . . . . . . . . 21
ARTICLE 7: RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8: DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 Costs of Enforcement. . . . . . . . . . . . . . . . . . . . . . 25
8.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 9: POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 26
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9.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Removal of Railroad Tracks. . . . . . . . . . . . . . . . . . . 26
ARTICLE 10. ENVIRONMENTAL CLEANUP MATTERS. . . . . . . . . . . . . . . . . . 27
10.1 Contamination . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11: FLOOD PLAIN MATTERS. . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Flood Plain . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Grading Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Allocation of Costs Under the Grading Plan. . . . . . . . . . . 27
ARTICLE 12: INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . 28
12.3 Access and Cooperation. . . . . . . . . . . . . . . . . . . . . 28
12.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Defense of Indemnified Claims . . . . . . . . . . . . . . . . . 29
ARTICLE 13: INTERPRETATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . 30
13.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . 30
13.4 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.5 Prior Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 14: MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.1 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.2 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.3 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.5 No Recording. . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.6 Days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 33
14.8 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (the "Agreement"), dated May __, 1997,
is entered into by and between SOUTHERN PACIFIC TRANSPORTATION COMPANY, a
Delaware corporation ("Seller"), and THE DENVER ARENA COMPANY, LLC, a
Colorado limited liability company ("Buyer").
RECITALS
A. Seller owns certain real property and related improvements located in the
City and County of Denver, State of Colorado, further described as the
"Property" in Article 1 of this Agreement.
B. Seller desires to sell the Property, and Buyer desires to purchase the
Property from Seller, free and clear of all liens, encumbrances,
liabilities, duties and obligations except those specifically assumed or
consented to by Buyer as set forth in this Agreement.
C. Buyer is purchasing the Property to construct a sports and entertainment
complex consisting of an arena, production facilities, retail facilities
and parking lot and other uses (the "Project"), all as described in the
City and County of Denver, Application for Zone Map Amendment, a copy of
which is attached hereto as EXHIBIT "A", together with the map submitted
therewith and described in EXHIBIT A, and together with the engineering
drawings described on EXHIBIT "A" (together called the "PUD Application").
NOW, THEREFORE, in consideration of the promises and agreements contained
herein, the sufficiency of which is hereby acknowledged by both parties, Seller
and Buyer hereby agree as follows:
PURCHASE AND SALE AGREEMENT
ARTICLE 1: PURCHASE AND SALE
1.1 PURCHASE AND SALE. Subject to the terms and conditions of this Agreement,
Seller shall sell and convey, and Buyer shall purchase and pay for, all of
Seller's interest in the following described property (all of which are
referred to herein collectively as the "Property"):
(a) the parcels of land comprising approximately 48.7101 acres located in
the City and County of Denver, State of Colorado, which are more
particularly described on EXHIBIT "B" attached hereto and by this
reference made a part hereof (the "Land");
(b) all strips and gores of land belonging, relating or appertaining to
the Land;
(c) all buildings and structures located on the Land, including all
permanent fixtures and equipment located thereon and permanently
affixed to and forming an integral part of such buildings and
structures (the "Improvements");
(d) all easements and other appurtenances to or benefitting the Land and
Improvements;
(e) all leases listed on EXHIBIT "C" attached hereto (the "Leases");
(f) to the extent the same are related to the Land and may be transferred
by Seller to Buyer, any licenses, permits, and similar agreements
benefitting the Property to which Seller is a party, and Seller's
interest as licensor in all licenses and agreements granted for use of
the Land for utility lines and similar purposes, including those not
of record, including without limitation those licenses, permits, and
similar agreements and those licenses and agreements burdening the
Property listed on EXHIBIT "D" attached hereto ("Other Agreements");
and
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(g) any prepaid rents under the Leases for periods occurring after the
Closing Date and all security deposits made by tenants under the
Leases, if any.
Notwithstanding the foregoing, the Improvements and the Property shall not
include the following property (collectively called the "Retained
Property"): (x) all railroad tracks located on the Land (which railroad
tracks include, for purposes hereof, all appurtenances thereto and all
rails and fastenings, switches and frogs, bumpers, ties, and signalling
devices (collectively called the "Railroad Improvements"), (y) all
buildings and structures (including related fixtures, equipment, and
appurtenances) which Seller is obligated to remove as provided for herein,
and (z) all personal property, including all fixtures and equipment,
located on the Land which are not part of the Improvements.
1.2 PURCHASE PRICE; EARNEST MONEY DEPOSIT. The purchase price for the Property
(the "Purchase Price") shall be Twenty Million Dollars ($20,000,000).
Simultaneously herewith, Buyer shall pay to Seller Seven Hundred Fifty
Thousand Dollars ($750,000) as an earnest money deposit for the purchase of
the Property (the "Deposit"). The Deposit shall be credited against the
Purchase Price at the Closing, and the balance of the Purchase Price shall
be payable by Buyer to Seller at the Closing as provided in Article 6,
after credit for the adjustments set forth in Section 1.3, by immediately
available funds delivered by wire transfer as directed by Seller. Except
as provided in Section 8.3, the Deposit shall be non-refundable in the
event the Closing does not occur.
1.3 ADJUSTMENTS AND COSTS. The amount of the Purchase Price due at Closing
shall be subject to the following adjustments and prorations:
(a) REAL PROPERTY TAXES AND ASSESSMENTS. Seller shall pay all real
property taxes and special assessments (including penalties and
interest) allocable to the Property for tax years prior to the year of
Closing. Real property taxes and assessments for the current tax year
shall be prorated between the parties as of the Closing Date, with the
amount of such taxes to be based upon taxes for the current year or,
if not then known, taxes for the prior year. Buyer shall receive a
credit against the Purchase Price for Seller's share of any unpaid
taxes and assessments. Real property taxes and assessments for the
current year and all subsequent tax years shall be paid by the Buyer.
If such taxes and assessments for a subsequent tax year are levied
against Seller, Seller shall forward the tax bill to Buyer for payment
directly by Buyer.
To the extent that the Property has previously been taxed by the State
of Colorado under a unified system applicable to railroad properties,
and the City of Denver subsequently taxes the Property separately,
such taxes shall be payable by Buyer only to the extent attributable
to periods after Closing.
In the event there is any supplemental assessment that relates to a
time period prior to the Closing Date, it shall be paid by Seller
unless, and only to the extent that, it is attributable to a change in
use by Buyer after the Closing Date, in which case Buyer shall pay the
incremental amount of any such taxes that are assessed and
attributable to such change in use.
(b) RENTS. All rents and other income, if any, from the Property and
expenses, if any, relating to the Leases on the Property shall be
prorated between Buyer and Seller as of the Closing Date. Seller
shall retain the right to collect rents for periods prior to the
Closing Date, and if Buyer collects any rents due under the Leases for
periods prior to the Closing Date, Buyer shall promptly remit to
Seller all such amounts. All security deposits and advance rents
attributable to periods subsequent to the Closing Date received by
Seller under any Leases as of the Closing Date shall be transferred by
Seller to Buyer at Closing. Buyer shall assume any obligations
relating to, and indemnify and hold Seller harmless from and against
any claims made against Seller for, such security deposits and advance
rents actually transferred to Buyer.
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(c) UTILITIES CHARGES. Seller shall pay all utility charges and other
operating expenses for the Property attributable to the period prior
to the Closing Date and Buyer shall pay all of the same attributable
to all periods thereafter. All accounts for water, sewer, gas,
electrical, telephone and other public utilities payable by Seller
affecting the Property shall be closed effective as of the Closing
Date.
(d) INSURANCE. Insurance policies shall not be assigned to Buyer, and
Seller may cancel the coverage provided thereby at the Closing. Each
party shall be responsible for carrying any insurance coverage it
deems to be appropriate for the period during which such party owns
the Property and otherwise.
(e) PERSONAL PROPERTY TAXES. Because no personal property is included in
the Property, the parties believe that no sales or use tax will be
payable on the sale of the Property. Buyer shall be responsible for
the payment of any such tax which is payable.
(f) RECORDING AND RELATED FEES. Buyer shall pay all recording fees,
filing fees, and documentary fees, and similar fees and taxes payable
in connection with transfer of the Property.
(g) NORMAL CLOSING COSTS. Seller and Buyer shall each pay any fees, costs
and expenses incurred by such party in connection with the transaction
contemplated by this Agreement and not otherwise adjusted or allocated
as set forth in this Section 1.3 or as otherwise provided in this
Agreement.
The obligations of the parties under this Section 1.3 shall survive the
Closing.
ARTICLE 2: TITLE
2.1 PERMITTED EXCEPTIONS. For purposes of this Agreement, "Permitted
Exceptions" shall mean:
(a) a lien for real property taxes and assessments for the current year,
not yet due and payable;
(b) the Leases;
(c) liens or encumbrances arising out of any activity of Buyer or its
agents with respect to the Land;
(d) easements, dedications and other matters of record granted or created
or proposed to be granted or created pursuant to the PUD Application
or any other document filed or submitted by Buyer in connection with
obtaining any governmental approvals necessary for construction of the
Project;
(e) the Other Agreements (to the extent the same create burdens on the
Land or restrict the use thereof);
(f) those exceptions to title listed in the Title Report (as defined in
Section 2.2);
(g) all encroachments, easements, and other matters shown on the Survey
(as defined in Section 2.2), regardless of whether the same are of
record or are otherwise evidenced by any document of record; and
(h) the claim of Alpen Construction Company and/or Anthony Brake to an
adverse possessory interest in a portion the part of the Property
described in EXHIBIT "B" under the heading "Parcel 3";
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(i) such other exceptions as Buyer shall from time to time accept or be
deemed to have accepted as hereinafter provided.
Those Permitted Exceptions referred to in Subsections (a) through (h) of
this Section 2.1 are hereinafter called the "Identified Exceptions."
2.2 TITLE REPORT AND DOCUMENTS; TITLE POLICY.
(a) TITLE REPORT. Prior to the date hereof, Seller, at its expense, has
delivered to Buyer a Commitment for Title Insurance (File
No. 8288 CM C2) (as the same may be amended or supplemented, the
"Title Report") for the Property issued by North American Title
Company of Colorado (the "Title Company"), as agent for First American
Title Insurance Company, together with legible copies of all documents
evidencing exceptions to title shown therein or otherwise affecting
the Property referred to in such Title Report (the "Title Exception
Documents"). On or before Closing, Seller shall cause the Title
Report to be endorsed or reissued so as to change the effective date
to a date not earlier than ten (10) business days prior to Closing,
and to conform to the requirements set forth in Paragraphs 1, 2, and 5
of EXHIBIT "E" hereto. Seller and Buyer shall cooperate together to
try to cause the Title Policy, when issued, to limit Exception 30, as
listed in the Title Report, to those leases then in effect which
affect the Property. Seller and Buyer shall cooperate together to try
to cause the Title Company to issue endorsements to the Title Report
or to reissue the Title Report to effect the remaining changes in the
Title Report proposed by EXHIBIT "E"; provided that, in the event that
the Title Company refuses to issue endorsements or to reissue the
Title Report to effect such changes on or before June 15, 1997, Buyer
may terminate this Agreement with the effect provided in Section 8.3.
(b) SURVEY. Seller has, prior to the date hereof, provided Buyer with a
copy of a survey of the Property prepared by Benchmark Surveying, Ltd.
and identified as Job No. 3531, dated October 1, 1994, and revised
November 16, 1994, November 30, 1994, and December 19, 1994 (the
"Survey"). The Title Report includes all exceptions required on
account of the encroachments, easements and other matters shown in the
Survey.
(c) INCREASE OF COVERAGE. Seller shall cooperate with Buyer as Buyer
reasonably requests to obtain from the Title Company (at Buyer's
expense), endorsements and other additions to the Title Report,
pursuant to which:
(i) The Title Report is supplemented to provide for the
increase of the amount of the Title Policy from time to
time as construction proceeds on the Project and
providing for the increase of the amount of the Title
Policy from time to time in effect to the sum of
(y) $20,000,000 plus (z) the amount expended by Buyer
from time to time in the construction of the Project.
(ii) The Title Report is supplemented by the addition of
such coinsurors and reinsurers acceptable to Buyer, as
shall be necessary so that none of the Title Company
and such reinsurers and coinsurors is committed to a
portion of the risk under the Title Policy (as
ultimately increased) which exceeds such title
company's normal, self-imposed insurance limits as to
any single policy.
(d) PERIODIC UPDATES. Seller shall, from time to time, provide Buyer with
updates of the Title Report, which shall show the status of the title
to the Property as of a current date. In the event that any update of
the Title Report shall show any exception to title to the Property
which is not an Identified Exception and which has not previously been
accepted by Buyer as a Permitted Exception, Buyer may give notice to
Seller objecting thereto within ten business days after receipt of the
updated Title Report first disclosing such exception. If Buyer fails
to object to any
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exception by notice given within such period of ten business days,
Buyer shall be deemed to have accepted the same as an additional
Permitted Exception. In the event that Buyer timely objects to any
such new or newly disclosed title exception, Seller shall at its
expense and in a manner and form acceptable to Buyer, cure any such
title exception that arises from a voluntary act of Seller (not
including any actions taken by or at the instance of Buyer)
occurring after March 27, 1996; provided that, as to any such
exception that is a monetary lien, Seller may, at its option, defer
the cure of any such monetary lien to the date of the Closing Date
or any prior date. In the event of any other new or newly
disclosed title exception to which Buyer makes timely objection,
Buyer and Seller will attempt to agree on a time and manner for
curing such title exception, but in the event that they do not
agree, Buyer shall have the right to terminate this Agreement with
the effect provided in Section 8.3.
(e) UNDERTAKING. At Closing, Seller, at its expense, shall cause the
Title Company to deliver its written undertaking (the "Undertaking"),
unconditionally agreeing to issue the Title Policy to Buyer, insuring
good and marketable title to the Property in Buyer in the amount of
$20,000,000, subject only to the Permitted Exceptions, in the form
provided for herein and with such endorsements as shall be necessary
to commit the Title Company to the increases of the amount of the
insurance and to the reinsurance and coinsurance provisions provided
in Section 2.2(c) and which have been agreed to by the Title Company,
and such additional endorsements that Buyer or the Buyer's lenders may
reasonably request and which have been agreed to by the Title Company.
(f) PAYMENT OF PREMIUM. At the Closing, Seller shall pay the premium for
the Title Policy to the Title Company; provided that Seller shall be
responsible for the premium only for $20,000,000 of coverage, and
Buyer shall be responsible for all costs of coverage in excess of
$20,000,000 and for the costs of any endorsements not required in
connection with the cure of any title exception that is made the
responsibility of Seller under Section 2.2(d).
(g) TAX CERTIFICATE. Seller has delivered a certificate or certificates
of taxes due covering the Property and issued by the Treasurer of the
City and County of Denver, Colorado, and, upon request of Buyer prior
to Closing, shall deliver updated certificates of taxes due.
(h) NO FURTHER TITLE EXCEPTIONS. So long as this Agreement continues in
effect, Seller shall not, without the prior written consent of Buyer,
sell, transfer, convey, lease, or create easements or other exceptions
to title to the Property, or otherwise cloud title to the Property.
2.3 TITLE CONVEYED.
At the Closing, Seller shall convey and Buyer shall accept good and
marketable title to the Property subject only to the Permitted Exceptions.
ARTICLE 3: INFORMATION, INSPECTION, AND DEVELOPMENT APPROVALS
3.1 INFORMATION. Prior to the execution of this Agreement, Seller has
delivered to Buyer:
(a) a true and correct copy of the Leases, the Other Agreements, the Title
Report, the Title Exception Documents, and the Survey, and all
amendments and/or supplements thereto; and
(b) all environmental studies and reports in the possession or under the
control of Seller relating to the Property, all of which are listed on
EXHIBIT "F" attached hereto (collectively, the "Seller Environmental
Reports").
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3.2 BUYER'S RIGHTS TO ENTER THE PROPERTY.
Prior to Closing, Buyer's rights to enter onto the Property shall be
governed by the following provisions:
(a) ENTRY FOR TESTING AND INSPECTION. Subject to the provisions of any of
the Leases, upon and subject to making prior arrangements with Seller
(which Seller may not delay beyond the second business day after
request to Seller is made), Buyer's Representatives (as defined below)
may enter onto the Property at all reasonable times to make tests,
surveys, studies and inspections in connection with the purchase of
the Property by Buyer and in connection with preparations for
construction of the Project which will occur after the Closing.
Seller or Seller's agents or employees shall be entitled to accompany
Buyer's Representatives onto the Property pursuant to this
Section 3.2(a). Any entry by Buyer's Representatives pursuant to this
Section 3.2(a) shall be made in a manner that results in the least
interference with the use of the Property by Seller or any third party
and with any activities on the Property by Seller or any third party.
"Buyer's Representatives" means Buyer; Buyer's agents, advisers,
contractors, consultants and other representatives (collectively,
"Buyer's Agents"); potential lenders to Buyer ("Lenders"); and
representatives of, or advisers or consultants for, Lenders ("Lenders'
Agents").
(b) EXTENT OF BUYER'S INVESTIGATIONS. Buyer or Lenders shall have the
right, at Buyer's sole cost and expense except and to the extent, if
any, as otherwise specifically provided in this Agreement, to conduct
such studies, evaluations, audits or surveys as Buyer or Lenders deem
appropriate (collectively, the "Buyer Environmental Surveys"), subject
to the other provisions of this Agreement and to the following terms
and conditions:
(i) Seller shall have the right to approve, review and
monitor any and all physical tests, studies and
procedures in or about the Property which are made or
implemented in connection with any Buyer Environmental
Surveys, including, without limitation, the review and
approval of the number, type, extent and location of
any test or monitoring wells or drillings.
(ii) Except as required by law, Buyer's Representatives
shall not make any contacts or communications to any
governmental agency, department, district or board in
connection with any Buyer Environmental Surveys without
the prior written approval of Seller, such approval not
to be unreasonably withheld or delayed.
(iii) Prior to the issuance of any final report by any
consultant to Buyer or Lenders, Seller shall be given
the opportunity to make comments, question and offer
recommendations to the Buyer's consultants or Lenders
preparing such reports.
(iv) Buyer shall provide all of Buyer's Agents, Lenders and
Lenders' Agents with a copy of this Section 3.2 and
obtain the agreement of each such person or entity to
abide by the terms and conditions hereof.
Buyer's obligations under this Section 3.2(b) shall survive the
Closing and the termination of this Agreement.
(c) ENTRY FOR SITE PREPARATION WORK. Seller shall not unreasonably
withhold its approval of any request by Buyer for Buyer and its
contractors to enter onto the Land for purposes of commencing site
preparation for construction of the sports arena, including without
limitation, excavation and filling necessary for construction of the
floor underlying the ice rink in the arena,
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and implementation of the Grading Plan (as defined in Section
11.2). Seller hereby approves Buyer's entry for purposes of
performing the activities described on EXHIBIT "G" attached hereto.
(d) INSURANCE. Prior to any entry by Buyer's Representatives, Buyer shall
(i) arrange for and cause to be maintained in full force and effect a
policy of comprehensive general liability insurance, with broad form
liability endorsement, having a combined single limit of not less than
Two Million Dollars ($2,000,000) per occurrence, and (ii) furnish to
Seller a certificate of such insurance which names Seller as an
additional insured and provides that such policy shall not be canceled
or amended without thirty (30) days' prior written notice to Seller.
Buyer's obligations under this Section 3.2(d) shall survive the
Closing and any termination of this Agreement.
(e) BUYER'S COSTS. Except as otherwise expressly provided in this
Agreement, all costs incurred in connection with tests, surveys,
studies, inspections, reviews, approvals, determinations,
applications, site work, and any other work made by Buyer or Buyer's
Representatives under this Agreement or otherwise shall be the sole
responsibility of and be paid by Buyer. In the event of the
recordation of any claim or lien against the Property for materials
supplied or labor or professional services performed on behalf of
Buyer, Buyer shall promptly discharge such lien at Buyer's sole cost
and expense. Buyer's obligations under this Section 3.2(e) shall
survive the Closing and the termination of this Agreement. Nothing
contained in this paragraph shall be interpreted as modifying or
otherwise affecting the provisions of the Environmental Responsibility
Agreement (as hereinafter defined).
(f) COPIES OF ALL REPORTS. Buyer shall provide to Seller a copy of each
technical report, study, survey, and any similar document obtained by
Buyer in connection with its investigation of the Property prior to
the Closing (whether preliminary, interim, or final in nature), all of
which shall be provided to Seller promptly after the same have been
received by Buyer at no cost to Seller. Buyer's obligations under
this Section 3.2(f) shall survive the Closing and any termination of
this Agreement.
(g) INDEMNIFICATION OF SELLER. Buyer shall indemnify and defend Seller
against, and hold Seller and the Property harmless from and against,
any and all costs, expenses (including, without limitation, reasonable
attorneys' fees), damages, claims, liabilities, liens, encumbrances
and charges arising out of the entry of Buyer's Representatives upon
the Property, unless and to the extent that any such matters arise
from the negligence of Seller or Seller's agents. The obligations of
Buyer under this Section 3.2(g) shall survive the Closing and the
termination of this Agreement.
(h) RESTORATION OF PROPERTY. In the event that the Closing does not occur
for any reason, Buyer shall at its expense fill any wells, test
drillings or other holes created by Buyer's Representatives, and shall
flatten and rough grade the surface of the Land disturbed by the
Buyer's entry or tests. The obligations of Buyer under this
Section 3.2(h) shall survive the Closing and the termination of this
Agreement.
3.3 ZONING AND DEVELOPMENT APPROVALS. Buyer anticipates that the Property will
need to be rezoned and that other development approvals will be required
for the Project. In order to proceed timely with the Project, prior to the
date hereof, Buyer has, jointly with Seller, submitted the PUD Application
and also anticipates that prior to Closing Buyer will want to proceed with
additional applications, for example, for the vacation of existing streets
and alleys on the Property and for the replatting of the Property. The PUD
Application, any additional applications, and amendments or supplements to
any of the foregoing and any commitments made in connection with any of the
foregoing are referred to collectively as the "Planning Documents" and the
rezoning, replatting, and other approval processes are hereinafter called
the "Approval Processes."
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Buyer shall be permitted, prior to Closing, to proceed with the Planning
Documents and Approval Processes as required for the Project, subject to
the following provisions:
(a) If reasonably requested in any instance by Buyer or Seller, Seller as
well as Buyer shall be named as the applicant on the Planning
Documents and in all Approval Processes.
(b) No Planning Document shall be submitted to any government entity until
approved in writing by Seller as to form and content, which approval
shall not be unreasonably withheld or delayed.
(c) Prior to the Closing, no Planning Document shall be permitted to be
completed, so as to be binding on the Property without Seller's
written approval, which may be withheld in Seller's discretion.
Subject to the foregoing, Seller shall cooperate with Buyer in
obtaining necessary approvals of the Planning Documents.
(d) Buyer and Seller shall each keep the other informed of any material
developments in connection with the Planning Documents of which such
party becomes aware.
(e) Except as otherwise specifically provided in this Agreement or the
Environmental Responsibility Agreement, Buyer shall pay for all of the
costs of preparing, submitting and processing the Planning Documents,
and all costs incurred in connection with the Approval Processes,
including, without limitation, application fees, professional fees,
and any required bonds, letters of credit, dedications, and
improvements. Seller shall not have any responsibility for such
costs, and Buyer shall indemnify Seller from and against any such
costs.
(f) In the event that the Closing does not occur, except to the extent
otherwise requested by Seller, Buyer shall, at no cost to Seller, take
all measures necessary to withdraw all of the Planning Documents and
terminate the Approval Processes. Buyer shall indemnify Seller
against all costs incurred in doing so and against any changes or
damages to the Property (excluding any changes to the real property
tax status of the Property) which cannot be reversed by withdrawing
the Planning Documents and terminating the Approval Processes.
The obligations of Buyer under this Section 3.3 shall survive the Closing
and any termination of this Agreement.
3.4 CONFIDENTIALITY. Except as required by law, Buyer shall and shall cause
Buyer's Representatives to maintain in confidence any and all information,
reports, evaluations and surveys generated in connection with their
investigation of the Property and Buyer shall not and shall cause Buyer's
Representatives not to make any disclosure of any such information,
reports, evaluations and surveys to any other person or entity without the
prior written approval of Seller, such approval not to be unreasonably
withheld or delayed; provided, however, Buyer may disclose such information
to representatives of the City and County of Denver, other governmental
organizations or Lenders, if relevant, in the reasonable judgment of Buyer,
to negotiations regarding construction, use or financing of the Project.
In the event the sale of the Property from Seller to Buyer contemplated
hereby is not, for any reason, closed, Buyer shall, upon request from
Seller, return to Seller or cause to be destroyed all information Buyer has
received from Seller with respect to the Property (including any such
information which Buyer has provided to Buyer's Representatives), and shall
not retain any copies thereof or permit any such person to retain any
copies thereof. The provisions of this Section 3.4 shall survive the
Closing and any termination of this Agreement. Buyer shall provide all of
Buyer's Representatives with a copy of this Section 3.4 and obtain the
agreement of each such Buyer's Representative to comply with the terms and
conditions hereof.
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ARTICLE 4: CONDITIONS TO CLOSING
4.1 BUYER'S CONDITIONS. Buyer's obligation to purchase the Property is
expressly conditioned upon satisfaction of each of the following conditions
prior to Closing:
(a) FINANCIAL. Buyer shall have obtained financing for the construction
of the Project on terms and conditions satisfactory to Buyer in its
sole discretion, provided that Buyer has used good faith efforts to
obtain such financing.
(b) CONSENTS. Seller shall have delivered to Buyer evidence of the
consent of any person or entity whose consent is required for the
purchase of the Property by Buyer from Seller.
(c) NO MATERIAL ADVERSE CHANGE. There shall have been no material and
adverse change in the physical condition of the Property between the
date hereof and Closing.
(d) PERFORMANCE. Seller shall have performed and observed all of its
covenants, agreements and obligations contained in this Agreement.
(e) WARRANTIES AND REPRESENTATIONS CORRECT. All the representations and
warranties of Seller contained in this Agreement shall have been true
and correct when made and shall be true and correct on and as of
Closing as if then made or given.
(f) RELEASE OF NUGGETS. The City and County of Denver shall have released
The Denver Nuggets Limited Partnership from its obligations under the
Basketball Agreement dated July 15, 1992 on terms and conditions
satisfactory to Buyer in its sole discretion.
(g) REZONING. Buyer shall have obtained final approvals of all the
Planning Documents.
(h) CITY APPROVALS. Buyer shall have obtained all necessary approvals and
consents from the City and County of Denver, and all agencies and
departments thereof, and from all other governmental entities and non-
governmental entities and persons whose consent is required to
commence construction of the Project, all on terms and conditions
satisfactory to Buyer in its sole discretion.
(i) [Intentionally deleted]
(j) ENVIRONMENTAL APPROVALS. The voluntary environmental management plan
for the Project ("VCUP") submitted to the Colorado Department of
Public Health and the Environment ("CDPHE") by application dated
February 21, 1995, as amended and supplemented and approved by CDPHE
by letter dated May 12, 1995, shall be in full force and effect and
shall not have been amended or modified in any respect, except for an
extension of the time for completion of the VCUP and for other changes
approved by Buyer and Seller. The letter from the Environmental
Protection Agency dated June 8, 1995, shall be in full force and
effect and shall not have been amended and modified in any respect,
except as approved by Buyer and Seller.
(k) APPROVAL OF GRADING PLAN. All governmental approvals of the Grading
Plan necessary to permit construction of the sports arena on the
Property shall have been obtained.
(l) DELIVERY OF DOCUMENTS. Seller shall have delivered the documents
required to be delivered by it pursuant to Section 6.2(a).
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Buyer may, at its option, waive any of such conditions. In the event that
the condition set forth in Section 4.1(e) is not satisfied (except for
matters not within Seller's control), Buyer may elect to close and pursue
any right of indemnification under Section 12.1.
4.2 SELLER'S CONDITIONS. Seller's obligation to sell the Property is expressly
conditioned upon satisfaction of the following conditions prior to Closing:
(a) WARRANTIES AND REPRESENTATIONS CORRECT. All the representations and
warranties of Buyer contained in this Agreement shall have been true
and correct when made and shall be true and correct on and as of
Closing as if then made or given.
(b) BUYER'S PERFORMANCE. Buyer shall have performed and observed all of
its covenants, agreements and obligations contained in this Agreement.
(c) ENVIRONMENTAL APPROVALS. The VCUP shall be in full force and effect
and shall not have been amended or modified in any respect, except for
an extension of the time for completion of the VCUP and for other
changes approved by Buyer and Seller. The letter from the
Environmental Protection Agency dated June 8, 1995, shall be in full
force and effect and shall not have been amended and modified in any
respect, except as approved by Buyer and Seller.
(d) DELIVERY OF DOCUMENTS. Buyer shall have delivered the documents
required to be delivered by it pursuant to Section 6.2(b).
Seller may, at its option, waive any of such conditions.
4.3 TERMINATION FOR FAILURE OF CONDITION. In the event any of the conditions
provided in Sections 4.1 and 4.2 have not occurred and have not been waived
by the appropriate party by the Termination Date, then, subject to
Section 4.4, this Agreement shall automatically terminate with the effect
provided in Section 8.3.
4.4 EFFECT OF DEFAULT. Notwithstanding anything to the contrary contained in
Section 4.3, if the failure of any condition listed in Section 4.1 or
Section 4.2 also constitutes a default under any other Section in this
Agreement, the non-defaulting party shall have the remedies set forth in
Article 8.
4.5 ENVIRONMENTAL RESPONSIBILITY AGREEMENT. In the event that Buyer and Seller
shall have not have agreed upon the form of an Environmental Responsibility
Allocation Agreement containing the terms set forth in EXHIBIT "H" (the
"Environmental Responsibility Agreement"), by June 30, 1997, as such date
may be extended by agreement of Buyer and Seller, Buyer or Seller may
terminate this Agreement with the effect provided in Section 8.3.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES; COVENANTS
5.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby represents and
warrants to Buyer as follows:
(a) ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has full power and authority to enter into this Agreement and to
fulfill its obligations hereunder.
(b) CORPORATE APPROVALS. Seller's board of directors has approved the
Prior Agreement (as defined in Section 13.5) and the transaction
contemplated by the Prior Agreement, and Seller has taken all
corporate action necessary to authorize the execution and delivery by
Seller of the Prior Agreement and other documents contemplated thereby
and the performance of its obligations thereunder. Because this
Agreement contains terms and conditions substantially the same as
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those of the Prior Agreement, no further action by Seller is required
for this Agreement and the transactions contemplated hereby to be
fully authorized by all necessary corporate action of Seller.
(c) DUE EXECUTION; BINDING AGREEMENTS. This Agreement has been duly
executed and delivered by Seller and all other documents contemplated
hereby to which Seller is a party have been or will be duly executed
(and acknowledged where necessary) and delivered by Seller, and are or
when duly executed and delivered, will be, valid, binding and
enforceable obligations of Seller.
(d) NO CONFLICT. The execution and performance of this Agreement and the
documents contemplated hereby, and consummation of the transactions
contemplated hereby, do not conflict with, with or without notice or
the passage of time or both, do not result in the breach of, and do
not constitute a default under or violation of the terms and
provisions of any contract, lease, agreement or obligation to which
Seller is a party or by which Seller may be bound or of any law, rule,
license, regulation, judgment, order or decree governing or affecting
Seller or the Property.
(e) NO PENDING LITIGATION OR GOVERNMENTAL ACTION. There is no pending or,
to Seller's knowledge, threatened litigation, administrative action,
condemnation by any federal or state authority, governmental
investigation, or similar governmental action relating to the Property
or the transactions contemplated by this Agreement, except as set
forth on EXHIBIT "I" attached hereto.
(f) NO NOTICE OF VIOLATION; LICENSES. Seller has not received any notice
of and has no knowledge of the assertion of any violation of any law,
rule, regulation, order or other legal action of any kind involving
the Property which now exists or is claimed now to exist. Seller has
all licenses, permits, certificates, orders, approvals and authority
from all governmental agencies that are necessary for the ownership
and operation of the Property as it is presently operated.
(g) LEASES. There are no tenancy or other agreements that affect Seller's
current use or Buyer's intended use of the Property (other than
agreements made by Buyer), or that otherwise burden the Property,
other than the Leases and the Other Agreements listed on EXHIBITS "C"
and "D". All of the Leases are in full force and effect and were
entered into by Seller in the ordinary course of its business. No
material violation by any party under any Lease has occurred, no
tenant has paid rent for more than thirty (30) days in advance of the
due date therefor, and no tenant has paid any security deposit except
as disclosed on EXHIBIT "C".
(h) HISTORIC DESIGNATIONS. No Improvements on the Property have been
listed on the National Register of Historic Places or any comparable
Colorado list, and, to Seller's knowledge, no claim has been made that
any Improvements should be so listed.
(i) ENVIRONMENTAL. Except as previously disclosed in the Seller
Environmental Reports delivered by Buyer pursuant to Section 3.1
above, or otherwise disclosed on EXHIBIT "F", to the actual knowledge
of M. W. Casey and John C. Terrell, both of whom are employees or
agents of Seller on the date hereof ("Seller's Knowledge"):
(i) The Property does not contain asbestos or material
containing asbestos.
(ii) The Property does not contain PCBs or PCB Items, as those
terms are defined in 40 C.F.R. Part 761.
(iii) The Property does not contain underground storage tanks, as
those terms are defined in 42 U.S.C. Section 6991 et seq.
("Solid Waste Disposal Act"), or above-ground storage tanks.
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(iv) There is no and has been no release of petroleum into the
environment from an above ground or underground storage tank
at the Property, as those terms are defined in the Solid
Waste Disposal Act, nor is any petroleum otherwise present
on the Property.
(v) There is, and has been, no release or threatened release,
other than federally permitted releases, of hazardous
substances or pollutants or contaminants into the
environment from or through the Property as those terms are
defined in 42 U.S.C. Section 9601 et seq. ("CERCLA").
(vi) The Property is not used, and has not been used, for the
generation, transportation, treatment, storage or disposal
of hazardous substances, pollutants, or contaminants, as
those terms are defined in CERCLA. As to those hazardous
substances, pollutants, or contaminants disposed of on, in,
or at the Property, the hazardous substances, pollutants, or
contaminants disposed of are not the subject of a release or
threatened release.
(vii) The Property is in compliance with all applicable federal,
state and local environmental statutes, regulations,
ordinances, and any permits, approvals, or judicial or
administrative orders issued thereunder. All existing
federal, state and local environmental permits and approvals
applicable to the Property are listed on EXHIBIT "J"
attached hereto.
(viii) The Property contains no conditions that could result in a
recovery by any governmental or private party of remedial or
removal costs, natural resource damages, property damages,
damages for personal injuries, other costs, expenses or
damages, or could result in injunctive relief, arising from
any alleged injury or threat of injury to health, safety, or
the environment relating to the Property.
(ix) Any prior administrative and judicial litigation or
proceedings, or threats of administrative and judicial
litigation or proceedings, regarding environmental issues
have been finally resolved and there are no commitments or
agreements that were entered into to resolve any such
litigation or proceedings.
(x) Except for the VCUP, there have been no orders or documents
issued by any court or administrative agency that impose
environmental requirements or interpret environmental
requirements under any environmental statute or regulation
relating to the Property.
(xi) All appropriate inquiry into the previous ownership and uses
of the Property consistent with good commercial or customary
practice has been undertaken in an effort to minimize
liability. The inquiry is adequate in light of commonly
known or reasonably ascertainable information about the
Property; the obviousness of the presence or likely presence
of contamination, assuming there is contamination at the
Property; and the ability to detect any contamination by
appropriate inspection.
(xii) Neither the Property nor any portion of the Property
constitutes a "wetland" subject to regulation pursuant to
Section 402 or Section 404 of the Federal Water Pollution
Control Act, or any comparable state or local law or
regulation.
(j) NO SPECIAL DISTRICT OR GOVERNMENTAL COMMITMENTS. Except as disclosed
on EXHIBIT "K" attached hereto, the Property is not situated within
any special assessment district other than the districts disclosed by
the most recent statement for real property taxes for the Property,
nor is the Property subject to any special assessments except for
those relating to such districts. To
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Seller's Knowledge, there is no proposal under which the Property is
to be placed in any other special assessment district except for
proposals relating to flood plain improvement work. Except as
listed on EXHIBIT "K" and except for any commitments or agreements
entered into by the Buyer in connection with the Project, there are
no existing commitments or agreements with any federal, state or local
government authority or agency affecting the Property.
(k) ORDINARY COURSE. The sale of the Property contemplated hereby is a
sale in the ordinary course of Seller's business.
(l) NO MISSTATEMENT. This Agreement (including the exhibits hereto)
contains no material misstatement of fact or omits to state any
material fact necessary to make the statements contained therein not
misleading.
Seller shall from time to time notify Buyer as to any change in the status
of any of the foregoing warranties and representations which are within
Seller's Knowledge, promptly after the same becomes Seller's Knowledge.
Seller will not take any actions that would cause any of the foregoing
representations and warranties not to be true and correct as of Closing.
No suit may be brought on account of any claimed breach or violation of any
provision of this Section 5.1 unless filed and served on or before the
third anniversary of the date of Closing.
5.2 NO OTHER WARRANTIES. Buyer hereby acknowledges that, except for the
warranties and representations set forth in Section 5.1 or in any document
delivered pursuant to this Agreement, Seller is making no warranty or
representation of any kind or nature whatsoever regarding the Property.
Buyer hereby acknowledges that Seller disclaims any and all express and
implied warranties regarding the Property or the condition thereof except
as set forth in Section 5.1 or in any document delivered pursuant to this
Agreement.
5.3 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and
warrants to Seller as follows:
(a) ORGANIZATION. Buyer is a limited liability company, organized,
validly existing and in good standing under the laws of the State of
Colorado. Buyer has full power and authority to enter into this
Agreement and to fulfill its obligations hereunder.
(b) AUTHORIZATION. Buyer has taken all action necessary to authorize the
execution and delivery of this Agreement by it and the performance of
its obligations hereunder.
(c) DUE EXECUTION; BINDING AGREEMENTS. This Agreement has been duly
executed and delivered by Buyer and all other documents contemplated
hereby to which Buyer is a party have been or will be duly executed
(and acknowledged where necessary) and delivered by Buyer, and are or
when duly executed and delivered, will be, valid, binding and
enforceable obligations of Buyer.
(d) NO CONFLICT. The execution and performance of this Agreement and the
documents contemplated hereby do not violate or conflict with, or,
with or without notice or the passage of time or both, result in the
breach of, or constitute a default under or violation of the terms or
provisions of any, and are not restricted by any, other agreement,
lease, contract, or obligation, court order or law to which Buyer or
any of its members is a party or by which Buyer or any of its members
is bound or of any law, rule, license, regulation, judgment, order or
decree governing or affecting Buyer or any of its members.
No suit may be brought on account of any claimed breach or violation of any
provision of this Section 5.3 unless filed and served on or before the
third anniversary of the date of Closing.
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5.4 PRE-CLOSING COVENANTS OF SELLER. Following execution of this Agreement and
prior to Closing, Seller shall, except as otherwise expressly provided in
this Agreement:
(a) ORDINARY COURSE. Conduct any business on and operate the Property in
the ordinary course consistent with past operations of the Property.
(b) CASUALTY INSURANCE. Maintain in effect any casualty insurance
policies insuring the Property or obtain suitable replacements
thereof; provided that nothing contained herein shall prohibit Seller
from self-insuring as to any casualty risk associated with the
Property, consistent with its current practice.
(c) LEASES. Not cancel, terminate or modify any existing Lease in any
respect adverse to the lessor's interest (except in accordance with
and as required by the provisions of any such Lease and except in
accordance with Seller's normal business practice) without Buyer's
prior written consent (which shall not unreasonably be withheld), not
enter into new Leases without Buyer's prior written consent (which
shall not be unreasonably withheld) except any Lease which may be
terminated on not more than 30 days' notice, not accept rents under
the Leases more than one month in advance of the date due, and perform
the lessor's obligations under the Leases in accordance with Seller's
established practice.
(d) TAXES. Pay all taxes and assessments affecting the Property prior to
the date such taxes and assessments are delinquent.
(e) COMPLIANCE WITH AGREEMENTS. Comply in all material respects with all
terms, conditions and provisions of all agreements affecting the
Property and make all payments due thereunder and suffer no material
default by Seller thereunder.
(f) TERMINATION OF LEASES. At Buyer's request as to any of the Leases
(i) which affect the part of the Property on which the Project will be
constructed and (ii) which Leases can be terminated with the giving of
notice by the lessor thereunder, send a notice of termination as to
such Lease; provided that in the event that the Closing does not occur
hereunder, as to any Lease terminated before Closing at the request of
Buyer (including any leases required to be terminated in order for
Buyer to perform its other obligations hereunder required to be
performed prior to the Closing), Buyer shall reimburse Seller for the
amount of the rent that would have been payable under that Lease
through the balance of the term of the Lease (or if the Lease was on a
month-to-month basis or year-to-year basis, for six months). If any
such notice is given by Seller at Buyer's request in accordance with
the terms of a particular Lease and the tenant thereunder nevertheless
asserts a claim against Seller arising out of the giving of such
notice by Seller at Buyer's direction, Buyer shall indemnify and hold
Seller harmless from any and all loss, liability, cost or expense
sustained by Seller as a result thereof, including reasonable
attorneys' fees. Buyer's obligations under this Section 5.4(f) shall
survive the Closing and the termination of this Agreement.
(g) DEMOLITION AND CLEARING. In order to facilitate site preparation for
construction of the sports arena by the Buyer, Seller, at its sole
cost and expense, (i) has taken or shall, subject to obtaining any
necessary permits, take the actions listed on EXHIBIT "L" to initiate
work required by the VCUP; and (ii) has (A) removed all Railroad
Improvements located on the Land which are located northeast of Ninth
Street; (B) removed any fences from the Property and removed from the
Land, stock piled on the Land, or destroyed all concrete docks, and
curbs not lying in dedicated street or alley right-of-ways, located on
the Land which are located northeast of Ninth Street; and
(C) demolished the ESCO warehouse located along Auraria Parkway
between 9th Street and 11th Street, and removed any foundations and
capped any underground utilities; provided, that if Closing does not
occur for any reason other than breach of this Agreement by
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Seller, subject to the limitation, if applicable, provided in Section
8.3 on Buyer's total reimbursement obligations under Section 11.3 and
this Section 5.4(g); Buyer shall reimburse Seller for the costs
incurred in taking the actions required by this Section 5.4(g). The
obligations of Buyer under this Section 5.4(g) shall survive the
termination of this Agreement.
5.5 COMPLIANCE WITH NCP. Seller and Buyer recognize that certain measures will
be required to ensure that contaminant removal activities performed under
the VCUP are substantially in compliance with applicable National
Contingency Plan ("NCP") procedures, involving public involvement and
related matters, established under CERCLA. Buyer and Seller intend that
all contaminant removal activities will be substantially in compliance with
the NCP. Seller has planned and implemented and shall continue to
implement public involvement and related programs as appropriate to ensure
substantial compliance with the NCP, and Buyer shall cooperate with such
activities by Seller.
The obligations of the parties under this Section 5.5 shall survive the
Closing and any termination of this Agreement.
5.6 INSURANCE; INDEMNITIES.
(a) Buyer shall use its reasonable efforts (at no additional cost to
Buyer) to require Buyer's contractors for the Project and any
subcontractors and subsubcontractors of such contractors, which are
required to carry liability insurance naming Buyer as an additional
insured, also to name Seller as an additional insured.
(b) Seller shall use its reasonable efforts (at no additional cost to
Seller) to require Seller's contractors for any work on the Property
and any subcontractors and subsubcontractors of such contractors,
which are required to carry liability insurance naming Seller as an
additional insured, also to name Buyer as an additional insured.
(c) To the extent Buyer obtains indemnities from liability for itself from
any contractors, subcontractors, and subsubcontractors described in
Section 5.6(a), Buyer shall use its reasonable efforts (at no
additional cost to Buyer) to cause Seller to be named as an additional
indemnitee under such indemnities.
(d) To the extent Seller obtains indemnities from liability for itself
from any contractors, subcontractors, and subsubcontractors described
in Section 5.6(b), Seller shall use its reasonable efforts (at no
additional cost to Seller) to cause Buyer to be named as an additional
indemnitee under such indemnities.
5.7 HART-SCOTT-RODINO. Buyer and Seller have satisfied themselves that they
are not required to make a filing before the Closing under the provisions
of Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("Hart-
Scott-Rodino") because the Property is unproductive real property and is
being sold by Seller in the ordinary course of Seller's business. In the
event of any change in circumstances or in the law that causes them to
change this determination, Seller and Buyer shall cooperate in making any
filing they determine to be required under Hart-Scott-Rodino.
ARTICLE 6: CLOSING
6.1 CLOSING. The closing of the transaction contemplated by this Agreement
(the "Closing") shall occur at the offices of Davis, Graham & Stubbs LLP,
370 17th Street, Suite 4700, Denver, Colorado, or such other place agreed
by the parties, at 10:00 a.m. on a date specified by Buyer (the "Closing
Date") in a written notice to Seller, which date shall be no earlier than
fourteen (14) days after the date of receipt of such notice; provided that,
unless a notice is properly given by Buyer specifying an earlier Closing
Date, the Closing Date shall be August 29, 1997.
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6.2 CLOSING OBLIGATIONS OF THE PARTIES. At the Closing, the parties shall
execute and deliver the following documents (the "Closing Documents") and
otherwise cause the following events to occur, each being a condition
precedent to the others but all being deemed to have occurred
simultaneously:
(a) Seller shall deliver or cause to be delivered to Buyer the following:
(i) DEED. A special warranty deed in the form attached
hereto as EXHIBIT "M" (the "Deed"), conveying to Buyer
title to the Property, subject only to the Permitted
Exceptions and to all other exceptions of record.
(ii) ASSIGNMENT AND ASSUMPTION. An assignment and
assumption agreement, substantially in the form of
EXHIBIT "N" attached hereto, transferring to Buyer all
of Seller's interests in and to the Leases and the
Other Agreements, indemnifying and holding harmless
Buyer from and against any and all claims from any
tenants or other parties thereunder arising prior to
the Closing Date, and requiring Buyer to indemnify and
hold harmless Seller from and against any such claims
arising after the Closing Date.
(iii) ORIGINAL DOCUMENTS. The original Leases and Other
Agreements (in the possession of Seller), together with
copies of all memoranda and/or drafts relating to
pending negotiations relating to the Leases and Other
Agreements in the possession of Seller, and any
security deposits and prepaid rents made by the tenants
under the Leases for periods occurring after the
Closing Date.
(iv) RENT ROLL. A rent roll updated to within ten
(10) business days of the Closing Date and certified as
true and complete by Seller, showing, for each Lease,
the name of the tenant, the rent payable, the date
through which rent has been paid, and the term and the
expiration date thereof (including any renewal
options), together with copies of all notices of
default sent (or received) by Seller as lessor under
such Lease that remain uncured.
(v) NOTICE TO TENANTS. A notice to the tenants under the
Leases of the assignment to Buyer of the lessor's
interest under the Leases.
(vi) GOOD STANDING CERTIFICATE. A certificate of the
Secretary of State of Delaware, dated not earlier than
thirty days prior to the Closing Date, showing that the
Seller is a validly existing corporation in good
standing under the laws of such state.
(vii) INCUMBENCY CERTIFICATE. An incumbency certificate
setting forth the officer(s) of Seller authorized to
execute and deliver the Closing Documents certified by
Seller's secretary or an assistant secretary.
(viii) FIRPTA AFFIDAVIT. A non-foreign affidavit of Seller,
substantially in the form of EXHIBIT "O" attached
hereto, to assure compliance with Section 1445 of the
Internal Revenue Code of 1986, as amended.
(ix) BOARD RESOLUTION. A certified copy of resolutions of
Seller's board of directors approving and authorizing
the execution, delivery and performance of this
Agreement and the documents to be delivered by Seller
pursuant to this Agreement.
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(x) LEGAL OPINION. An opinion of Seller's legal counsel,
satisfactory in form and substance to Buyer, that the
documents to be delivered by Seller pursuant to this
Agreement have been duly authorized by Seller, that
this Agreement and such documents are the valid,
binding and enforceable obligations of Seller, and
opining as to such other matters as Buyer may
reasonably request.
(xi) TITLE ASSURANCE. The Undertaking of the Title Company.
(xii) ENVIRONMENTAL RESPONSIBILITY AGREEMENT. The
Environmental Responsibility Agreement executed by
Seller.
(xiii) OTHER DOCUMENTS. Such other documents as may be
reasonably required by Buyer to effect the consummation
of the transaction contemplated hereby.
(b) Buyer shall deliver or cause to be delivered to Seller the following:
(i) PAYMENT. The Purchase Price, as adjusted pursuant to
Section 1.3, in immediately available funds delivered
by wire transfer as specified by Seller.
(ii) ASSIGNMENT AND ASSUMPTION. A copy of the assignment
and assumption referred to in Section 6.2(a)(ii),
executed by Buyer.
(iii) LEGAL OPINION. An opinion of Buyer's legal counsel,
satisfactory in form and substance to Seller, that
Buyer is a duly organized Colorado limited liability
company in good standing in Colorado, that the
documents to be delivered by Buyer pursuant to this
Agreement have been duly authorized by Buyer, that this
Agreement and, when executed and delivered by Buyer,
such other documents are the valid, binding, and
enforceable obligations of Buyer, and opining as to
such other matters as Seller may reasonably request.
(iv) CERTIFICATE REGARDING BUYER. A certificate of the
Secretary of State of Colorado, dated not earlier than
thirty days prior to the Closing Date, showing that
Buyer is a validly existing limited liability company
in good standing under the laws of that state.
(v) CERTIFICATES REGARDING THE MEMBERS. Certificates from
their respective states of organization, dated not
earlier than fourteen days prior to the Closing Date,
showing that each of the members of Buyer is validly
existing and in good standing under the laws of that
state and a certificate from the Secretary of State of
Colorado dated not earlier than thirty days prior to
the Closing Date showing that each member is qualified
to do business in Colorado.
(vi) ENVIRONMENTAL RESPONSIBILITY AGREEMENT. The
Environmental Responsibility Agreement executed by
Buyer.
(vii) ADDITIONAL DOCUMENTS. Such affidavits and other
documents as may be required or reasonably requested by
Seller to effect the consummation of the transaction
contemplated hereby.
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(c) Buyer and Seller shall each execute settlement statements showing
adjustments to the Purchase Price and payments of the costs of
Closing. Prorated items and costs shall be charged or credited to
Seller and Buyer as provided in Section 1.3.
(d) Seller shall surrender possession of the Property to Buyer.
ARTICLE 7: RISK OF LOSS
If, between the date of this Agreement and the Closing Date, either (i) any
part of the Property is damaged or destroyed by fire or other casualty
which, in the reasonable judgment of Buyer, would render the Property
unsuitable for Buyer's use thereof, or (ii) any material part of the
Property is taken in condemnation or under the right of eminent domain, or
proceedings for such taking shall be pending or threatened and, in the
reasonable judgment of Buyer, such taking renders or would render the
Property unsuitable for Buyer's use thereof, Buyer shall have the right to
terminate this Agreement by notice given to Seller within ten (10) days
after receiving notice thereof. Any such termination shall be governed by
Section 8.3. Seller shall promptly notify Buyer of each occurrence of the
kind specified above which comes within Seller's Knowledge and shall give
Buyer such information relating thereto as Buyer may thereafter reasonably
request. If Buyer fails to give notice of termination within such ten-day
period as to any damage or taking, Buyer's right to terminate on account of
such damage or taking shall be deemed to have been waived and this
Agreement shall continue in full force and effect, notwithstanding the
damage or taking, without any diminution of the Purchase Price, in such
case Seller shall, on the Closing Date, deliver to Buyer any insurance
proceeds or condemnation awards received by Seller as a result of any
occurrence specified herein, assign to Buyer all of Seller's right, title
and interest in and to any insurance proceeds or condemnation awards
resulting from any such occurrence that have not yet been received by
Seller on that date, and cooperate with and assist Buyer in collecting any
such proceeds or awards, at Buyer's sole cost and expense.
ARTICLE 8: DEFAULT AND REMEDIES
8.1 REMEDIES.
(a) PRE-CLOSING. In the event of any default at or before the Closing:
(i) SELLER'S REMEDIES. In the event of a material default by
Buyer (including a material breach in any of Buyer's
warranties or representations but not including the failure
to close on the Closing Date) which occurs at or before the
Closing and continues for 14 days after Buyer receives
notice of such default from Seller, or in the event Buyer
defaults on its obligation to close the purchase of the
Property on the Closing Date, Seller shall be entitled to
terminate this Agreement and retain the Deposit as
liquidated damages, in which event both parties shall be
relieved of all further obligations hereunder; provided that
no such termination or retention shall relieve Buyer of any
obligation for the performance of its obligations under any
of the provisions of this Agreement which provide that they
will survive the termination of this Agreement, all of which
(subject to the limitation, if applicable, provided in
Section 8.3 on Buyer's total reimbursement obligation under
Sections 5.4(g) and 11.3) shall continue in full force and
effect until fully performed and as to which Seller shall
have all remedies normally available at law or in equity.
(ii) BUYER'S REMEDIES. In the event of a default by Seller at or
before the Closing (including any breach of Seller's
warranties and representations but not including the failure
to close on the Closing Date), which continues for 14 days
after Seller receives notice of such default from Buyer, or
in the event Seller defaults on its obligation to close the
purchase of the Property on the Closing Date, Buyer shall
have all remedies
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available at law or equity, including damages and specific
performance, which remedies shall be cumulative and
non-exclusive. Seller acknowledges that, if Seller fails
to close the transaction provided for herein as a result of
its breach of its obligations hereunder, Buyer shall, in
addition to other remedies available at law or in equity, be
entitled to specific performance of this Agreement because
the Property is unique and possession thereof cannot be
duplicated, and that any remedy at law is inadequate.
(b) POST-CLOSING DEFAULTS. In the event that, after the Closing has
occurred, Buyer or Seller (i) fails to perform or comply with any of
its obligations or the terms contained in this Agreement or
(ii) breaches any of its representations and warranties made herein,
the injured party shall have all rights and remedies available at law
or in equity, including damages, specific performance and termination
of this Agreement, which remedies shall be cumulative and not
exclusive, except for circumstances where an exclusive remedy is
otherwise specified in this Agreement.
8.2 COSTS OF ENFORCEMENT. In any action to interpret or enforce this
Agreement, to collect damages as a result of a breach of its provisions, or
to collect any indemnity provided for herein, the prevailing party shall
also be entitled to collect all its costs in such action, including the
costs of investigation, expert witnesses and reasonable attorneys' and
consultants' fees and disbursements, together with all additional costs
incurred in enforcing or collecting any judgment rendered.
8.3 TERMINATION. In the event of the termination as provided for in this
Agreement or for any reason other than default as set forth in Section 8.1,
(i) Buyer shall pay all amounts to Seller which Buyer is obligated to pay
hereunder (provided that, before expending any amounts for which Buyer is
obligated to reimburse Seller under Sections 5.4(g) and 11.3 in excess of
$750,000, Seller shall give Buyer notice thereof, and Buyer shall have the
option, to be exercised by Buyer by notice to Seller given within fourteen
(14) days after receipt of Seller's notice, to waive any further
performance by Seller under Sections 5.4(g) and 11.3, in which event
Buyer's reimbursement obligation under Sections 5.4(g) and 11.3 shall be
limited to a total of $750,000, and, in the absence of the exercise of such
right in such time and manner by Buyer, there shall be no limitation on the
amount of Buyer's reimbursement obligation under Sections 5.4(g) and 11.3);
(ii) Buyer shall perform its other obligations under any provisions hereof
which specifically survive the termination of this Agreement; (iii) Buyer
shall comply with the provisions of Sections 3.2 and 3.3.; (iv) Buyer shall
execute and deliver to Seller any instruments which Seller from time to
time reasonably requests relinquishing any interest Buyer may have in the
Property under this Agreement or under any documents given pursuant to this
Agreement; (v) Seller shall apply the Deposit against any amounts Buyer is
obligated to pay under Section 8.3(i), and shall return the balance of the
Deposit, unless this Agreement has been terminated as a result of the
failure of Buyer's conditions set forth in Sections 4.1(a), (f), (g), (h)
or (k), in which event Seller may retain the balance of the Deposit; and
(vi) the parties shall be relieved of all further obligations hereunder.
ARTICLE 9: POST-CLOSING COVENANTS
9.1 FURTHER ASSURANCES. From time to time after the Closing Date, each of
Seller and Buyer shall execute and deliver such other instruments
(including instruments of conveyance, assignment and transfer), and shall
take such other actions in addition to those expressly provided for herein,
as the other party may from time to time reasonably request in order to
effect and confirm the transactions provided for herein. Each of Seller
and Buyer also shall provide such cooperation and furnish such information
to the other party as that party may from time to time reasonably request
for purposes of necessary and voluntary filings, related to the
transactions contemplated hereby, with any governmental entity.
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9.2 REMOVAL OF RAILROAD TRACKS.
(a) SELLER OBLIGATION AND RIGHT TO REMOVE. Seller shall remove all
remaining Retained Property located on the Land by no later than
thirty (30) days after the Closing (the "Retained Property Removal
Date") and shall, except to the extent that Buyer requests otherwise,
rough grade, substantially at the present level, the portions of the
Land disturbed by the removal of the Retained Property by Seller.
(b) BUYER'S REMEDY. If Seller shall fail to remove the remaining Retained
Property on or before the Retained Property Removal Date, Buyer may
give Seller notice thereof within ten days after the Retained Property
Removal Date, and Buyer shall be entitled, but shall not be obligated,
to remove and dispose of such Retained Property, at the sole cost and
expense of Seller and Seller shall reimburse Buyer, promptly upon
demand, for all costs reasonably incurred by Buyer in connection with
the removal and disposal of the Retained Property. Seller shall not
have any obligation with respect to any Retained Property not removed
by the Retained Property Removal Date and not identified in a notice
given by Buyer to Seller within ten days after the Retained Property
Removal Date.
(c) ACCESS FOR REMOVAL. Buyer shall provide Seller with access to the
Property for thirty (30) days after the Closing for purposes of
removing the Retained Property as provided for herein.
ARTICLE 10. ENVIRONMENTAL CLEANUP MATTERS
10.1 CONTAMINATION. The parties' agreement with respect to environmental
cleanup matters relating to the Property will be set forth in the
Environmental Responsibility Agreement.
ARTICLE 11: FLOOD PLAIN MATTERS
11.1 FLOOD PLAIN. The Survey reveals that the Property is located in the flood
plain for a 100-year storm (the "Flood Plain").
11.2 GRADING PLAN. Based on a study of surface water drainage on the Property,
Buyer's civil engineer has developed a grading plan, as set forth on plans
prepared by HOK Sport, No. C2.1-3 and C2.1-4, Project No. 93-382-221, dated
July 1, 1995, as revised after the date thereof by the Buyer with the
consent of Seller, which consent shall not be unreasonably withheld (the
"Grading Plan"). The Grading Plan provides for raising the land underlying
the floor of the arena to a level 18 inches higher than the flood level
during a 100-year storm and other resulting grading requirements.
11.3 ALLOCATION OF COSTS UNDER THE GRADING PLAN. Seller shall be solely
responsible for paying any and all expenses and costs associated with
grading the Land to the levels specified in the Grading Plan plus or minus
1/10 of a foot, including the costs of preparing the Grading Plan and
related surface water drainage reports. Based on preliminary bids received
before March 27, 1996, such expenses (all such expenses and costs are
herein referred to as "Flood Plain Costs") were expected to be in the range
of $400,000, plus or minus, but Seller's obligation for Flood Plain Costs,
including any such costs incurred prior to the date hereof, shall not
exceed $500,000. In the event that such work is commenced prior to Closing
and the Closing does not occur for any reason other than Seller's breach of
this Agreement, notwithstanding the foregoing provisions of this
Section 11.3, subject to the limitation, if applicable, provided in
Section 8.3 on Buyer's total reimbursement obligation under Section 5.4(g)
and this Section 11.3, Buyer shall reimburse Seller for all Flood Plain
Costs Seller incurs, including any such costs incurred prior to the date
hereof. Buyer and Seller shall cooperate with one another in obtaining
competitive bids for such grading. Except for any of such work done by
Seller prior to the Closing, Buyer shall contract and pay for the costs for
such grading, and Seller shall reimburse Buyer for such
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costs (not to exceed a total amount, including amounts expended by Seller
prior to the Closing, of $500,000); provided that, if Seller is not
satisfied with the bids obtained for such grading, Seller shall have the
right to perform the grading directly or through its own contractors, in
which event Buyer shall permit Seller and its contractors access to the
Property for such purposes. Seller shall cooperate with Buyer in obtaining
any necessary permits for the Grading Plan. The obligations of the parties
under this Section 11.3 shall survive the Closing or the termination of
this Agreement. Seller shall have the right to monitor completion of the
Grading Plan to ensure that work is proceeding in accordance with such
Plan.
ARTICLE 12: INDEMNIFICATION
12.1 INDEMNITY BY SELLER.
(a) Seller, to the fullest extent permitted by law but subject to the
limitations set forth in this Section, shall defend, indemnify, and
hold harmless Buyer, its Affiliates and their respective officers,
directors, employees, agents, successors and assigns (the
"Indemnitees") from and against all Losses of such Indemnitees,
directly or indirectly, relating to, resulting from or arising out of:
(i) The breach by Seller of any representation or warranty made
by Seller and contained in this Agreement; and
(ii) The failure of Seller to fulfill, satisfy, and discharge any
of its obligations or covenants under this Agreement.
(b) No suit may be brought pursuant to this Section 12.1 unless filed and
served on or before the third anniversary of the Closing Date.
12.2 INDEMNIFICATION BY BUYER.
(a) Buyer shall, to the fullest extent permitted by law, defend, indemnify
and hold harmless Seller, its Affiliates and their respective
officers, directors, employees, agents, successors and assigns (the
"Indemnitees") directly or indirectly, relating to, resulting from or
arising out of, from and against the following:
(i) The breach by Buyer of any representation or warranty made
by Buyer and contained in this Agreement; and
(ii) The failure of Buyer to fulfill, satisfy, and discharge any
of its obligations or covenants under this Agreement.
(b) No suit may be brought pursuant to this Section 12.2 unless filed and
served on or before the third anniversary of the Closing Date.
12.3 ACCESS AND COOPERATION. Both Seller and Buyer shall make available to each
other as reasonably requested all information, records and documents
relating to all Losses and shall preserve all such information, records and
documents until the termination of any claim and the resolution of any
issue with respect to indemnification hereunder relating to such claim.
Each of Seller and Buyer shall also make available to the other, as
reasonably requested, its personnel (including technical personnel), agents
and other representatives who are responsible for preparing or maintaining
information, records or other documents, or who may have particular
knowledge, with respect to any claim. Each of Buyer and Seller shall also
cooperate with the other in attempting to minimize the Losses subject to
indemnification by pursuing and/or assigning to the other any rights of
contribution or right to reimbursement through contractual or other
arrangements.
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12.4 DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
(a) "AFFILIATE" means, as to Buyer or Seller, any person or entity that
controls, is controlled by, or is under common control with, Buyer or
Seller, respectively.
(b) "INDEMNITEE" shall mean any Person which may be entitled to seek
indemnification pursuant to the provisions of Sections 12.1 or 12.2
hereof.
(c) "INDEMNITOR" shall mean any Person which may be obligated to provide
indemnification pursuant to Sections 12.1 or 12.2 hereof.
(d) "LOSSES" shall mean any and all direct or indirect demands, claims,
payments, obligations, actions or causes of action, assessments,
administrative fines or penalties, damages, losses, liabilities, costs
and expenses paid or incurred (whether or not known or asserted prior
to the date hereof, fixed or unfixed, conditional or unconditional,
choate or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise), including without
limitation any legal or other expenses reasonably incurred in
connection with investigating or defending any such claims or actions;
provided, however, that Losses shall be net of any insurance proceeds
received by an Indemnitee from an insurance company on account of such
Losses, and net of any reimbursement of Losses received by an
Indemnitee pursuant to a right of contribution or to a contractual or
other arrangement.
12.5 DEFENSE OF INDEMNIFIED CLAIMS. In the event that an Indemnitee seeks
indemnification pursuant to this Article 12, it shall give written notice
to the Indemnitor within ten (10) days of becoming aware that an event or
circumstance would give rise to the claim of indemnification; provided,
that failure to give such notice shall not bar the Indemnitee's rights of
indemnification if the Indemnitor does not suffer actual prejudice from
such failure. Except as provided below, in the event that the claim for
indemnification arises from a claim of a third party asserted against the
Indemnitee, the Indemnitor may assume the defense of such claim upon
delivering to the Indemnitee a written notice acknowledging that it will
indemnify the Indemnitee against the claim pursuant to this Article;
provided that, in the event that Indemnitee reasonably believes there
exists a conflict between it and Indemnitor in any such litigation,
Indemnitee may be represented by counsel at its own expense. The
Indemnitor may settle such third-party claim unless the settlement involves
the entry of injunctive relief against the Indemnitee or the Property, in
which case such settlement is subject to the Indemnitee's consent.
ARTICLE 13: INTERPRETATION OF AGREEMENT
13.1 GOVERNING LAW. The validity and effect of this Agreement shall be governed
by the laws of the State of Colorado.
13.2 HEADINGS. The article and section headings in this Agreement are for
convenience only and shall not be used in its interpretation or considered
part of this Agreement.
13.3 EFFECT OF AGREEMENT. No provision of this Agreement shall be altered,
amended, revoked or waived except by an instrument in writing signed by the
party to be charged with such amendment, revocation or waiver. This
Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns.
13.4 SURVIVAL. The provisions of this Agreement which are specifically provided
to survive the Closing and/or the termination of this Agreement,
respectively, shall survive the Closing and/or termination of this
Agreement.
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13.5 PRIOR AGREEMENT. Buyer and Seller hereby acknowledge and agree that:
(a) PRIOR AGREEMENT. Buyer and Seller previously entered into the
Purchase and Sale Agreement (the "Prior Agreement") dated March 27,
1996, relating to the sale of the Property from Seller to Buyer and
Buyer paid an earnest money deposit of $500,000 to Seller under the
Prior Agreement.
(b) STATUS OF PRIOR AGREEMENT. Buyer failed to close the purchase of the
Property under the Prior Agreement, and, pursuant to SECTION 8.1(a)(i)
of the Prior Agreement, Seller terminated the Prior Agreement and
retained the $500,000 as liquidated damages. As a result of said
termination:
(i) The Prior Agreement has terminated.
(ii) Buyer has no interest under the Prior Agreement in the
Property or in the $500,000 paid to Seller under the Prior
Agreement and hereby releases any interest therein which
Buyer might otherwise have had.
(iii) The $500,000 paid to Seller under the Prior Agreement is the
property of Seller and shall not be applicable to any
obligation of Buyer under this Agreement (including without
limitation any obligation under Section 8.3(i), including
without limitation any such obligation which also was or
might have been an obligation of Buyer under the Prior
Agreement), and shall not satisfy or be applied to satisfy
or reduce or otherwise be credited against any obligation of
Buyer under this Agreement (including without limitation any
obligation under Section 8.3(i), including without
limitation any such obligation which also was or might have
been an obligation of Buyer under the Prior Agreement).
(c) EFFECT OF PRIOR AGREEMENT. The Prior Agreement shall not be
considered in interpreting or applying any provision of this
Agreement.
ARTICLE 14: MISCELLANEOUS
14.1 TIME. Time is of the essence of this Agreement. If any of the conditions
or obligations in this Agreement are not fulfilled timely by Buyer or
Seller (including but not limited to the execution and delivery of the
Closing Documents on or before the Closing Date), then Buyer or Seller, as
the case may be, shall be deemed to be in default hereunder, and the non-
defaulting party may, at its option, exercise its rights under this
Agreement, including without limitation, Article 8.
14.2 NO BROKERS. Seller hereby represents and warrants to Buyer that it has not
been represented or assisted by any broker or similar person in connection
with the transaction contemplated herein. Seller shall indemnify and hold
harmless Buyer from and against any and all claims for commissions, fees,
or other compensation payable to any real estate broker, agent, salesman,
finder, or other person on account of any implied or express commitment or
undertaking made by Seller as a result of the consummation of the
transaction contemplated herein.
Buyer hereby represents and warrants to Seller that it has not been
represented or assisted by any broker or similar person in connection with
the transaction contemplated herein. Seller acknowledges that The Anschutz
Corporation has provided advice and assistance in connection with the
transactions contemplated by this Agreement. Buyer's arrangements with The
Anschutz Corporation are covered by a separate agreement, and Buyer is
responsible for any payments thereunder. Buyer shall indemnify and hold
harmless Seller from and against any and all claims for commissions, fees,
or other compensation payable to any real estate broker, agent, salesman,
finder, or other person on account of any implied or
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<PAGE>
express commitment or undertaking made by Buyer as a result of the
consummation of the transaction contemplated herein.
14.3 NO ASSIGNMENT. The qualifications and reputation of Buyer are material
inducements to Seller in entering into this Agreement. Therefore, Buyer
may not assign its rights or delegate its duties under this Agreement
without the prior written consent of Seller. Seller's consent hereunder
shall not be unreasonably withheld.
14.4 NOTICES. All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given when actually
received if delivered personally, by commercial carrier, by successful
telecopy transmission, or by first class mail, registered or certified,
return receipt requested. Notices to Seller shall be given at the
following addresses:
Union Pacific Railroad
4099 McEwen, Suite 600
Dallas, Texas 75244
Attention: Mr. John C. Terrell
Telephone No.: 972-770-4322
Telecopy No.: 972-770-4330
and
DAVIS, GRAHAM & STUBBS LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80201-0185
Attention: James E. Culhane, Esq.
Telephone No.: 303-892-7397
Telecopy No.: 303-893-1379
Notices to Buyer shall be given at the following addresses:
The Denver Arena Company, LLC
901 Auraria Parkway
Denver, Colorado 80204
Attention: Project Executive
Telephone No.: 303-892-1997
Telecopy No.: 303-892-6685
and
Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: President
Telephone No.: 303-626-7020
Telecopy No.: 303-595-0127
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<PAGE>
and
HOGAN & HARTSON L.L.P.
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Jac K. Sperling
Telephone No.: 303-899-7300
Telecopy No.: 303-899-7333
Either party may change its addresses for notices from time to time by
notice to the other party.
14.5 NO RECORDING. Buyer shall not record this Agreement or any evidence
thereof. Recording this Agreement or any evidence hereof shall constitute
a material default by Buyer entitling Seller to all remedies available at
law or in equity. In the event that this Agreement is terminated without
the Closing occurring hereunder, Buyer shall, upon Seller's request,
promptly execute and deliver to Seller a quitclaim deed conveying to Seller
any interest Buyer may have in any of the Property hereunder and any
additional documents that Seller shall from time to time reasonably request
hereunder to relinquish any interest in the Property which Buyer may have
hereunder. Buyer shall be liable to Seller for any damages suffered by
Seller on account of any recording of this Agreement and on account of any
failure of Buyer to execute and deliver such quitclaim deed and other
documents required hereby, including consequential damages. Buyer's
obligations under this Section 14.5 shall survive the termination of this
Agreement.
14.6 DAYS. As used herein, the term "business day" shall mean any day which is
not a Saturday, Sunday, or other day on which banks in Denver, Colorado are
not open for the regular transaction of business. In the event that any
act, event, or performance provided for herein is scheduled or permitted to
occur on a day which is not a business day, the time for the act, event, or
performance to occur shall be extended to the next business day.
14.7 ENTIRE AGREEMENT. This Agreement (together with the Exhibits hereto, and
any additional written agreements entered into contemporaneously and which
provide that they are intended to be in addition to this Agreement)
constitute the entire understanding and agreement of the parties with
respect to the subject matter hereof and thereof and supersede all prior
and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect hereto, including without limitation, that letter agreement between
Buyer and Seller dated February 16, 1995.
14.8 EXECUTION. This Agreement may be executed in counterparts and, when
counterparts of this Agreement have been executed and delivered by both
Buyer and Seller, this Agreement shall be fully binding and effective, just
as if both Buyer and Seller had executed and delivered a single counterpart
hereof. Without limiting the manner in which execution of this Agreement
may otherwise be effected hereunder, execution by either of the parties may
be effected by facsimile transmission of a signature page hereof executed
by such party. If any party effects execution in such manner, such party
shall also promptly deliver to the other party the counterparts physically
signed by such party, but the failure of such party to do so shall not
invalidate the execution hereof effected by facsimile transmission.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it as
of this day and year first above written.
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<PAGE>
SELLER:
SOUTHERN PACIFIC TRANSPORTATION
COMPANY, a Delaware corporation
By: /s/ MIKE CASEY
-------------------------------------
Title: AVP/GM
-------------------------------------
BUYER:
THE DENVER ARENA COMPANY, LLC, a Colorado
limited liability company
By: Ascent Arena Corporation, a Delaware
corporation, a Member
By: /s/ JAMES A. CRONIN, III
--------------------------------
Title: EVP
--------------------------------
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<PAGE>
EXHIBIT "H"
TERMS SHEET
Environmental Terms
Southern Pacific Transportation Company ("SP") and
Denver Arena Company, LLC ("DAC")
1. Contamination. Proposal relates to contamination now existing on
the Property (the "Existing Contamination"). Contamination caused by activities
after the closing (the "New Contamination") will be the responsibility of DAC.
The Existing Contamination includes any part of the existing tar and related
contamination lying on the Elitch's property, immediately across the mainline
from the Arena footprint, which hereafter migrates onto the Property. The New
Contamination includes contamination from any source other than the Existing
Contamination.
2. CONSTRUCTION UNDER VCUP.
a. INCREMENTAL COSTS. SP pays for incremental costs of
construction of Arena and the other improvements specifically provided
for in the VCUP to the extent that the incremental costs are
attributable to Existing Contamination. SP has no obligation for
incremental costs incurred in connection with any other construction.
b. OTHER LIABILITIES. SP will indemnify DAC against
liabilities arising from Existing Contamination as a result of
construction of Arena and other improvements specifically provided for
in the VCUP.
c. TIME LIMITS. SP's obligation for incremental costs and
other liabilities arising from construction of Arena ends on first to
occur of (i) completion of Arena and (ii) three years after Closing
(as extended by force majeure affecting physical construction). SP's
obligation for incremental costs and other liabilities for
construction on other buildings provided for in the VCUP ends on first
to occur of (i) completion of each building and (ii) two years after
completion of Arena.
d. COST DETERMINATION. Determination of incremental costs will
be through allocation arrangement. SP and DAC will together select
environmental project manager responsible for making those
environmental determinations affecting construction and allocating
costs of construction as provided above. SP and DAC will work
together to determine most efficient and cost-effective means for
integrating environmental work with regular construction work and to
provide guidelines, where applicable, for the allocation of costs.
e. EXTENSION OF VCUP. SP will be responsible to obtain
extension for completion of construction under VCUP for the period
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required for the completion of the Arena, as reasonably estimated by
DAC and SP, or if a longer period is available, for such longer
period. DAC will cooperate with SP's efforts to get extension.
Extensions thereafter will be responsibility of DAC. SP will
cooperate with DAC's efforts to get subsequent extensions.
f. EXPIRATION OF VCUP. SP's obligations under Paragraph 2
shall survive the expiration of the VCUP; provided that if the VCUP
expires before SP's obligations would otherwise end pursuant to
Paragraph 2c, the SP shall not be responsible for any increased
incremental costs which result from the expiration of the VCUP.
3. OTHER COSTS AND LIABILITIES ARISING FROM EXISTING CONTAMINATION.
These obligations may be applicable at the same time that Paragraph 2
obligations are applicable. To the extent of any such overlap, the Paragraph 2
obligations will control.
a. GROUNDWATER MONITORING. Paid by DAC after initial round of
sampling, which will be paid by SP. Monitoring costs not included as
shared costs under Paragraph 3b.
b. SHARED COSTS. Response costs and third party liability are
shared by parties through 2023. First $25,000 in any year paid by
DAC. Sharing ratio is 80% SP--20% DAC through 2003. Thereafter, SP's
percentage goes down, and DAC's percentage goes up, 3% per year.
E.g., 2004 is 77% SP -- 23% DAC, 2005 is 74% SP -- 26% DAC. $25,000
deductible paid by DAC is credited against DAC's share for that year
but SP will not have any responsibility for any part of $25,000
deductible. Sharing ratio, including $25,000 deductible, for any year
applies to all costs incurred in that year, except that, if a ground
water remediation program is ordered by CDPHE, EPA, or other
governmental agency or by a court or is agreed to by SP and DAC, the
sharing ratio and deductible for the costs of the ground water
remediation program shall be determined as if all of the costs of the
ground water remediation program were incurred in the year the order
is issued or the agreement is signed.
c. AFTER 2023. SP relieved of all further costs and liability.
d. CHANGE OF USE. SP's responsibilities have been determined
on the assumption that the Property will be used as provided in the
VCUP. If the use of the Property for the Arena terminated, SP's
obligations end. If there is any change in use that increases
environmental costs or liability, DAC will be responsible for the
increase in the environmental costs and liability resulting from the
change in use (including both the costs and liability specifically
attributable to the changed use and any increase in costs and
liability attributable to the part of the Property not included in the
changed use but which result from the changed use). SP would continue
to be responsible (in accordance with Paragraph 3b) for its share of
the costs of the
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<PAGE>
project described in the VCUP to the extent such costs were not an
incremental cost attributable to the change in use.
e. CONSTRUCTION AFTER TIME LIMITS. SP will have no
responsibility for the incremental environmental costs of construction
of improvements provided for in the VCUP to the extent that the
construction occurs after the time limits provided in Paragraph 2c.
Any such construction done in accordance with the VCUP will not be a
change in use under Paragraph 3d.
f. MANAGEMENT. DAC will manage responses to environmental
events. SP will have sign-off right on any response and will have
right to be involved.
g. INSURANCE. SP will cooperate with DAC at no cost or
obligation to SP in exploring possible insurance coverage against
these costs and liabilities. Any insurance will waive subrogation
against SP.
4. LIABILITY OF PSCO.
a. Parties will cooperate with each other in connection with
actions they or either of them may bring against PSCo or any other
PRP.
b. SP free to bring suit against PSCo after all building
permits required for the Arena have been issued and foundation work
has been completed.
c. In any joint suit to recover against PSCo (of other PRP),
parties will share recovery (in excess of litigation expenses) first
to SP to reimburse SP for costs of VCUP and VCUP compliance and then
in proportion in which parties bore costs.
35
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN
Effective as of June 27, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1 - PURPOSE AND EFFECTIVE DATE
1.1 Purpose 3
1.2 Effective Date 3
SECTION 2 - DEFINITIONS AND CONSTRUCTION
2.1 Definitions 3
2.2 Construction 7
SECTION 3 - ELIGIBILITY AND PARTICIPATION
3.1 Eligibility 7
3.2 Participation; Deferral Elections 7
3.3 Initial Eligibility During the Plan Year 7
3.4 Modification of Deferral Election 8
SECTION 4 - DEFERRED COMPENSATION ACCOUNTS
4.1 Maintenance of Accounts 8
4.2 Interest 8
SECTION 5 - PAYMENT OF BENEFITS
5.1 Payment Upon Termination of Service 8
5.2 Payments Upon Death 9
5.3 Hardship Distributions 10
5.4 Form of Payment 10
5.5 Commencement of Payments 11
5.6 Change in Control 11
5.7 Early Distributions 11
SECTION 6 - ADMINISTRATION
6.1 Committee; Duties 12
6.2 Appointment of Agents 12
SECTION 7 - AMENDMENT OR TERMINATION OF PLAN
7.1 Right to Amend or Terminate 12
7.2 Effect of Amendment or Termination 12
SECTION 8 - MISCELLANEOUS PROVISIONS
8.1 No Implied Rights 13
8.2 Insurance Policies 13
8.3 No Assignment or Alienation 13
8.4 Expenses 13
8.5 Applicable Laws 13
8.6 Establishment of Trust 13
8.7 Distribution in the Event of Taxation 14
SECTION 1 - PURPOSE AND EFFECTIVE DATE
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<PAGE>
1.1 PURPOSE. The purpose of this Plan is to provide Directors and key
executives of the Company with supplemental retirement income and death benefits
in order to assist the Company in attracting and retaining Directors and
executives of outstanding ability.
1.2 EFFECTIVE DATE. The Plan shall become effective on June 27, 1997,
subject to the approval of the Board within one year thereafter.
SECTION 2 - DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. For purposes of the Plan, unless a different meaning is
plainly required by the context, the following definitions are applicable:
(a) "Beneficiary" means the person designated by a Participant, in
accordance with Section 5.4(a), to receive benefits payable under the Plan upon
the death of the Participant.
(b) "Board" means the Board of Directors of Ascent Entertainment Group,
Inc. or any successor to Ascent.
(c) "Change in Control" means, with respect to Ascent, the occurrence of
any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (1) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (2) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any acquisition
by the Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (4) any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subsection (iii); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the
4
<PAGE>
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or though one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (3) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(d) "Committee" means the Compensation Committee of the Board.
(e) "Compensation" means:
(i) In the case of an Employee, the following amounts payable or
awarded to the Employee by the Company with respect to a Plan Year: (1) base
salary, (2) Incentive Compensation, (3) dividend equivalents from Restricted
Stock Units and Phantom Stock Units, if any, and (4) cash proceeds from vested
Restricted Stock Units, Phantom Stock Units or Stock Appreciation Rights, if
any, or
(ii) In the case of a Director, the fees and retainer payable to the
Director by the Company with respect to a Plan Year, before reduction for any
amounts deferred pursuant to this Plan or any other plan of the Company, and not
including any expense reimbursements or any form of non-cash compensation and
benefits.
(f) "Company" means Ascent Entertainment Group, Inc. (referred to herein
as "Ascent") or any successor thereto, and any wholly-owned subsidiary of
Ascent.
(g) "Deferral Election" means an election made by the Participant, in
accordance with Section 3.2 or 3.3, to defer an amount of Compensation payable
or awarded to the Participant with respect to a Plan Year.
(h) "Deferred Compensation Account" means the account maintained for a
Participant by the Company, in accordance with Section 4.1, with respect to the
Compensation for which the Participant has made a Deferral Election.
5
<PAGE>
(i) "Determination Date" means for purposes of Section 4.2, the last
Friday of each biweekly payroll period of the Company.
(j) "Director" means any member of the Board who is not an Employee.
(k) "Disability" means total disability as defined in the Company's Long-
Term Disability Plan, if any.
(l) "Employee" means any person who is employed by the Company.
(m) "Hardship" means the immediate and heavy financial need of a
Participant as determined by the Committee in accordance with uniform standards
established by the Committee.
(n) "Inactive Participant" means a Participant who is no longer an
Employee or Director but who has an interest in the Plan which has not yet been
fully distributed.
(o) "Incentive Compensation" means the additional compensation awarded a
Participant with respect to a Plan Year under the Company's annual incentive or
bonus plan and such other incentive plans or arrangements of the Company as
designated by the Committee from time to time as such plans or arrangements may
be amended from time to time.
(p) "Participant" means (i) an Employee or Director participating in the
Plan in accordance with Section 3, and (ii) an Inactive Participant.
(q) "Phantom Stock Units" means phantom stock units, if any, awarded to a
Participant.
(r) "Plan" means this Ascent Entertainment Group Inc. Directors and
Executives Deferred Compensation Plan, as amended from time to time.
(s) "Plan Year" means period beginning as soon as practicable after the
effective date of the Plan and ending December 31, 1997, and each calendar year
thereafter.
(t) "Restricted Stock Units" means restricted stock units, if any, awarded
to a Participant under the Company's 1995 Key Employee Stock Plan or any
successor plan.
(u) "Retirement Plan" means the Company's qualified defined benefit
pension plan, if any, as amended from time to time, or any successor thereto.
(v) "Stock Appreciation Rights" means stock appreciation rights, if any,
awarded to a Participant.
(w) "Transferred Amounts" means, in the case of any Employee who
participated in the COMSAT Corporation Directors and Executives Deferred
Compensation Plan (the "COMSAT Plan") and who participates in this Plan, the
balance in such employee's Deferred Compensation Account in the COMSAT Plan as
of June 27, 1997, which, by agreement between COMSAT Corporation and the
Company, has been transferred to this Plan pursuant to Section 4.1.
2.2 CONSTRUCTION. Wherever applicable, the masculine pronoun shall mean
or include the feminine pronoun, and the words used in the singular shall
include the plural, and vice versa.
SECTION 3 - ELIGIBILITY AND PARTICIPATION
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<PAGE>
3.1 ELIGIBILITY. Eligibility to participate in the Plan is limited to (a)
Directors, (b) Employees who have Transferred Amounts, and (c) Employees who are
designated as eligible by the Board.
3.2 PARTICIPATION; DEFERRAL ELECTIONS. An eligible Employee or Director
may elect to participate in the Plan with respect to any Plan Year by filing a
Deferral Election, in the form and manner prescribed by the Committee, by
December __ of the immediately preceding Plan Year, except that a Deferral
Election with respect to the first Plan Year shall be filed at such time before
the commencement of such Plan Year as the Committee shall determine. The
Participant may elect in the Deferral Election to defer Compensation with
respect to the Plan Year as follows:
(a) If the Participant is an Employee, he may elect to defer, subject to a
minimum deferral of $1,000, (i) base salary payable during the Plan Year in
increments of 5 percent up to a maximum of 25 percent, (ii) Incentive
Compensation awarded with respect to the Plan Year in increments of 25 percent
up to a maximum of 100 percent, (iii) dividend equivalents from Restricted Stock
Units and Stock Appreciation Rights payable during the Plan Year, if any, in
increments of 25 percent up to a maximum of 100 percent, and (iv) cash proceeds
from vested Restricted Stock Units and Stock Appreciation Rights payable during
the Plan Year, if any, in increments of 25 percent up to a maximum of 100
percent.
(b) If the Participant is a Director, he may elect to defer any amount or
percentage of fees and retainer payable with respect to the Plan Year, subject
to a minimum deferral of $1,000.
3.3 INITIAL ELIGIBILITY DURING THE PLAN YEAR. If an Employee or Director
first becomes eligible to participate in the Plan during a Plan Year, he may
elect to participate with respect to such Plan Year by filing a Deferral
Election for such Plan Year not later than 30 days after notification to him by
the Committee of his eligibility to participate in the Plan. The Participant
may elect in such Deferral Election to defer Compensation with respect to the
Plan Year which is payable or awarded following the filing of the Deferral
Election, in accordance with the limitations of Section 3.2(a) and (b) as if
such period were an entire Plan Year.
3.4 MODIFICATION OF DEFERRAL ELECTION. A Deferral Election made pursuant
to Section 3.2 or 3.3 shall be irrevocable, except that the Committee in its
discretion may at any time reduce, or waive the remainder of, the amount to be
deferred under the Deferral Election upon determining that the Participant has
suffered a Hardship.
SECTION 4 - DEFERRED COMPENSATION ACCOUNTS
4.1 MAINTENANCE OF ACCOUNTS. The Company shall maintain a
Deferred Compensation Account for each Participant who files a Deferral Election
or who has a Transferred Amount. The Compensation deferred pursuant to a
Deferral Election shall be credited to the Participant's Deferral Compensation
Account as it otherwise would become payable to the Participant. Any
Transferred Amount shall be credited to the Participant's Deferred Compensation
Account on the effective date of the Plan.
4.2 INTEREST. Each Participant's Deferred Compensation Account shall be
credited with interest at the interest rate equal to (a) Moody's plus 6
percent as of each Determination Date for such account based
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<PAGE>
upon the balance of such account as of the immediately preceding Determination
Date for Transferred Amounts and (b) a rate set by the Committee on or before
December 1, 1997 for amounts in a Participant's Deferred Compensation Account
other than Transferred Amounts. For this purpose, "Moody's" means the effective
annual yield on Moody's Seasoned Corporate Bond Yield Index as determined during
the first week of the Plan Year from Moody's Bond Record published by Moody's
Investors Service, Inc., or any successor thereto. If Moody's annual yield is
no longer published, the rate of interest for such Participants' Deferred
Compensation Accounts shall be based on a substantially similar annual yield
selected by the Committee.
SECTION 5 - PAYMENT OF BENEFITS
5.1 PAYMENT UPON TERMINATION OF SERVICE.
(a) A Participant whose service with the Company terminates for any of the
following reasons shall be entitled to receive an amount equal to the balance of
his Deferred Compensation Account, payable as provided in Sections 5.4 and 5.5:
(i) retirement under the Company's retirement plan or policies, as
such are in effect and may be amended from time to time;
(ii) Disability;
(iii) the convenience of the Company as determined by the Committee;
or
(iv) if the Participant is a Director, termination of service for any
reason other than death.
(b) A Participant whose service with the Company terminates for any reason
other than death or the reasons specified in paragraphs (a) or (c) shall be
entitled to receive an amount, payable as provided in Sections 5.4 and 5.5,
equal to the balance of his Deferred Compensation Account, calculated by
recomputing all interest credited to his Deferred Compensation Account at a rate
equal to Moody's plus 2 percent.
(c) A Participant, other than a Director, whose service with the Company
is terminated for cause shall be entitled to receive an amount, payable as
provided in Sections 5.4 and 5.5, equal to the balance of his Deferred
Compensation Account, calculated by recomputing all interest credited to his
Deferred Compensation Account at a rate equal to Moody's. For this purpose, a
Participant's service with the Company shall be considered to be terminated for
cause only if: (i) the Participant is convicted of a felony, without regard to
his right to appeal, which involves the Company's real, tangible or intellectual
property, any of its personnel or any person with whom the Company has a
business relationship, or (ii) at least two-thirds of the members of the Board
affirmatively vote, in their sole discretion, to terminate the Participant's
employment with the Company for cause pursuant to the terms of the Employee's
employment agreement, if any, or the Company's policies and proceudres.
5.2 PAYMENTS UPON DEATH.
(a) Each Participant may designate a Beneficiary or Beneficiaries to
receive payment of the amounts provided in paragraph (b) in the event of his
death. Each Beneficiary designation: (i) shall be made on a form filed in the
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<PAGE>
manner prescribed by the Committee, (ii) shall be effective when, and only if
made and filed in such manner during the Participant's lifetime, and (iii) upon
such filing, shall automatically revoke all previous Beneficiary designations.
(b) Upon the death of a Participant, the Participant's Beneficiary shall
be entitled to receive an amount equal to the balance of the Participant's
Deferred Compensation Account payable as provided in Sections 5.4 and 5.5.
(c) If the payments to be made pursuant to paragraph (b) are not subject
to a valid Beneficiary designation at the time of the Participant's death
(because the designated Beneficiary predeceased the Participant or for any other
reason), the estate of the Participant shall be the Beneficiary. If a
Beneficiary designated by the Participant to receive all or any part of the
Participant's Deferred Compensation Account dies after the Participant but
before complete distribution of that portion of that Deferred Compensation
Account, and at the time of the Beneficiary's death there is no valid
designation of a contingent Beneficiary, the estate of such Beneficiary shall be
the Beneficiary of the portion in question.
(d) Any payments made to a Participant's Beneficiary pursuant to life
insurance policies on the life of the Participant which are purchased in
connection with this Plan shall be offset against, and shall to that extent
reduce the payments otherwise required to be made to such Beneficiary pursuant
to Section 5.2(b).
5.3 HARDSHIP DISTRIBUTIONS. The Committee may, in its sole discretion,
make distributions to a Participant from his Deferred Compensation Account prior
to his termination of service with the Company if the Committee determines that
the Participant has suffered a Hardship. The amount of any such distribution
shall be limited to the amount reasonably necessary to meet the Participant's
needs created by the Hardship.
5.4 FORM OF PAYMENT.
(a) Except as provided in paragraph (c), the amount which a Participant or
Beneficiary becomes entitled to receive pursuant to Section 5.1 or 5.2 shall be
paid either:
(i) as a lump sum, or
(ii) in regular annual installments over a period of time not to
exceed 15 years. The amount of each annual installment shall be determined by
dividing the balance of the Deferred Compensation Account as of the most recent
Determination Date, as defined in Section 2.1(i), by the number of remaining
installments. The remaining balance of the Deferred Compensation Account shall
continue to be credited with interest in accordance with Section 4.2.
(b) Except as provided below in this paragraph (b), the Participant shall
elect, at the time and in the manner prescribed by the Committee, the form
specified in paragraph (a) in which payment shall be made. If the Participant
fails to elect the form of payment, payment shall be made in accordance with
paragraph (a)(ii) over a period of 15 years, provided that in the case of such
a Participant's death, the Participant's Beneficiary may elect the form of
payment. In the case of a Participant who becomes entitled to receive payment
pursuant to Section 5.1(a)(iii), the Committee shall determine the form
specified in paragraph (a) in which payment shall be made.
(c) Notwithstanding any other provision of this Plan, the amount which a
Participant becomes entitled to receive pursuant to paragraph (b) or (c) of
Section 5.1 shall be paid in a lump sum.
9
<PAGE>
5.5 COMMENCEMENT OF PAYMENTS.
(a) Payment which a Participant or Beneficiary becomes entitled to receive
in the event of the Participant's death, Disability or termination of service
pursuant to paragraph (b) or (c) of Section 5.1 shall commence or be made, as
the case may be, as soon as practicable after the occurrence of such event.
(b) Payment which a Participant becomes entitled to receive upon
termination of service pursuant to Section 5.1(a)(iii) shall commence or be
made, as determined by the Committee, on the first day of any month between the
date the Participant's service terminates and his 66th birthday.
(c) Payment which a Participant becomes entitled to receive upon
termination of service for any other reason shall commence or be made, as
elected by the Participant at the time and in the manner prescribed by the
Committee, on the first day of any month between the date his service terminates
and (i) in the case of an Employee, his 66th birthday, or (ii) in the case of a
Director, his 73rd birthday.
5.6 CHANGE IN CONTROL. Notwithstanding any other provision of this Plan,
each Participant in the Plan shall be entitled to receive an immediate lump sum
payment in an amount equal to the balance of his Deferred Compensation Account
upon the occurrence of a Change in Control.
5.7 EARLY DISTRIBUTIONS.
A Participant or Beneficiary may elect to withdraw amounts from his or her
Deferred Compensation Account as of any Determination Date whether during or
after the employment of the Participant (an "Early Distribution"), subject to
the following restrictions:
(a) The election to take an Early Distribution shall be made by filing a
form provided by and filed with the Committee at least ten (10) days before the
applicable Determination Date. The Early Distribution shall be made in a single
cash lump sum as soon as practicable after such Determination Date.
(b) The amount of the Early Distribution shall in all cases equal ninety
percent (90%) of the balance in the Deferred Compensation Account as of such
Determination Date. The remaining balance of such Deferred Compensation Account
shall be permanently forfeited and the Company and the Committee shall have no
obligation to the Participant or Beneficiary with respect to such forfeited
amount.
(c) If a Participant receives an Early Distribution, the Participant will
be ineligible to participate in the Plan for the balance of the Plan Year and
for the following Plan Year. A Participant and his Beneficiary will be limited
to a maximum of two (2) Early Distributions.
10
<PAGE>
SECTION 6 - ADMINISTRATION
6.1 COMMITTEE; DUTIES. The Plan shall be administered by the Committee,
which shall have the responsibility and authority to, among other things, (a)
interpret and construe the terms of the Plan and (b) adopt such regulations,
rules, procedures and forms consistent with the Plan as it considers necessary
or desirable for the administration of the Plan. In all cases the determination
of the Committee shall be final, conclusive and binding on all persons.
6.2 APPOINTMENT OF AGENTS. The Committee shall appoint the Controller to
be the Committee's agent and shall delegate to him its duties with respect to
the day-to-day administration of the Plan. The Committee may from time to time
appoint other agents and delegate to them such administrative duties as it sees
fit. Notwithstanding the above, the Committee may not delegate to any agent its
duties under the Plan provided in Sections 2.1(o), 3.4, 4.2, 5.1(a)(iii) and
5.3.
SECTION 7 - AMENDMENT OR TERMINATION OF PLAN
7.1 RIGHT TO AMEND OR TERMINATE. The Board reserves in its sole
discretion the right, at any time and from time to time, to amend or terminate
the Plan.
7.2 EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of
the Plan pursuant to Section 7.1 shall deprive any Participant or Beneficiary of
any part of his benefits under the Plan accrued as of the time of such amendment
or termination. If the Plan is terminated, each Participant shall be paid the
full amount of his Deferred Compensation Account in a lump sum within 90 days of
the date of termination.
SECTION 8 - MISCELLANEOUS PROVISIONS
8.1 NO IMPLIED RIGHTS. Nothing in his Plan shall be deemed to: (a) give
to any Employee the right to be retained in the employ of the Company or to
interfere with the right of the Company to dismiss any Employee at any time, or
(b) give to any Participant or Beneficiary (i) any right to any payments except
as specifically provided for in the Plan or (ii) any interest in any insurance
policies acquired by the Company in accordance with Section 8.2.
8.2 INSURANCE POLICIES. The Company in its discretion may, but shall not
be required to, provide for its obligations under this Plan through the purchase
of one or more life insurance policies on the life a Participant. Each
Participant agrees, as a condition to receiving any benefits under this Plan, to
cooperate in securing life insurance on his life by furnishing such information
as the Company or any insurer may require, by submitting to such physical
examinations as may be necessary, and by taking such other actions as may be
required by the Company or any insurer to obtain and maintain such insurance
coverage.
8.3 NO ASSIGNMENT OR ALIENATION. To the extent permitted by law, no
benefit provided under the Plan shall be anticipated, assigned (either at law or
in equity), alienated or subject to attachment, garnishment, levy, execution, or
other process. Any attempt to perform any such action shall be void.
11
<PAGE>
8.4 EXPENSES. The Company shall pay all expenses incident to the
operation and administration of the Plan.
8.5 APPLICABLE LAWS. Except as otherwise required by federal law, the
provisions of the Plan and the rules, regulations and decisions of the Board and
the Committee shall be construed and enforced according to the laws of the State
of Colorado.
8.6 ESTABLISHMENT OF TRUST. The Company shall establish a "rabbi" trust
(the "Trust"), which shall have the following characteristics:
(a) The Trust shall be a grantor trust, of which the Company shall be the
grantor, within the meaning of Subpart E, Part I, Subchapter J, Chapter 1,
Subtitle A of the Internal Revenue Code of 1986, as amended,
(b) The Trust shall be irrevocable by the Company, and
(c) The assets of the Trust shall be available to the Company's general
creditors in the event of the Company's insolvency.
Upon the crediting of any amount under this Plan to the Deferred Compensation
Account of any Participant, the Company shall contribute such amount to the
Trust. The provisions of this Plan shall govern the rights of a Participant to
receive distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Company, Participants and the general creditors of the
Company to the assets transferred to the Trust. The Company shall at all times
remain liable to carry out its obligations under this Plan, but the Company's
obligations under this Plan may be satisfied with assets of the Trust
distributed pursuant to the terms of the Trust, and any such distribution shall
reduce the Company's obligations under this Agreement.
8.7 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to the
Participant prior to receipt, the Participant may petition the Committee for a
distribution of that portion of his or her benefit that has become taxable.
Upon the grant of such a petition, which grant shall not be unreasonably
withheld, the Company shall distribute to the Participant immediately available
funds in an amount equal to the taxable portion of his or her benefit (which
amount shall not exceed the balance in the Participant's Deferred Compensation
Account as of the latest Determination Date). If the petition is granted, the
tax liability distribution shall be made within ninety (90) days of the date
when the Participant's petition is granted. Such a distribution shall reduce
the benefits to be paid under this Plan.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,807
<SECURITIES> 0
<RECEIVABLES> 40,614
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89,170
<PP&E> 308,174
<DEPRECIATION> 0
<TOTAL-ASSETS> 740,674
<CURRENT-LIABILITIES> 327,317
<BONDS> 50,000
0
0
<COMMON> 297
<OTHER-SE> 242,084
<TOTAL-LIABILITY-AND-EQUITY> 740,674
<SALES> 0
<TOTAL-REVENUES> 177,453
<CGS> 0
<TOTAL-COSTS> 155,991
<OTHER-EXPENSES> 53,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,286
<INCOME-PRETAX> (42,125)
<INCOME-TAX> (7,389)
<INCOME-CONTINUING> (34,736)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,393)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)
</TABLE>
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
PRESS RELEASE
ASCENT ENTERTAINMENT & CITY OF DENVER REACH
ACCORD ON NEW DOWNTOWN ARENA
Pepsi Center - The New Home For Ascent's NBA and NHL Franchises
Ascent's Lender Agrees to Extend Groundbreaking Deadline
FOR RELEASE;
Wednesday, August 13, 1997
Contact: Media Analysts
Paul Jacobson Jim Cronin
Ascent Ascent
(303) 626-7060 (303) 626-7060
Denver, Colo. - After almost three years of negotiations, Ascent Entertainment
Group, Inc. (NASDAQ:GOAL) and the City and County of Denver announced today they
will formally sign a memorandum of understanding setting forth terms on which
for Ascent would build, own and operate the new state-of-the-art, Pepsi Center
arena in Denver's Central Platte Valley near the city's downtown. The arena,
slated for a 1999 opening, will house Ascent's NBA Denver Nuggets and NHL
Colorado Avalanche teams and serve as a showcase facility for numerous other
entertainment and business events.
The memorandum of understanding (MOU) will be signed at 11:00 a.m. today at a
public signing ceremony in the Denver City Hall Rotunda. The MOU on the
construction of the arena is subject to definitive documentation and approval by
the Denver City Council and Ascent's Board of Directors.
"This arena agreement is a significant milestone for Ascent," said Charlie
Lyons, chairman and CEO of Ascent. "The Pepsi Center will convert our NBA and
NHL teams, which are already valuable entertainment assets, into cash flow
positive businesses. The entertainment industry is based on the creation,
ownership and distribution of unique creative content. By owning and operating
the venue where our teams play, we can enhance long-term shareholder value with
the positive cash flow generated by game dates and with other entertainment
events such as concerts and family shows."
<PAGE>
ASCENT - PEPSI CENTER
August 13, 1997 - Page 2
"This arena agreement comes in the wake of a solid second quarter and the
successful release of Air Force One," Lyons added. "Our strategy remains to
build Ascent on a foundation of exclusive entertainment assets accompanied by
strong distribution methods. Our goal is to maximize the value of each asset."
Lyons noted the MOU is an important step forward for Denver as well, which gets
a world-class entertainment facility near other Central Platte Valley
attractions and the lower downtown entertainment zone. The Pepsi Center will
allow Denver to attract major sports and entertainment events that currently
bypass the city for lack of adequate facilities.
The new Pepsi Center will replace the city-owned McNichols Arena, which was
built in 1975. Offering 18,100 seats for hockey, 19,300 for basketball and more
than 20,000 for center stage concerts, the Pepsi Center will house 95 suites and
1,850 club seats compared to 18 suites and zero club seats at McNichols Arena.
As a state-of-the-art facility, the Pepsi Center will be a building of unique
imagination and style - one that provides an unparalleled experience for fans
from across the interior western United States.
Under major terms of the MOU with the city, Ascent will raise the capital to
build the arena and will keep all revenues. The city will pay for certain
infrastructure improvements near the building, rebate incremental property taxes
and a portion of the sales taxes generated by the construction of the building.
Upon completion of the new arena Ascent would transfer to the City and County of
Denver the land associated with the arena and the City will lease the land back
to Ascent for a 25 year term. At the end of the term the city will convey the
arena site back to Ascent at no cost. In addition, Ascent will commit that the
teams will play in the Pepsi Center for 25 years and the city will terminate
agreements requiring the Denver Nuggets and Colorado Avalanche to play at
McNichols Arena upon completion of the new arena.
Ascent will pay the city a minimum of $1 million per year out of revenues
generated at the arena for 25 years rising annually at a rate based on
attendance. The arena will be built under the labor rate guidelines of
prevailing wage. The city will decide whether to demolish McNichols arena, but
if it is torn down within the first four years after the new arena opens Ascent
will pay demolition costs based on a sliding scale starting at 100
<PAGE>
ASCENT - PEPSI CENTER
August 13, 1997 - Page 3
percent the first year and dropping to zero after four years. While McNichols
remains open, Ascent will generally have the right to book events at McNichols
with a booking fee paid to Ascent, or at the Pepsi Center with certain
exceptions.
Ascent has also reached agreement with its bank lender to extend to October 31
the deadline for starting arena construction. Under Ascent's credit facility,
Ascent would have been in default if construction of the arena had not commenced
by August 31. Ascent's lender has extended that deadline to October 31,
conditional on Ascent's delivery by August 31 of an executed memorandum of
understanding.
The Pepsi Center design, logo, construction schedule and management team headed
by General Manager Tim Romani will be presented at a special media briefing in
Denver within the next 14 days.
Ascent Entertainment Group's principal business is providing pay-per-view
entertainment and information services through its majority-owned On Command
Corporation. In addition, Ascent is involved in other entertainment-related
businesses including ownership and operation of the NBA Denver Nuggets and NHL
Colorado Avalanche, and Beacon Communications, a motion picture and television
production company.
###
For a menu of Ascent Entertainment Group's news releases available by fax 24
hours (no charge) or to retrieve a specific release, please call 1-800-758-5804,
ext. 152850, or access the address http://www.prnewswire.com on the Internet.
<PAGE>
EXHIBIT 99.2
ASCENT ENTERTAINMENT GROUP, INC.
PRESS RELEASE
TCI'S LIBERTY MEDIA AGREES TO INVEST IN ASCENT'S PEPSI CENTER
ARENA PROJECT
ASCENT STRIKES 7-YEAR TV RIGHTS DEAL WITH FOX SPORTS ROCKY
MOUNTAIN FOR NUGGETS AND AVALANCHE
FOR RELEASE:
Wednesday, August 13, 1997
Contact: Ascent Entertainment, Paul Jacobson (303) 626-7060
TCI, Lela Cocoros or Joann Dobbs (303) 267-5273
Liberty Media Corporation, Vivian Carr (303) 721-5406
Fox Sports Rocky Mountain, Susan Stallworth (303) 267-7219
Denver, Colo. -- Ascent Entertainment Group, Inc. (NASDAQ:GOAL) Chairman and
CEO Charlie Lyons, Tele-Communications, Inc. (TCI) President and Chief Operating
Officer Leo J. Hindery, Jr. and Liberty Media Corporation (NASDAQ:LBTYA/LBTYB)
(Liberty) President and CEO Robert Bennett announced today that TCI's
wholly-owned subsidiary Liberty will invest $15 million in the Denver Arena
Company, LLC, the Ascent entity that will build, own and operate the Pepsi
Center arena project. The $15 million represents a significant portion of the
equity that will be invested in the center.
Ascent and FOX Sports Rocky Mountain (FSR), a 50-50 partnership between Liberty
and The News Corporation, also announced the signing of a seven-year regional
television license agreement for Ascent's NBA Denver Nuggets and NHL Colorado
Avalanche franchises.
At a Denver City Hall ceremony today at 11:00 a.m., Lyons and Denver Mayor
Wellington Webb will formally sign a memorandum of understanding setting forth
the terms for Ascent to build, own and operate the new Pepsi Center in Denver's
Central Platte Valley near downtown. Hindery and Bennett will join Lyons and
Webb at the signing ceremony.
Arena Investment
Liberty's investment will be in the Denver Arena Company, LLC, the business unit
established by Ascent to develop, construct, own and operate the Pepsi Center.
As an investor, TCI and Liberty will not be involved in the management or
operation of the Pepsi Center or the Avalanche or Nuggets.
<PAGE>
ASCENT - LIBERTY - FOX SPORTS
August 13, 1997 - Page 2
"Today Ascent is joining together with Denver's civic leadership and one of
Denver's finest corporate citizens to make history for Denver sports fans," said
Charlie Lyons, chairman and CEO of Ascent. "TCI and Liberty have recognized the
value of Ascent's assets in choosing to make these long-term investments. This
is a major contribution to the community and a solid endorsement of Ascent's
business strategy."
"The local spirit and support around each home-town team is certainly alive and
well in Denver, and it is something that TCI is proud to be a part of," said
Hindery. "We are truly pleased that our involvement in the arena project will
help ensure that the Avalanche and Nuggets will be part of the Denver community
for many years to come. With this partnership, we will also be able to bring
our customers in this region their local sports teams, taking advantage of this
new, state-of-the-art arena and providing fans with both live and in-home sports
enjoyment."
"We share a passion for sports with many of TCI's customers, and we look forward
to continuing to bring the Colorado Avalanche and the Denver Nuggets directly to
the homes in the Denver community and the entire Rocky Mountain region for many
years to come," said Bennett. "This investment and our partnership with the
Ascent organization will be a valuable addition to Liberty's portfolio."
Television Rights Agreement
The seven-year television rights agreement gives FSR exclusive over-the-air and
cable television rights for 65 regular season games and all available playoff
games for each of the Nuggets and Avalanche beginning with the 1997-1998 season
and concluding with the 2003-2004 season.
FSR will determine the split between over-the-air and cable telecasts. It is
FSR's intent to distribute games based on the historic pattern of Nuggets and
Avalanche coverage consisting of cable and over-the-air broadcasts. Fans will
receive the largest cable package ever of Nuggets-Avalanche games.
"We are pleased to be retaining both the Avalanche and Nuggets as part of FSR's
programming and to be expanding our relationship with the teams to include
producing games for broadcast distribution," said Bob Thompson, senior vice
president of tights acquisitions and regional network operations for FOX Sports
Net, the parent company of FSR.
<PAGE>
ASCENT - LIBERTY - FOX SPORTS
August 13, 1997 - Page 3
"In the current highly competitive environment for sports franchise media
rights, this agreement with FSR secures the certainty and significantly
increases the value of those rights to Ascent and provides our franchises and
company with increased financial flexibility," added Lyons. "Our fans will be
treated as well to the superior production abilities of FOX."
FSR reaches more than 2.7 million cable and satellite subscribers in a seven
state region including Colorado, Kansas, Nebraska, Wyoming, Montana, Idaho, Utah
and parts of Nevada and New Mexico and is one of nine FOX Sports Net
owned-and-operated regional sports networks, along with numerous affiliated
systems across the country.
Both transactions are subject to the approvals of Ascent's Board of Directors
and lenders and Liberty's Board of Directors.
Liberty is a wholly owned subsidiary of Tele-Communications, Inc., one of the
nation's leading cable and tele-communications companies. In addition to its
ownership interest in the FOX Sports Net regional sports networks, Liberty holds
numerous other investments in globally branded entertainment, movie and
electronic retailing networks such as Discovery Channel, BET, FX, QVC, Encore
and STARZ! Liberty Media Group Series A and B Common Stock are series of
Tele-Communications, Inc. Common Stock and are traded on the NASDAQ National
Market under the symbols LBTYA and LBTYB, respectively.
Ascent Entertainment Group's principal business is providing pay-per-view
entertainment and information services through its majority-owned On Command
Corporation. In addition, Ascent is involved in other entertainment-related
business including ownership and operation of the NBA Denver Nuggets and NHL
Colorado Avalanche and Beacon Communications, a motion picture and television
production company.
###
For a menu of Ascent Entertainment Group's news releases available by fax 24
hours (no charge) or to retrieve a specific release, please call 1-800-758-5804,
ext. 152850, or access the address http://www.prnewswire.com on the Internet.
