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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 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 and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (303) 626-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, par value $.01 NASDAQ National Market
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the
Registrant was $69,419,262 based on a price of $12.125 per share, which was the
average of the bid and asked prices of such stock on March 3, 1997, as reported
on the NASDAQ National Market reporting system.
29,754,000 shares of Common Stock were outstanding on March 3, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement with respect to its annual meeting
of stockholders is incorporated herein to Part III of this document by
reference.
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Table of Contents
Page
Part I 1
Item 1. Business 1
General Information 1
Multimedia Distribution 2
On Command Corporation 2
OCC Operating and Growth Strategy 2
Services and Products 3
Technology 4
Sales and Marketing 5
Installation and Service Operations 5
Hotel Contracts 5
Suppliers 5
Integrating Operations 6
Competition 6
International Markets 8
Investment in OCC 8
Ascent Network Services 8
Entertainment 9
Colorado Avalanche and Denver Nuggets 9
Sources of Revenue 10
Ticket Sales 10
Television, Cable and Radio
Broadcasting 10
Other Sources 11
NBA and NHL Governance 11
Competition 12
Broadcast Operations 12
Beacon Communications 12
Competition 13
Other Business Interests 14
Patents Trademarks and Copyrights 14
Regulation 15
Employees 15
Item 2. Properties 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Executive Officers of the Registrant 17
Part II 18
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 18
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 8. Financial Statements and Supplementary Data 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 57
Part III 58
Item 10. Directors and Executive Officers of the Registrant 58
Item 11. Executive Compensation 58
Item 12. Security Ownership of Certain Beneficial Owners and
Management 58
Item 13. Certain Relationships and Related Transactions 58
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 58
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PART I
CERTAIN OF THE STATEMENTS THAT FOLLOW 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
ITEM 1. BUSINESS
GENERAL INFORMATION
Ascent Entertainment Group, Inc. ("Ascent Entertainment Group" or the
"Company") is a diversified entertainment and media company which operates
entertainment production and distribution businesses characterized by well known
franchises. The Company is the leading provider of on-demand in-room
entertainment services to the domestic lodging industry through its
approximately 57% owned subsidiary, On Command Corporation ("OCC"), which is in
turn the 100% owner of On Command Video Corporation, a Delaware corporation
("OCV") and the 100% owner of Spectravision, Inc., a Texas corporation
("Spectravision"). The Company is the primary provider of satellite
distribution support services to affiliates of the National Broadcasting Company
("NBC") television network through its wholly owned subsidiary, Ascent Network
Services, Inc. (formerly COMSAT Video Enterprises, Inc.) ("ANS"). The Company
owns two professional sports franchises, the National Hockey League ("NHL") 1996
Stanley Cup champion Colorado Avalanche (the "Avalanche") and the National
Basketball Association ("NBA") Denver Nuggets (the "Nuggets"). The Company owns
a motion picture and television production company, Beacon Communications Corp.
("Beacon").
The Company is a Delaware corporation and was incorporated in 1995. The
Company was formed by COMSAT Corporation ("COMSAT") to organize COMSAT's
multimedia distribution and entertainment assets under one management group. An
initial public offering (the "Offering") of Ascent's common stock was completed
in December 1995. As a result of the Offering, COMSAT currently owns 80.67% of
the Company's common stock.
COMSAT originally became involved in the entertainment industry through its
acquisition of the multimedia distribution businesses, ANS and OCV, and its
initial acquisition of an interest in the Nuggets. COMSAT expanded the Company
by acquiring complementary entertainment businesses, including increasing its
investment in OCV and the Nuggets and acquiring the Avalanche, Beacon, and other
related interests. In 1996, the Company formed OCC to combine OCV and the assets
and certain liabilities of Spectravision.
In connection with the Offering, the Company and COMSAT entered into three
intercompany agreements: (a) a one-year Services Agreement, pursuant to which
COMSAT leased office space, provided certain administrative, financial,
treasury, legal, insurance and other services to the Company and made available
certain of its employee benefit plans to the Company's employees, for which the
Company paid to COMSAT an annual fee of $2 million and actual costs and expenses
to COMSAT of providing benefits to the Company's employees and certain other
services; (b) a Corporate Agreement (the "COMSAT Corporate Agreement"), which
provides, among other things, that for so long as COMSAT owns at least 50% of
the Company's outstanding Common Stock, (i) the Company's board of directors
will consist of at least a majority of members designated by COMSAT, (ii) the
Company will not incur any indebtedness, other than
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that under its original credit facility (and refinancings thereof) and
indebtedness incurred in the ordinary course of business which together shall
not exceed $175 million in the aggregate, or issue any equity securities or any
securities convertible into equity securities without COMSAT's prior consent,
and (iii) the Company will not amend its Certificate of Incorporation or Bylaws
without COMSAT's prior consent; and (c) a Tax Sharing Agreement, pursuant to
which the Company and COMSAT will make payments between them such that with
respect to any period, the amount of taxes to be paid by the Company or any
refund payable to the Company will be determined as though the Company were to
file separate federal, state and local income tax returns (including any amounts
determined to be due as a result of a redetermination of the tax liability of
COMSAT arising from an audit or otherwise) as the common parent of an affiliated
group of corporations filing a consolidated return rather than as a member of
COMSAT's consolidated tax group.
The Services Agreement was amended as of December 18, 1996. Under the
Services Agreement, as amended, COMSAT will continue to provide to the Company
limited administrative and support services and the Company will pay to COMSAT
$15,000 per month.
During 1996 COMSAT twice consented to permit the Company to incur
indebtedness above the original $175 million aggregate indebtedness limit under
the Corporate Agreement, and in March 1997 COMSAT consented to an increase in
the limitation on the Company's consolidated indebtedness under the Corporate
Agreement to $270 million, provided that: (i) no more than $50 million of such
indebtedness constituted long-term debt; and (ii) indebtedness subordinated to
indebtedness under Ascent's existing credit facility could only be incurred on
terms which did not adversely affect COMSAT's proposed tax-free distribution of
its interest in Ascent to COMSAT shareholders.
MULTIMEDIA DISTRIBUTION
ON COMMAND CORPORATION
OCC is the leading provider of on-demand in-room entertainment for the
United States lodging industry. On October 10, 1996 the Company, through OCC,
consummated the acquisition of the assets and properties and certain liabilities
of Spectravision (the "Acquisition"). Immediately prior to the Acquisition,
OCV, formerly an 84% (78.4% on a fully diluted basis) owned subsidiary of the
Company, was merged with a subsidiary of OCC, On Command Merger Corporation, and
OCV as the surviving corporation became a wholly owned subsidiary of OCC (the
"Merger" and with the Acquisition, the "OCC Transactions"). On Command
Development Corporation, a wholly owned subsidiary of OCC, develops technologies
to be used by OCV and SpectraVision to support and enhance OCV's and
SpectraVision's operations and to develop new applications to be marketed by OCV
and SpectraVision.
In addition to installing systems in hotels served by OCC, OCC sells
systems to certain other providers of in-room entertainment, including MagiNet
Corporation (formerly Pacific Pay Video Limited), which is licensed to use OCC's
system to provide on-demand in-room entertainment in the Asia Pacific region.
OCC OPERATING AND GROWTH STRATEGY
OCC's operating and growth strategy is to (i) increase its installed hotel
customer base by obtaining contracts with business and luxury hotels and select
mid-priced hotels without current service, converting hotels currently served by
other vendors as the contracts covering such hotels expire, and servicing hotels
which are acquired or constructed by existing customers, (ii) increase revenues
and decrease costs in certain hotels acquired in the SpectraVision acquisition
by
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installing OCC technology offering greater reliability, broader selection and
more viewing flexibility, (iii) create new revenue sources through an expanding
range of interactive and information services offered to the lodging industry,
and (iv) expand into foreign markets.
SERVICES AND PRODUCTS
OCC provides on-demand and scheduled in-room television viewing of major
motion pictures (including new releases) and independent non-rated motion
pictures for mature audiences for which a hotel guest pays on a per-view basis.
Depending on the type of system installed and the size of the hotel, guests can
choose among twenty (20) to fifty (50) different movies with an on-demand system
or among eight (8) to twelve (12) movies with a scheduled system.
OCC obtains non-exclusive rights to show motion pictures from major motion
picture studios generally pursuant to a master agreement with each studio. The
license period and fee for each motion picture are negotiated individually with
each studio, which typically receives a percentage of that picture's gross
revenues generated by the pay-per-view system. Negotiated fees are related to
the popularity of the picture and the volume of pictures licensed from a given
studio. License fees typically decline over the time the movie is played.
Typically, OCC obtains rights to exhibit major motion pictures during the
"Hotel/Motel Pay-Per-View Window," which is the time period after initial
theatrical release and before release for home video distribution or cable
television exhibition. OCC attempts to license pictures as close as possible to
a motion picture's theatrical release date to benefit from the studios'
advertising and promotional efforts. OCC also obtains independent motion
pictures, most of which are non-rated and are intended for mature audiences, for
a one-time flat fee that is nominal in relation to the licensing fees paid for
major motion pictures.
OCC provides services under contracts with hotels that generally run for a
term of five to seven years. Under these contracts, OCC installs its system
into the hotel at OCC's cost and OCC retains ownership of all equipment utilized
in providing the service. Traditionally, the hotel provides and owns the
televisions; however, based on certain economic evaluations, OCC may provide
televisions to certain hotels. OCC undertakes a significant investment when it
installs its system in a property, sometimes rewiring part of the hotel.
Depending on the size of the hotel property and the configuration of the system
installed, the installed cost of a new on-demand system with interactive and
video game services capabilities, including the head-end equipment, averages
from approximately $400 to $700 per room, or approximately $300 per room if the
VideoNOW-TM- system is used. OCC's contracts with hotels provide that OCC will
be the exclusive provider of in-room, pay-per-view television entertainment
services to the hotel and generally permit OCC to set the movie price. The
hotels collect movie viewing charges from their guests and retain a commission
equal to a percentage of the total pay-per-view revenue that varies depending on
the size and profitability of the system. Some contracts may also require OCC
to upgrade its system to the extent that new technologies and features are
introduced during the term of the contract. At the scheduled expiration of a
contract, OCC generally seeks to extend the contract on terms substantially
similar to the current terms.
The revenue generated from OCC's pay-per-view service is dependent upon the
occupancy rate at the property, the "buy rate" or percentage of occupied rooms
that buy movies or other services at the property and the price of the movie or
service. Occupancy rates vary by property based on the property's location and
competitive position within its marketplace and over time based on seasonal
factors and general economic conditions. Buy rates generally reflect the
hotel's guest mix profile, the popularity of the motion pictures or services
available at the hotel and the guests' other entertainment alternatives. Buy
rates also vary
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over time with general economic conditions. Movie price levels are established
by OCC and are set based on the guest mix profile at each property and overall
economic conditions. Currently, OCV's movie prices typically are $8.95 for the
first purchase by an end-consumer and $4.95 for each subsequent buy by the same
end-consumer on the same day. The SpectraVision equipped hotels currently do
not discount second buys.
The hardware installed in OCV's systems consists of a microprocessor
controlling the television in each room, a hand held remote control, and a
central "head-end" video rack and system computer located elsewhere in the
hotel. The in-room terminal unit may be integrated within, or located
behind, the television. OCC emphasizes sales and installations of full-scale
OCV video on-demand systems to business and luxury hotels. OCC markets lower
cost OCV VideoNOW systems to select mid-priced hotels. The VideoNOW system
works with the hotel's existing televisions and telephones, allowing guests
to use their touchtone telephones to access movies and other programming.
SpectraVision hotels contain several products including: (i) SPECTRAVISION,
a scheduled tape-based play system: (ii) SPECTRAVISION GUEST THEATER, a
scheduled play system using satellite delivery; (iii) GUEST CHOICE, an analog
tape system which provides on-demand viewing of up to 200 videotapes; and (iv)
DIGITAL GUEST CHOICE, the industry's only digital video on-demand service.
OCC, through both OCV and SpectraVision, also markets a free-to-guest
service pursuant to which a hotel may elect to receive one or more satellite
programming channels, such as HBO, Showtime, CNN, ESPN, WTBS and other cable
networks. OCC provides hotels free-to-guest services through a variety of
arrangements including having the hotel pay the company a fixed monthly fee per
room for each programming channel selected or having the price of such
programming included in OCC's other offerings. OCC also provides certain
interactive services such as video check-out, room service ordering and guest
satisfaction surveys. The OCC system also enables hotel owners to broadcast
informational and promotional messages and to monitor room availability.
TECHNOLOGY
OCC's product development philosophy is to design high quality
entertainment and information systems which incorporate features allowing OCC to
add or upgrade system enhancements as they become commercially available and
economically viable. The high speed, two-way digital communications capability
of OCV's system enables OCC to provide advanced interactive features, such as
video games, in addition to basic interactive services such as video checkout,
room service ordering and guest surveying.
OCC's systems incorporate proprietary communications system designs with
commercially manufactured components and hardware such as video cassette
players, amplifiers and computers. Because systems generally use industry
standard interfaces, OCC can integrate new technologies as they become
economically viable. Such technologies might include digital compression and
store-and-forward, which would permit multiple users to access the same stored
movie at varying start times.
In 1993, SpectraVision entered into an agreement with Electronic Data
Systems ("EDS") to install a satellite-based digital movie delivery system to
replace its existing tape-based delivery systems. In conjunction with the
installation of this system, SpectraVision introduced its new SPEXIS-TM-
computer system which allows SpectraVision to provide new and improved
interactive services. SpectraVision and EDS first installed equipment to
enable SpectraVision to provide its scheduled
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play movies in a compressed digital video format on a real time basis via
satellite (GUEST THEATER-TM-). In late 1994, SpectraVision and EDS began the
second phase of the technology conversion and initiated the installation of a
digital video on-demand system (DIGITAL GUEST CHOICE) in selected hotels. This
system consists of high capacity disk arrays, which are used to store digitized
movies, delivered to a hotel via satellite, for instantaneous on-demand viewing
by hotel guests.
Upon completing the Acquisition, On Command Corporation entered into a new
agreement with EDS for the continued delivery of the satellite delivered service
for up to 45 months after the closing. After the loss of AT&T's Telestar 401
satellite, the satellite through which EDS provided transmission services to
SpectraVision, in late January, 1997, the Company entered into a six-month
agreement with Hughes Network Systems for transponder capacity on a GE American
Communications, Inc. satellite to resume the service interrupted by the loss of
Telestar 401. See Note 16 to Notes to the Consolidated Financial Statements.
SALES AND MARKETING
OCC's marketing efforts are focused on business and luxury hotels with
approximately 150 rooms or more, as OCC management believes that such hotels
consistently generate the highest revenues per room in the lodging industry.
OCC also targets smaller business and luxury hotels and select mid-priced hotels
that meet its profitability criteria. OCC intends to continue targeting
established hotel chains, certain business and luxury hotel management
companies, and selected independent hotels.
INSTALLATION AND SERVICE OPERATIONS
At December 31, 1996, OCC's installation and service organization consisted
of approximately 400 installation and service personnel in the United States and
Canada. OCC installation and service personnel are responsible for all of the
hotel rooms served by OCC. Installation and service personnel are responsible
for system maintenance and distribution of video cassettes. OCC's installation
personnel prepare site surveys to determine the type of equipment to be
installed at each hotel, install systems, train the hotel staff to operate the
systems, and perform quality control tests. OCC also uses local installation
subcontractors supervised by full-time OCC personnel to install its systems.
OCC maintains a toll-free technical support hot line that is monitored 24
hours a day by trained support technicians. The on-line diagnostic capability
of the OCV and SpectraVision systems enables the technician to identify and
resolve a majority of the reported system malfunctions from OCC's service
control center without visiting the hotel property. When a service visit is
required, the modular design of the OCV and SpectraVision systems generally
permits installation and service personnel to replace defective components at
the hotel site.
HOTEL CONTRACTS
On Command Corporation typically enters into a separate contract with each
hotel for the services provided. Contracts with the corporate-managed hotels in
any one chain generally are negotiated by that chain's corporate management, and
the hotels subscribe at the direction of the corporate management. In the case
of franchised or independently owned hotels, the contracts are generally
negotiated separately with each hotel. Existing contracts generally have a term
of five or seven years from the date the system becomes operational. At
expiration, OCC typically seeks to extend the term of the contract on terms
competitive in the market. At December 31, 1996, approximately 8.5% of the pay-
per-view hotels served by OCC have contracts that have expired and are on a
month-to-month basis. Approximately 9.5% of the pay-per-view hotels served by
OCC have contracts expiring in 1997.
SUPPLIERS
OCC contracts directly with various electronics firms for the manufacture
and assembly of its systems hardware, the design of which is controlled by On
Command Development Corporation. Historically, these suppliers have been
dependable and able to meet delivery schedules on time. OCC believes that, in
the event of a termination of any of its sources, alternate suppliers could be
located without incurring significant costs or delays. However, certain
electronic component parts used with OCC's products are available from a limited
number of suppliers and can be subject to temporary shortages because of general
economic conditions and the demand and supply for such component parts. In
addition, some of SpectraVision's systems currently installed in hotels
require a high level of service and repair. As these systems become older,
servicing replacement parts will become more difficult. If OCC were to
experience a shortage of any given electronic part, OCC believes that
alternative parts could be obtained or system design changes implemented. In
such event, OCC
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could experience a temporary reduction in the rate of new room installations
and/or an increase in the cost of such installations.
The head-end electronics are assembled at OCC's facilities for testing
prior to shipping. Following assembly and testing of equipment designed
specifically for a particular hotel, the system is shipped to each location,
where it is installed by OCC-employed and trained technicians, typically
assisted by independent contractors.
OCC also maintains direct contractual relations with various suppliers
of pay-per-view and free-to-guest programming, including the motion picture
studios and programming networks. OCC obtains its free-to-guest programming
pursuant to multi-year license agreements and pays its programming suppliers a
monthly fee for each room offering the service. OCC believes its relationships
with all suppliers are good, except for Showtime Networks, Inc. which is
disputing OCC's performance of the contract with Showtime in connection with the
Company's termination of scheduled satellite delivered pay-per-view service. In
addition, OCC is negotiating the renewal of a contract with HBO which expired in
June 1996, although OCC continues to provide HBO programming under the expired
contract.
INTEGRATING OPERATIONS
On Command Corporation is working towards the full integration of its
operations in support of the OCV and SpectraVision systems. Most of the work
had been completed by December 31, 1996, however, significant system development
and field support projects would continue throughout 1997 to complete the
integration. In addition, OCC intends to pursue the renewal or extension of
these contracts by offering these customers the opportunity to obtain OCV on-
demand pay-per-view movie service and related services.
Certain of SpectraVision's customers will not be offered the opportunity to
receive OCV equipment. These customers are located in Hong Kong, Australia,
Singapore and Thailand. OCV is currently a party to an agreement with MagiNet
Corporation ("MagiNet") to provide OCV systems and technology to MagiNet in the
Asia-Pacific region.
COMPETITION
There are several providers of in-room video entertainment to the lodging
industry, at least two of which provide on-demand pay-per-view and free-to-guest
programming and other interactive services over the hotel television. Pay-per-
view, the most profitable component of the services offered, competes for a
guest's time and entertainment resources with broadcast television, free-to-
guest programming and cable television services. In addition, there are a
number of potential competitors that could utilize their existing infrastructure
to provide in-room entertainment to the lodging industry, including cable
companies (including wireless cable), telecommunications companies and direct-
to-home and direct broadcast satellite companies. Some of these potential
competitors are already providing free-to-guest services to hotels and testing
video-on-demand.
OCC, through OCV and SpectraVision, is the leading provider (by number of
hotel rooms served) of in-room video entertainment services and the leading
provider (by number of hotels rooms served) of in-room on-demand video
entertainment services to the United States lodging industry. OCC competes on a
national scale primarily with LodgeNet Entertainment Corporation ("LodgeNet")
and on a regional basis with certain other smaller entities. Based on publicly
filed information, OCC estimates that, at December 31, 1996, LodgeNet served
approximately 400,000 pay-per-view rooms, of which approximately 359,000 are
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equipped with on-demand service. At December 31, 1996, OCC served approximately
918,000 rooms, of which approximately 709,000 are on-demand rooms.
Competition with respect to new pay-per-view contracts centers on a variety
of factors, depending upon the circumstances important to a particular hotel.
Among the more important factors are (i) the features and benefits of the
entertainment systems, (ii) the quality of the vendor's technical support and
maintenance services and (iii) the financial terms and conditions of the
proposed contract. With respect to hotel properties already receiving in-room
entertainment services, the current provider may have certain informational and
installation cost advantages as compared to outside competitors.
The Company believes that OCC's competitive advantages include (i)
technological leadership represented by its superior on-demand capability and
range of services offered, and (ii) system reliability and high quality service.
OCC believes that its growth (including OCV's growth over the previous three
years) reflects the strong competitive position of OCC's products and services.
The OCC system offers an expansive library of on-demand movies and will allow
OCC to upgrade and add new features to the OCC system during the terms of the
pay-per-view contracts.
OCC anticipates substantial competition in obtaining new contracts with
major hotel chains. The Company believes that hotels view the provision of in-
room on-demand entertainment both as a revenue source and as a source of
competitive advantage in that sophisticated hotel guests are increasingly
demanding a greater range of quality entertainment and informational
alternatives. At the same time, OCC believes that certain major hotel chains
have awarded contracts based primarily on the level and nature of financial and
other incentives offered by the pay-per-view service provider. While the
Company believes its competitive advantages will enable OCC to continue to offer
financial arrangements that are attractive to hotels, its competitors may
attempt to gain or maintain market share at the expense of profitability. OCC
may not always be willing to match the incentives provided by its competitors.
The communications industry is subject to rapid technological change. New
technological developments could adversely affect OCC's operations unless it is
able to provide equivalent services at competitive prices.
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INTERNATIONAL MARKETS
In addition to its operations in the United States, OCC, through OCV and
SpectraVision and its international subsidiaries, offers its services in Canada,
Mexico, Puerto Rico, the U.S. Virgin Islands, Hong Kong, Singapore, Thailand,
Australia, and the Bahamas.
SpectraVision has been a leading provider of in-room video entertainment in
the Asia-Pacific region and Australia. SpectraVision has provided its
international hotel customers primarily with its tape-based systems, but
generally experiences higher revenues and operating cash flow per room than in
the United States because of higher prices, higher buy rate, and the lack of
programming alternatives. At December 31, 1996, there were 375 hotels with a
total of 97,830 rooms located outside the United States with SpectraVision
systems.
The competition to provide pay-per-view services to international hotels
is even more dispersed than in the United States. Expansion of OCC's
operations into foreign markets involves certain risks that are not
associated with further expansion in the United States including availability
of programming, government regulation, currency fluctuations, language
barriers, differences in signal transmission formats, local economic and
political conditions, and restriction on foreign ownership and investment.
Consequently, these risks may hinder OCC's efforts to grow its base of hotel
rooms in foreign markets.
INVESTMENT IN OCC
The Company made its initial investment in OCV in 1991 and owned
approximately 84% of OCV (78.4% on a fully diluted basis) prior to the
Acquisition. In connection with the OCC Transactions, each stockholder of OCV
received (i) 2.84 shares of OCC common stock for each share of OCV common stock
previously held and (ii) Series A Warrants to purchase, on a cashless basis,
18.607% of a share of OCC common stock for each share of OCV common stock
previously held. Of the 21,750,000 shares of OCC common stock and Series A
Warrants to purchase 1,425,000 shares of OCC common stock distributed to the OCV
stockholders, Ascent received 17,149,766 shares of OCC common stock and Series A
Warrants to purchase 1,123,823 shares of OCC common stock. Hilton Hotels
Corporation, former minority stockholder of OCV that is unaffiliated with the
Company but is a significant customer of OCC, received approximately 2,331,986
shares of OCC common stock and Series A Warrants to purchase approximately
152,786 shares.
The Company currently has no agreements or understandings with respect to
the minority stockholders of the Company or OCC, other than a letter agreement
dated April 19, 1996 with Gary Wilson Partners that provides that (i) Gary
Wilson Partners will, so long as (a) it owns any shares of OCC common stock
received upon exercise of the Series C Warrants that it received for advisory
and other services that it provided in connection with the OCC Transactions
and (b) the Company continues to own 20% of the outstanding shares of OCC
common stock, vote its shares of OCC common stock in accordance with the
instructions of the Company and (ii) so long as the Company owns 20% of the
outstanding OCC common stock, Gary Wilson Partners will not, without the prior
written consent of the Company, sell any interest in the Series C Warrants or
the shares of OCC common stock purchasable for cash in connection with the
Series C Warrants, until October 8, 1998.
ASCENT NETWORK SERVICES
ANS, a wholly owned subsidiary of the Company, is a satellite distribution
support service company that operates a nationwide installation, field service
and
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maintenance support business that principally services the NBC affiliate
distribution network. Pursuant to a service contract which runs until 1999, ANS
distributes national television programming of the NBC television network via
satellite transponders leased by NBC to NBC affiliate stations nationwide.
In 1984, in connection with its construction, service and support of NBC's
master earth station and receiver earth stations at NBC affiliates, ANS entered
into a ten year contract to design, build and operate a Ku-band satellite
distribution network, for which the network control center is located in
Florida. The initial ten year contract with NBC was extended to continue
through 1999. The Company owns and operates the network (excluding the
satellite transponders, which are leased by NBC) and receives yearly payments
from NBC in connection with such operations. The network consists of the
network control center, two master earth stations, eight transmit/receive
stations, 170 receive earth stations at NBC affiliates, 54 portable uplink
antennas, and six transportable transmit/receive trucks.
NBC, with ANS's technical assistance, issued a request for information to
certain of its hardware vendors in July 1995 with respect to procuring equipment
necessary to upgrade the NBC distribution network to digital technology. In
August of 1996, ANS and NBC executed a letter of intent pursuant to which ANS
has procured and installed certain of such digital equipment to provide MSNBC,
LLC, a joint venture between NBC and Microsoft Corporation ("MSNBC") with
network service, maintenance and support. The partial digital upgrade service
is being provided for a 10 year term and is currently governed by the
underlying NBC service contract. ANS and MSNBC anticipate finalizing a
service agreement separate from the underlying NBC contract in the first half
of 1997 for the partial digital upgrade service. The network service,
maintenance and support provided to MSNBC are related to and dependent upon
the original NBC distribution network. The Company anticipates that ANS will
assist NBC in a full network upgrade of all satellite distribution locations
to digital technology in late 1998 or early 1999, which will likely involve
significant capital expenditures on the part of the Company and would be
accompanied by an extension of ANS's contract with NBC that expires in 1999.
ANS also provides installation, integration, design and customer service
of the VSAT microwave and fiber optics systems to a variety of customers other
than NBC. In addition, prior to 1996, ANS also included the Company's
Satellite Cinema division, which provided satellite-delivered pay-per-view
movies on a scheduled basis to the lodging industry. In the third quarter of
1995, ANS contributed substantially all of its hotel pay per view assets,
including Satellite Cinema assets, to OCV in exchange for OCV common stock
(the "Contribution"), raising the Company's ownership in OCV by approximately
5% to 84.7% (which was subsequently adjusted to 83.7%). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview" and Note 14 of Notes to Consolidated Financial Statements. In
connection with the Contribution, OCC converted select Satellite Cinema hotel
properties to higher margin OCV services and OCV completed a transaction
whereby it sold certain of the contracts to provide pay-per-view service to
approximately 100,000 rooms and related equipment to TeleVideoComm Corporation
("TVC") for a payment of approximately $3.3 million. Satellite Cinema
operations at the hotel properties not included in the TVC transaction were
not converted and were discontinued.
ENTERTAINMENT
COLORADO AVALANCHE AND DENVER NUGGETS
In June 1996, the Avalanche won the NHL championship in its first year in
Denver. The Company had acquired one of the 26 franchises in the NHL in July
1995 and had moved the franchise to Denver. For the 1995-1996 NHL season, the
Avalanche sold all 12,000 season tickets that the team made available for sale.
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For the 1996 - 1997 season all 12,250 season tickets made available by the team
to the public were sold.
The Nuggets are one of 29 franchises in the NBA. Since the Company's
initial investment in the team in 1989 through the 1995 - 1996 season, the
Nuggets experienced gains in attendance, season ticket sales, corporate
sponsorships, broadcast fees and proceeds from licensed merchandise. For the
1996 - 1997 season Nuggets season ticket sales declined from 11,960 to
approximately 8,700. The Nuggets corporate sales and other arena related sales
have also seen declines of somewhat smaller proportions. The Company assumed
operating control of the Nuggets at the end of the 1991-1992 season and through
the 1995-1996 season, the Nuggets have enjoyed a compound annual growth rate in
revenues (excluding $9.2 million of NBA expansion fees recorded in 1995) of
approximately 17.5%. Revenues for the 1996-1997 season will almost certainly
show a decline from those of the 1995-1996 season.
The Company markets, produces and sells advertising for local market over-
the-air television and radio broadcasts of the Avalanche and the Nuggets games.
In connection with cable television broadcasts, the Company has agreements with
Fox Sports Rocky Mountain ("Fox Sports") whereby Fox Sports pays a rights fee to
the Company and Fox Sports is then entitled to all cable advertising revenue.
The Company believes that the Avalanche and the Nuggets are among only a few
sports franchises to control their own local market cable, over-the-air
television and radio broadcast distribution. The Company produces many of the
Avalanche and the Nuggets games through Colorado Studios, a television
production company that owns and operates mobile television production
facilities and in which the Company owns a one-third interest. The Company
believes that its control of over-the-air television and radio broadcast
distribution increases the profitability to the Company from these media. The
Company also capitalizes on its ownership of the Avalanche and the Nuggets
through marketing and local market sales of branded Avalanche, Nuggets, NHL and
NBA merchandise. The Company believes that its ownership of the Avalanche and
the Nuggets and its control of its own over-the-air television and radio
broadcast distribution form a base of expansion into ancillary entertainment
opportunities in the Rocky Mountain region. To capitalize on this competitive
advantage, the Company is proposing to build a new arena as an integral part of
its operating and growth strategy for the Avalanche and the Nuggets. (See Item
2. "Properties")
SOURCES OF REVENUES
The Avalanche and the Nuggets derive a significant amount of their revenues
from the sale of tickets to home games, the licensing of local market
television, cable network and radio rights and distributions from the leagues.
TICKET SALES. Each of the Avalanche and the Nuggets play an equal number
of home games and away games during the 82-game NBA and 82-game NHL regular
seasons. In addition, the teams play approximately eight exhibition games
prior to the commencement of the regular season. The Avalanche and the
Nuggets receive all revenues from the sale of tickets to regular season
home games (subject, in the case of the Nuggets, to an NBA gate assessment)
and no revenue from the sale of tickets to regular season away games.
Generally, the Avalanche and the Nuggets retain all revenues from the sale
of tickets to home exhibition games played in Denver and the Rocky Mountain
region (less appearance fees paid to the visiting team), and receive
appearance fees for exhibition games played elsewhere. If the Avalanche or
the Nuggets make the playoffs in their respective league, the team receives
revenues from the sale of tickets to playoff games, although a portion of
such ticket revenue is shared with the respective league.
The seating capacity of Denver's McNichols Arena is approximately 17,000
for Nuggets basketball games and approximately 16,000 for the Avalanche
hockey games, including 27 executive suites containing a total of 374
seats. The policy of the Avalanche and the Nuggets is to limit the number
of season tickets so that approximately 25% of the tickets are available on
a per game basis. For the 1996-1997 season, the Avalanche have sold 12,250
season tickets and the Nuggets have sold approximately 8,700 season
tickets.
TELEVISION, CABLE AND RADIO BROADCASTING. The Nuggets and the NBA license
the television and radio broadcast rights to Nuggets basketball games. The
NBA, as agent for its members, licenses the national broadcast of the games
under agreements with NBC Sports, a division of NBC, and Turner Network
Television, Inc. ("TNT"), an affiliate of the Turner Broadcasting System.
Each NBA member team shares equally in these license fees, except that
pursuant to an agreement entered into when the Nuggets and the other former
American Basketball Association ("ABA") teams joined the NBA in 1976, a
portion of the national television revenues otherwise payable to each of
the former ABA teams is paid to a group which owned an ABA franchise that
was not admitted to the NBA. The Nuggets license the local over-the-air
rights to broadcast certain Nuggets games to KWGN, Inc. ("KWGN"), and the
cable rights to broadcast certain games to Fox Sports. Pursuant to the
Nuggets' agreement with KWGN, the Nuggets pay a specified fee per game to
KWGN. In return, the Nuggets are entitled to sell all advertising spots
available during the broadcast and retain all revenues from such sales.
Pursuant to the Nuggets' agreement with Fox Sports, Fox Sports pays a fee
to the Nuggets based upon the number of cable subscribers served, subject
to a specified minimum fee per game, and Fox Sports is entitled to all
advertising revenue. The Nuggets also license the rights to broadcast all
games on radio under an agreement with KKFN, 950 AM.
The Avalanche and NHL license the television and radio broadcast rights to
Avalanche hockey games. The NHL, as agent for its members, licenses the
national broadcast of the games under agreements with ESPN, the Fox
television network and the Canadian Broadcasting Company, which broadcasts
NHL games in Canada. Each NHL member team shares equally in these license
fees. In addition, the Avalanche license the local over-the-air rights to
broadcast select games to the local ABC affiliate, KMGH Television ("KMGH")
and the cable rights to broadcast select games to Fox Sports. Pursuant to
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the Avalanche's agreement with KMGH, the Avalanche pay a specified fee per
game to KMGH. In return, the Avalanche are entitled to sell all
advertising spots available during the broadcast and retain all revenues
from such sales. Pursuant to the Avalanche's agreement with Fox Sports,
Fox Sports pays a rights fee to the Avalanche and Fox Sports is entitled to
all advertising revenue. The Avalanche also license the rights to
broadcast all games on radio under an agreement with KKFN, 950 AM.
OTHER SOURCES. Other sources of revenue for each of the Nuggets and the
Avalanche include their pro rata share of franchise fees to be paid by
expansion teams upon entry to the NBA or NHL and promotional and novelty
revenues, including royalties from marketing and merchandising conducted by
each of the NBA and NHL. In 1995, the Nuggets recorded $9.2 million in
revenue in connection with the admission of two new franchises into the
NBA. In connection with obtaining the NHL's consent to the Company's
acquisition of the Avalanche franchise and relocation to Denver, the
Company agreed that up to $2.0 million of the Avalanche's share of
expansion fees from each of the next four expansion teams will be retained
by the NHL.
The Avalanche and the Nuggets also derive additional revenues through the
sale of signage, promotions and program advertising space to corporate
sponsors, arena concessions and parking and sales generated by team stores
that sell NHL, Avalanche, NBA and Nuggets branded goods.
Each member of the NBA and NHL assigns to its respective league the
exclusive rights to the merchandising of its team name, insignia and other
similar properties, subject to certain restrictions and limitations. Each
of the leagues then pay royalties to each of their respective teams in
consideration of the receipt of such rights. This assignment is subject to
the Nuggets' and the Avalanche's right to use their insignia and symbols in
connection with the promotion of the team in their home territory and
retail sales in their home arena and team owned stores. Each of the NBA
and NHL licenses other companies to manufacture and sell official NBA and
NHL items such as warm-up jackets and sweatshirts, as well as certain non-
sports items.
NBA AND NHL GOVERNANCE
The NBA and the NHL are generally responsible for regulating the conduct of
their member teams. The NBA and the NHL establish the regular season and
playoff schedules for the teams. They also negotiate, on behalf of their
members, the leagues' national over-the-air and cable television contracts and
collective bargaining agreements with the NBA and NHL Players' Associations.
Because the NBA and NHL are joint ventures, each of their members generally has
joint and several liability for the league's liabilities and obligations and
shares in its profits. Under the terms of the constitution and by-laws of the
NBA and the NHL, league approval is required under certain circumstances,
including in connection with the sale or relocation of a member team.
Each of the NBA and the NHL is governed by a Board of Governors, which
consists of one representative from each member team. The Board of Governors of
each league selects the league Commissioner who administers the daily affairs of
the league, including dealings with the Players' Association, interpretations of
playing rules and arbitration of conflicts among members. The Commissioner also
has the power to impose sanctions, including fines and suspensions, for
violations of league rules.
The Commissioner of each of the NBA and NHL has the exclusive power to
interpret the constitution, by-laws, rules and regulations of their respective
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league, and their interpretations are final and binding on the Company, the
Nuggets, the Avalanche and their personnel. In addition, member clubs of the
NBA and NHL may not resort to the courts to enforce or maintain rights or claims
against other member clubs, or to seek resolution of any dispute or controversy
between member clubs, but instead all such matters must be submitted for final
and binding determination to the respective Commissioner of such league without
any right of appeal to the courts or otherwise. Finally, each of the NHL and
the NBA prohibits the acquisition of 5% or more of the direct or indirect
ownership interests in a member club owned by a publicly traded company without
the respective league's prior consent. Neither the NBA nor the NHL, nor any of
their respective member clubs, nor any officer or employee of either league or
its member clubs, other than the Company, has reviewed in advance the
information being provided in this report, or assumes any responsibility for the
accuracy of any representations made by the Company to any potential investors.
On September 13, 1995, the NBA Players' Association approved the new six-
year NBA Collective Bargaining Agreement, which was subsequently ratified by the
NBA owners on September 18, 1995. The NBA Collective Bargaining Agreement
provides for, among other things, maximum and minimum total team salaries to be
paid to players and runs for a term from September 18, 1995 through June 30,
2001. The NBA Collective Bargaining Agreement provides various exceptions to
the salary limitations, including exceptions relating to a team's resigning its
own veteran free agent players, replacing injured players, and signing players
at the minimum individual player salary. As a result of the signing and
ratification of the NBA Collective Bargaining Agreement, the Company does not
anticipate any player labor disruptions in the near future.
The NHL and the NHL Players' Association entered into the new seven-year
NHL Collective Bargaining Agreement on August 11, 1995 that took retroactive
effect as of September 6, 1993. Though the NHL Collective Bargaining Agreement
does not expire until September 15, 2000, both the NHL and NHL Players'
Association had the right to reopen negotiations at the end of the 1997-1998
season. However, both parties have agreed to waive the right to reopen
negotiations in connection with an agreement that allows NHL players to
participate in the 1998 Winter Olympics. As with the NBA Collective Bargaining
Agreement, the Company believes that the NHL Collective Bargaining Agreement
renders unlikely any player labor disruptions in the near future.
COMPETITION
The Nuggets and the Avalanche compete for sports fans' entertainment
dollars not only with each other and other major league sports, but also with
minor league sports, college athletics, other sports entertainment and non-
sports entertainment such as the Colorado Symphony, Opera and Ballet, movies,
local theater and recreational activities such as skiing. During portions of
their respective seasons, the Nuggets and the Avalanche will experience
competition from each other, professional football (the Denver Broncos),
professional baseball (the Colorado Rockies) and women's professional basketball
(the Colorado Xplosion). In addition, the colleges and universities in the
Rocky Mountain region, as well as public and private schools, offer a full
schedule of athletic events throughout the year. The Nuggets and the Avalanche
compete with other United States and foreign teams, professional and otherwise,
for available players.
BROADCAST OPERATIONS
In addition to its Denver sports franchises, the Company also owns a one-
third interest in Colorado Studios, a Denver television production company that
owns and operates mobile television production facilities. Colorado Studios
allows the Company to produce and transmit Nuggets and Avalanche games to the
Rocky Mountain region. Colorado Studios is co-owned equally by the Company, Fox
Sports and Norac, Inc., a Denver-based television production company.
BEACON COMMUNICATIONS
Beacon, a wholly owned subsidiary of the Company acquired in 1994, was
founded in 1990 to produce feature length motion pictures for theater and
television distribution. Beacon's principal focus is the production of high
quality motion pictures with varying budgets. It has developed a production
formula that it believes will allow it to maximize its production capacity while
at the same time optimizing the cost structure and quality of its motion
pictures and television programming. A component of that formula includes
Beacon's strategic relationships with significant domestic and international
motion picture distributors. Beacon began production of three motion pictures
in 1996, all of which are intended to be released in 1997. Beacon currently is
planning to begin production of three motion pictures in 1997, which may be
released in 1998.
In July 1996, Beacon entered into a five-year agreement (the "Universal
Agreement") with Universal Pictures ("Universal"), pursuant to which Universal
has agreed to co-finance and distribute in the United States and Canada, up to
20 pictures produced by Beacon, although Universal is not obligated to accept
more than 4 films per year from Beacon. To date, no motion pictures have been
produced and distributed pursuant to the Universal Agreement. Pursuant to the
Universal Agreement, Beacon pays Universal a distribution fee out of the
revenues generated by domestic distribution of such motion pictures and Beacon
receives net revenues after Universal's fees and expenses. Universal generally
controls all rights to distribute such motion pictures domestically for two full
television syndication cycles, not to exceed 21 years from the theatrical
release of the picture, although Beacon retains the copyrights and retains
certain other rights related to such films such as music publishing,
merchandising and hotel television rights.
In April 1993, Beacon entered into a five-year agreement (the "Sony
Agreement") with Sony Pictures Entertainment, Inc. ("Sony"), pursuant to which
Sony agreed to co-finance and distribute in the United States and Canada,
through Sony's affiliates, including Columbia Pictures and Tri-Star Pictures, up
to 15 motion pictures produced by Beacon. Two motion pictures have been
distributed pursuant to the Sony Agreement. Another has been produced and is
scheduled to be
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released in 1997, the motion picture "Air Force One" starring Harrison Ford.
Pursuant to the Sony Agreement, Beacon and Sony share in the revenues generated
by domestic distribution of such motion pictures. Sony generally controls all
rights to distribute the motion pictures domestically for the later of 14 years
or the end of the second television syndication cycle for such motion picture
(but in no event later than 23 years), although Beacon retains the copyrights.
In July 1996, the Sony Agreement was amended to terminate Sony's exclusive
acquisition term and to provide that Sony has the right to jointly develop,
produce and distribute up to two additional motion pictures with Beacon for
distribution under the Sony Agreement.
Generally, Beacon intends to produce motion pictures with production
budgets in the range of approximately $5 million to $40 million, although Beacon
will also consider certain higher budget projects. In that regard, Beacon
produced "Air Force One" starring Harrison Ford with a production budget of
approximately $95 million which will be distributed domestically pursuant to the
Sony Agreement, and distributed internationally by Buena Vista International,
Inc., a subsidiary of the Walt Disney Company ("Buena Vista"), pursuant to an
agreement which provides for a fixed advance of a significant portion of
production costs.
Beacon plans to release most of its motion pictures on a nationwide basis,
with advertising and distribution budgets generally comparable to those of the
major motion picture companies. This type of release pattern requires
substantial marketing expenditures to create a campaign and purchase advertising
on television, newspapers, radio and other media. Beacon expects that the
Universal Agreement and the Sony Agreement, as amended, will help offset such
costs and provide more cost effective use of Beacon's resources than if Beacon
distributed its motion pictures alone. The Universal Agreement and the Sony
Agreement, as amended, each allow Beacon to continue to offset risks by pre-
selling foreign distribution rights to its motion pictures and each provides
Beacon a proven domestic distribution network for its productions, however the
Universal Agreement is more favorable to Beacon in terms of the overhead advance
paid to Beacon, production funding and domestic print and advertising funding.
In 1997, "Playing God" a suspense film starring David Duchovny and "A
Thousand Acres" starring Michelle Pfeiffer and Jessica Lange will be released
domestically by Buena Vista and not under the Universal Agreement or the Sony
Agreement, as amended. Beacon has retained the foreign distribution rights to
"Playing God" and a portion of the film's production costs are offset by the
domestic distribution arrangement with Buena Vista. "A Thousand Acres" is being
distributed internationally by Polygram Filmed Entertainment ("Polygram") and
the production costs are being split among Beacon, Beacon's co-producer
Propaganda Films, Inc. (a subsidiary of Polygram) and Buena Vista.
The production and release of motion pictures are subject to numerous
uncertainties, however, and there can be no assurance that Beacon's strategy
will be successful, that its release schedule will be met, that Beacon will be
successful in obtaining the necessary financing for its operations or that it
will achieve its goals. Beacon intends to maintain flexibility in order to
adjust its strategies, including the criteria for investing in motion pictures,
in response to changes in the motion picture industry.
COMPETITION
Beacon competes with many other motion picture producers and distributors,
including major motion picture studios. Although the motion picture industry is
extremely competitive, Beacon believes it can attract well known and highly
respected talent at or below market rates as a result of its focus on high
quality scripts. In addition, the Company has generally produced its motion
pictures
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consistent with the established budgets. Beacon believes that its high quality
and production efficiency will allow it to compete effectively.
OTHER BUSINESS INTERESTS
The Company owned a 26% limited partnership interest in New Elitch Gardens,
Ltd. ("Elitch Gardens"), which it purchased at a cost of approximately $7.9
million. Elitch Gardens operated an amusement park in Denver, Colorado. In
October 1996, Elitch Gardens' amusement park was sold to Premier Parks Inc. In
connection with the sale, the Company has recorded a loss on its investment of
$2.3 million in 1996. The Company has received distributions in 1996 and in
January of 1997 in an aggregate amount of $3.6 million for its interest as a
limited partner of Elitch Gardens, and expects an additional distribution in the
first half of 1997. See Note 2 to the Company's Consolidated Financial
Statements.
The Company also owns small equity interests in Maginet Corporation, which
purchases and uses OCC's on-demand systems in the Asia-Pacific region, and
Metromedia International Group, a diversified company pursuing
telecommunications ventures in eastern Europe and producing motion pictures,
among other things. See Note 2 to the Company's Consolidated Financial
Statements.
PATENTS, TRADEMARKS AND COPYRIGHTS
The Company uses a number of trademarks, wordmarks and logos for its
products and services, including "Ascent," "On Command," "Spectravision,"
"Denver Nuggets," "Colorado Avalanche," "Beacon" and others. Many of these
trademarks are registered by the Company, and those trademarks that are not
registered are protected by common law and state unfair competition laws.
Additionally, "Denver Nuggets" is trademarked by the NBA and NBA Properties,
Inc. and "Colorado Avalanche" is trademarked by the NHL and NHL Enterprises,
L.P. and the Company is licensed by such entities to use the names in connection
with its operation of the teams. Because the Company believes that these
trademarks are significant to the Company's business, the Company has taken
affirmative legal steps to protect its trademarks in the past and intends to
actively protect these trademarks in the future. The Company believes that its
trademark position is adequately protected. The Company also believes that its
trademarks are generally well recognized by consumers of its products and are
associated with a high level of quality and value.
OCV and SpectraVision own a number of patents and patent licenses covering
various aspects of its pay-per-view and interactive systems. Although OCV and
SpectraVision maintain these valuable assets, OCC believes that the design,
innovation, and quality of OCV's and SpectraVision's products and their
relations with their customers are at least as important, if not more so, to the
maintenance and growth of the Company.
Distribution rights to motion pictures are granted legal protection under
the copyright laws of the United States and most foreign countries, which
provide substantial civil and criminal sanctions for unauthorized duplication
and exhibition of motion pictures. Beacon plans to take all appropriate and
reasonable measures to secure, protect and maintain or obtain agreements from
licensees to secure, protect and maintain copyright protection for all of the
motion pictures distributed by Beacon under the laws of all applicable
jurisdictions.
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REGULATION
The Federal Communications Commission (the "FCC") has broad jurisdiction
over electronic communications. The FCC does not directly regulate On Command
Corporation's pay-per-view or free-to-guest services. However, the FCC's
jurisdiction does encompass certain aspects of ANS's satellite delivery
operations and of OCC's operations as they relate to the offering of satellite-
delivered pay-per-view movies.
The FCC's jurisdiction also encompasses certain aspects of On Command
Corporation's operations as they relate to its use of the radio frequency
spectrum in certain hotels acquired in connection with SpectraVision.
SpectraVision had obtained optional licenses from the FCC for a number of its
downlink, television receive-only satellite receivers, which are used to receive
transmissions from communications satellites in connection with its free-to-
guest services. SpectraVision had also obtained the required licenses for the
microwave point-to-point relay facilities.
On February 1, 1996, Congress passed the Telecommunications Act of 1996
(the "Telecommunications Act"), which was signed into law on February 8, 1996.
The Telecommunications Act has and will continue to alter federal, state and
local laws and regulations for telecommunications providers and services, and
may affect OCC. There are numerous rulemakings to be undertaken by the FCC that
will interpret and implement the Telecommunications Act. It is not possible at
this time to predict the outcome of such rulemakings.
EMPLOYEES
The Company had approximately 1,070 employees at December 31, 1996. In
addition to the NBA Collective Bargaining Agreement and the NHL Collective
Bargaining Agreement, relating to the players for the Nuggets and the Avalanche,
respectively, Beacon is a signatory to collective bargaining agreements with the
Screen Actors Guild, the Directors' Guild of America and the Writers' Guild of
America. These agreements generally require Beacon to employ union actors,
directors and writers and comply with certain other provisions relating to
compensation, benefits and work rules. Other than the foregoing, none of the
Company's employees is represented by a labor union or collection burgeoning
unit. The Company considers its relations with its employees to be good.
ITEM 2. PROPERTIES
The Company currently leases its principal offices in Denver, Colorado
under a lease which expires in August 1998. The Company also leases facilities
for ANS from COMSAT in Maryland, for Beacon in Los Angeles, California, and for
ANS in Palm Bay, Florida. Through 1996, OCV leased facilities in Santa Clara,
California for its headquarters and manufacturing plant; however, in December
1996 OCC entered into a lease for facilities in San Jose, California and
relocated its headquarters and OCV's manufacturing facilities to that location.
In connection with the OCC Transactions, OCC acquired Spectravision's
headquarters building in Plano, Texas and directed Spectravision to assume
certain leases for office space throughout the United States, Canada, Mexico,
Puerto Rico, Hong Kong and Australia for its customer support operations.
The Avalanche and the Nuggets currently play their home games in Denver's
McNichols Arena, an indoor sports arena located in downtown Denver. McNichols
Arena is owned by the City and County of Denver (the "City") and is made
available to the Nuggets under a lease agreement which extends until the
conclusion of the 2005-2006 season. McNichols Arena is made available to the
Avalanche under a lease agreement which extends until the conclusion of the
1996-1997 season, subject to renewals for two one-year terms. Pursuant to an
amendment to the
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Nuggets lease agreement, the term of the Nuggets' lease decreased by one year
for each of the first two years that the Avalanche played in McNichols Arena
(from the 2007-2008 season to the 2005-2006 season).
The Avalanche's and the Nuggets' leases with the City require the teams to
pay rent to the City for use of McNichols Arena equal to a percentage of the
teams' net income from ticket sales, subject to certain minimum and maximum
annual payments. The City is generally responsible for maintaining McNichols
Arena and providing administrative personnel such as ushers, electricians,
janitors, technicians and engineers. The Avalanche and the Nuggets are
responsible for providing police and fire safety personnel, announcers, timers,
scorers and statisticians. The Avalanche and the Nuggets also share in revenue
from food and beverage concessions and parking rights at McNichols Arena.
The Company is currently developing and reviewing plans for a privately
financed arena for the Avalanche, the Nuggets and other entertainment events,
including among other things, concerts, college sporting events, ice and dance
performances, comedy shows and circuses. Under current plans, the proposed
arena would seat approximately 18,000 for Avalanche games, approximately 19,000
for Nuggets games and approximately 20,000 for concerts and other events. The
proposed arena would have approximately 95 luxury suites and 1,669 luxury seats.
The Company estimates that the cost of the new arena would be approximately $160
million. The Company is currently negotiating with the City regarding the
proposed arena and the current leases of the Avalanche and Nuggets. Management
believes that these negotiations can be successfully concluded, but there can be
no assurance that Ascent will be able to reach acceptable terms for the
construction of the new arena.
On March 28, 1996, Ascent entered into a Land Purchase Agreement with
Southern Pacific Transportation Company ("SPT") pursuant to which Ascent would
purchase approximately 49 acres in downtown Denver as a site for the proposed
arena and entertainment complex for a purchase price of $20,000,000. Pursuant
to the Land Purchase Agreement, the closing of the land purchase had to have
occurred on or before June 29, 1996. The closing did not take place by this
time and the Land Purchase Agreement terminated. It is management's belief
that SPT is likely to reinstate the agreement and the closing date of the
transaction would be subject to several conditions, including obtaining
satisfactory financing and reaching agreements with the City regarding the
construction of the proposed arena and the release of the Nuggets and the
Avalanche from their existing leases at McNichols Arena. The Land Purchase
Agreement also provides for SPT to effect a state-approved environmental
clean-up plan on the site, and provide continuing indemnification with regard
to certain environmental liabilities. Although there can be no assurance, it
is management's belief that SPT will reinstate the Land Purchase Agreement on
substantially similar terms and the closing date for the Land Purchase
Agreement will be extended.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to certain legal proceedings in the ordinary course
of its business. While the outcome of such proceedings cannot be predicted with
certainty, the Company does not believe that any such legal proceedings, to the
extent covered by insurance or otherwise, will have a material adverse effect on
the Company's financial condition or results of operations. In addition,
through its ownership of the Avalanche and the Nuggets, the Company is a
defendant along with other NHL and NBA owners in various lawsuits incidental to
the operations of the two professional sports leagues. The Company will
generally be liable, jointly and severally, with all other owners of the NHL and
NBA, as the case may be, for the costs of defending such lawsuits and any
liabilities of the NHL or NBA which might result from such lawsuits. While the
outcome of such proceedings
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cannot be predicted with certainty, the Company does not believe that any such
lawsuits, singly or in the aggregate, will have a material adverse effect on the
Company's financial condition or results of operations. The Nuggets, along with
three other teams, have also agreed to indemnify the NBA, its member teams and
other related parties against certain ABA-related obligations and litigation,
including costs to defend such actions. The Company believes that the ultimate
disposition and the costs of defending these or any other incidental NBA or NHL
legal matters or of reimbursing related costs, if any, will not have a material
adverse effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G to the Annual Report on Form 10-K,
included herein is the following table, which sets forth the names, ages at
March 3, 1997 and titles of the executive officers of the Company, and
biographical information with respect to such officers.
Charles Lyons 42 President and Chief Executive Officer
Robert M. Kavner 53 President and Chief Executive Officer, On Command
Corporation
James A. Cronin, 42 Executive Vice President, Finance and Chief Operating
III Officer
Arthur M. Aaron 39 Vice President, Business and Legal Affairs and
Secretary
David A. Holden 37 Controller
Ellen Robinson 34 President, Ascent Sports, Inc.
There is no family relationship between an officer and any other officer or
director and no arrangement or understanding between an officer and any other
person pursuant to which he or she was selected as an officer.
Mr. Lyons has been President and a director of the Company since February
1992. He was Vice President and General Manager of the Company from October
1990 to January 1992. Prior to joining COMSAT, Mr. Lyons was with Mariott
Corporation from 1982 to October 1990 in various executive positions. Mr. Lyons
is Chairman of the Board of Directors of OCC.
Mr. Kavner has been President and Chief Executive Officer of OCC since
September, 1996. Prior thereto Mr. Kavner was a principal in Kavner &
Associates, a consulting firm for media and communications companies. From June
1994 through September 1995 Mr. Kavner was an Executive Vice President of
Creative Artists Agency, Inc. ("CAA"). Prior to joining CAA, Mr. Kavner was
Executive Vice President of AT&T Corp. ("AT&T") and Chief Executive Officer of
AT&T's Multimedia Products and Services Group. From 1992 to 1994, Mr. Kavner
was Group Executive for the Communications Products Group of AT&T. From 1988 to
1991, Mr. Kavner was President of AT&T's Data Systems Group. Mr. Kavner is a
director of Fleet Financial Corp. and Tandem Computers Incorporated.
Mr. Cronin has been Executive Vice President, Finance and Chief Operating
Officer of the Company since June 1996. From July to October 1996 Mr. Cronin
was Executive Vice President - Finance, acting Chief Financial Officer and
acting Chief Operating Officer of OCC. Mr. Cronin served as a financial and
management consultant from 1992 through June 1996 and as a partner in Alfred
Checchi Associates, a merchant bank from 1990 through 1991. Mr. Cronin is a
director of OCC and Landair Services, Inc.
Mr. Aaron has been Vice President, Business and Legal Affairs of the
Company since April 1995. From July to December 1996, Mr. Aaron was Vice
President and acting General Counsel of OCC. He was a General Attorney in the
Office of the General Counsel of COMSAT from July 1993 to April 1995. From
October 1987 to July 1993, Mr. Aaron was an attorney at the law firm of Skadden,
Arps, Slate, Meagher & Flom in Boston, Massachusetts.
17
<PAGE>
Mr. Holden has been Controller of the Company since April 1996. Prior
thereto, Mr. Holden was Senior Manager at Deloitte & Touche LLP ("Deloitte")
from 1987 through 1996. Prior to 1987, Mr. Holden was an audit manager at
Deloitte.
Ms. Robinson has been President of Ascent Sports, Inc. since June 1996.
Prior thereto, Ms. Robinson served as General Manager of Pepsi Cola Bottling
Company ("Pepsi")in Denver from 1995 to 1996, Vice President of Customer
Development of Pepsi from 1992 through 1995 and Area Marketing Manager of Pepsi
from 1988 through 1992.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of March 3, 1997, there were approximately 150 record holders of shares
of Common Stock, $.01 par value, of the Company ("Common Stock"). The principal
market for the Common Stock is the NASDAQ Stock Market, where it is traded under
the symbol "GOAL." The Company's Transfer Agent and Registrar is The Bank of
New York, 101 Barclay Street, New York, New York. The Company has not declared
or paid any dividends on the Common Stock and does not intend to do so in the
foreseeable future. For a description of certain restrictions on the Company's
payment of dividends, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 5 to the Company's Consolidated
Financial Statements
The high and low closing prices for the Company's Common Stock for the year
ended December 31, 1996 are as follows:
Quarter Ended High Low
------------- ---- ---
December 31, 1996 $23 1/8 $11 1/2
September 30, 1996 $24 7/8 $15 3/4
June 30, 1996 $25 1/4 $14 1/2
March 31, 1996 $15 3/4 $11 1/4
December 31, 1995* $16 $13 1/2
*The Offering occurred on December 18, 1995, prior to which there was no
public market for the Company's Common Stock.
18
<PAGE>
Item 6. SELECTED FINANCIAL DATA FOR THE REGISTRANT FOR EACH OF THE LAST FIVE
FISCAL YEARS.
The following selected consolidated financial data should be read in conjunction
with the Company's consolidated financial statements and schedules and
accompanying notes and with "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" presented elsewhere in this document.
FIVE YEAR FINANCIAL SUMMARY
(Dollar amounts in thousands, except per share information)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
OPERATIONS:
Income Statement Data: 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Multimedia Distribution Revenue(1). $ 167,976(2) $ 135,782 $ 125,823 $ 97,855 $ 81,767
Entertainment Revenue (1) . . . . . 90,144 66,036(3) 39,653 27,826 21,901
---------- --------- --------- --------- ---------
Total Revenue . . . . . . . . . . . 258,120 201,818(3) 165,476 125,681 103,668
---------- --------- --------- --------- ---------
Operating expenses
Cost of services . . . . . . . . . . 217,949 154,676 107,452 85,998 75,046
Depreciation and amortization. . . . 74,812 53,675 38,820 27,227 22,386
General and administrative . . . . . 9,678 10,002 9,203 7,967 7,089
Provision for restructuring . . . . - 10,866(4) - - 15,318(5)
---------- --------- --------- --------- ---------
Total operating expenses. . . . . 302,439 229,219(4) 155,475 121,192 119,839
---------- --------- --------- --------- ---------
Income (loss) from operations. . . . (44,319) (27,401) 10,001 4,489 (16,171)
Interest expense . . . . . . . . . . (10,715) (759) (326) (567) (2,186)
Other income (expense), net. . . . . 565 (2,070) 1,021 585 597
Income tax benefit (expense) . . . . 11,957 9,835 (4,831) (2,416) 5,506
Minority interest. . . . . . . . . . 6,812 (628) (265) (362) 583
---------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of accounting change
and extraordinary loss . . . . . . (35,700) (21,023) 5,600 1,729 (11,671)
Cumulative effect of accounting
change for income taxes. . . . . . - - - 941 -
Extraordinary loss, net of taxes . . (334) - - - -
---------- --------- --------- --------- ---------
Net income (loss). . . . . . . . . . $ (36,034) $ (21,023) $ 5,600 $ 2,670 $ (11,671)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Weighted average number of common
shares outstanding (6) . . . . . . 29,753 24,217 24,000 24,000 24,000
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Net income (loss) per common
share (6) . . . . . . . . . . . . . $ (1.21) $ (.87) $ .23 $ .11 $ (.49)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
BALANCE SHEET DATA
(AT END OF PERIOD):
Total assets . . . . . . . . . . . $ 736,602 $ 502,603 $ 372,580 $ 270,473 $ 203,085
Total long-term debt . . . . . . . 50,000 70,000 207 1,024 2,570
Equity . . . . . . . . . . . . . . 269,585 301,269 268,197 181,181 137,209
19
<PAGE>
OTHER DATA:
Operating income (loss):
Multimedia Distribution. . . . . . . $ (9,775) $ 2,885 $ 18,140 $ 15,327 $ 12,793
Entertainment. . . . . . . . . . . . (24,812) (9,418) 1,064 (2,871) (6,557)
General and administrative . . . . . (9,732) (10,002) (9,203) (7,967) (7,089)
Restructuring Reserve. . . . . . . . -- (10,866)(4) -- -- (15,318)
---------- --------- --------- --------- ---------
Total. . . . . . . . . . . . . . . $ (44,319) $ (27,401) $ 10,001 $ 4,489 $ (16,171)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Capital Expenditures:
Multimedia Distribution. . . . . . . $78,220 $ 82,903 $ 89,073 $ 63,708 $ 17,700
Entertainment. . . . . . . . . . . . 10,066 2,208 980 1,232 371
---------- --------- --------- --------- ---------
Total Capital Expenditures . . . . $88,286 $ 85,111 $ 90,053 $ 64,940 $ 18,071
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Cash Flow Data:
Net cash provided by operating
activities . . . . . . . . . . . . . $ 23,277 $ 63,771 $ 38,560 $ 27,713 $ 27,528
Net cash used in investing
activities . . . . . . . . . . . . . (113,314) $(180,523) $(119,975) $ (76,086) $ (23,212)
Net cash provided by (used in)
financing activities . . . . . . . . 82,988 $ 124,406 $ 81,554 $ 51,217 $ (3,512)
EBITDA (7)
Multimedia Distribution. . . . . . . $ 52,457 $ 48,277 $ 53,031 $ 39,071 $ 31,227
Entertainment. . . . . . . . . . . . (12,286) (1,135) 4,993 612 (2,695)
General & Administrative . . . . . . (9,678) (10,002) (9,203) (7,967) (7,089)
---------- --------- --------- --------- ---------
Total EBITDA . . . . . . . . . . . . $ 30,493 $ 37,140 $ 48,821 $ 31,716 $21,443
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
Room data:
Total Number of Guest-pay rooms
(at end of period):
On-demand. . . . . . . . . . . . . . 710,000 361,000 248,000 124,000 37,000
Scheduled only . . . . . . . . . . . 208,000 51,000 194,000 264,000 298,000
---------- --------- --------- --------- ---------
Total Rooms. . . . . . . . . . . . 918,000 412,000 442,000 388,000 335,000
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
OCC on-demand backlog (at end of
period (8) . . . . . . . . . . . . . . 58,000 113,000 128,000 137,000 27,000
------ ------- ------- ------- ------
------ ------- ------- ------- ------
</TABLE>
(1) OCC has reclassified certain income statement amounts in OCV's historical
financial statements to be consistent with the presentation used by
SpectraVision, Inc. and to conform to a more common presentation used by
providers of in-room entertainment to the lodging industry. Specifically,
OCV previously reflected certain costs as a reduction of Revenues and has
reclassified such costs as a Cost of Service. This reclassification has no
impact on either OCC's or Ascent's previously reported operating income
(loss). Accordingly, Ascent conformed its presentation to that of OCC's
during the fourth quarter of 1996 in conjunction with this Annual Report on
Form 10-K and Revenues for the Multimedia Distribution segment have
increased by $8.4 million to $135.8 million, by $5.3 million to $125.8
million, by $1.9 million to $97.9 million and by $.7 million to $81.8
million for the years ended December 31, 1995, 1994, 1993, and 1992,
respectively. In addition, both the Avalanche and Nuggets reclassified
certain income statement amounts in their historical financial statements
to be consistent with the presentation in 1996. Accordingly, revenues for
the Entertainment Segments have been restated for all years presented
above.
(2) Includes $24.1 million in revenues from SpectraVision. The results of
operations for the fourth quarter of 1996 include the results from
20
<PAGE>
SpectraVision assets which were acquired on October 8, 1996. See Note 2 of
Notes to the Consolidated Financial Statements.
(3) Includes $9.2 million of NBA expansion fee revenue recorded in the second
quarter of 1995. In addition, the results of operations for the second and
third quarter of 1995 include the results of the Avalanche which was
acquired on July 1, 1995.
(4) Includes a $10.9 million restructuring charge resulting from the
discontinuation of Satellite Cinema's lower margin, scheduled, satellite
delivered pay-per-view service. See Note 12 of Notes to Consolidated
Financial Statements.
(5) Includes a restructuring charge of $15.3 million relating to the Company's
decision to shift its business focus from mid-priced hotels served by
Satellite Cinema's scheduled, satellite delivered pay-per-view systems to
business and luxury hotels served by OCV's on-demand technology, and the
write-off of an equity investment in a company pursuing media ventures in
Russia and other countries in the Commonwealth of Independent States.
(6) Gives effect to the 24,000-for-1 stock split of the outstanding Common
Stock effected upon consummation of the Offering.
(7) 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 income 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 Item 7 under Liquidity and Capital Resources. See the Consolidated
Financial Statements and the Notes thereto appearing elsewhere in this
document. EBITDA for the years ended December 31, 1992 and 1995 excludes
the provisions for restructuring during such periods.
(8) OCC backlog represents the approximate number of hotel rooms under contract
with OCC which are awaiting installation of OCV equipment.
The vast majority of such rooms in the 1996 backlog amount represent
SpectraVision rooms which are to be converted to OCV systems.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this Annual Report.
CERTAIN OF THE STATEMENTS THAT FOLLOW 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.
OVERVIEW
The Company operates in two segments: MultiMedia Distribution, which consists
of OCC and Ascent Network Services, and Entertainment, which consists of the
Denver Nuggets, the Colorado Avalanche and Beacon.
MULTIMEDIA DISTRIBUTION
The Company made its initial investment in OCV in 1991 and owned approximately
84% (78.4% fully diluted) of OCV prior to the acquisition of SpectraVision. On
October 10, 1996 the Company, through OCC, consummated the acquisition of the
assets and properties and certain liabilities of SpectraVision (the
"Acquisition") and acquired 100% of On Command Video Corporation, its previously
84% owned subsidiary ("OCV"). Immediately prior to the Acquisition, OCV, was
merged with a subsidiary of OCC, On Command Merger Corporation, and, OCV as the
surviving corporation, became a wholly owned subsidiary of OCC. At December 31,
1996, 1995 and 1994, the Company owned interests representing approximately 57%,
84% and 80%, respectively in OCC (or OCV in prior years). Subsequent to the
Acquisition, OCC is the leading provider of on-demand in-room entertainment for
the United States lodging industry.
Prior to the OCC Transactions, OCV had experienced rapid growth in the past
three and one half years, increasing its base of installed rooms from
approximately 37,000 rooms in approximately 90 hotels at the end of 1992 to
approximately 441,000 rooms in approximately 1,585 hotels at October 1996.
Conversely, SpectraVision, as a result of financial constraints and its
bankruptcy filing in June 1995, had experienced deterioration in its room base
over the same period. SpectraVision's room base, including both pay-per-view
and free-to-guest, had decreased from approximately 1,059,000 installed rooms in
approximately 2,543 hotels at the end of 1992 to approximately 484,000 rooms,
including both pay-per-view and free-to-guest, in approximately 1,632 hotels at
October 1996.
The following table sets forth information in regard to pay-per-view rooms
installed as of December 31:
22
<PAGE>
1996 1995 1994
---- ---- ----
ROOMS PERCENT ROOMS PERCENT ROOMS PERCENT
----- ------- ----- ------- ----- -------
On-Demand 710,000 77.3 % 361,000 87.6 % 248,000 56.1 %
Scheduled 208,000 22.7 51,000 12.4 194,000 43.9
------- ----- ------- ----- ------- -----
918,000 100.0 % 412,000 100.0 % 442,000 100.0 %
------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- -----
The Company will continue to derive a majority of its revenues from OCC.
Revenue and income growth are expected from the continued installation of on-
demand systems for new hotel customers and to replace scheduled systems of
existing customers. The primary sources of revenues of OCC (which are more
fully discussed below) are movie rentals (including video games and free-to-
guest services), and video system sales.
Through ANS, the Company also provides satellite distribution support services,
principally to affiliates of the NBC television network. In connection with an
extension of ANS's agreement with NBC through 1999, the Company agreed to reduce
the amounts payable by NBC to the Company under the contract, since the original
contract provided for higher payments to the Company to reimburse the Company
for capital expenditures made in connection with the purchase and construction
of certain equipment. As a result of this agreement, the Company expects that
revenues from the NBC contract for each year from 1995 through 1999 will be
approximately $12 million less than in 1994. In addition, NBC, with ANS'
technical assistance, issued a request for information to certain hardware
vendors in July 1995 with respect to procuring equipment necessary to upgrade
the NBC distribution network to digital technology. In August of 1996, ANS and
NBC executed a letter of intent pursuant to which ANS has procured and installed
certain of such digital equipment to provide MSNBC, LLC, a joint venture between
NBC and Microsoft Corporation ("MSNBC") with network service, maintenance and
support. The partial digital upgrade service is being provided for a 10 year
term and is currently governed by the underlying NBC service contract. ANS and
MSNBC anticipate finalizing a service agreement separate from the underlying NBC
contract in the first half of 1997 for the partial digital upgrade service. The
network service, maintenance and support provided to MSNBC are related to and
dependent upon the original NBC distribution network. The Company anticipates
that ANS will assist NBC in completing the upgrade of the NBC network to digital
technology, which will likely involve significant capital expenditures on the
part of the Company and would be accompanied by an extension of ANS's contract
with NBC that expires in 1999. The Company does not anticipate that the
contract to complete the digital upgrade for NBC will be awarded until 1998.
ENTERTAINMENT
The Company made its initial investment in the Nuggets in 1989 with the
acquisition of a 62.5% interest in a limited partnership that acquired the
Nuggets. In 1991 and 1992, the Company acquired the remaining interests in the
partnership. As discussed below, in December 1994, the Company acquired Beacon
and, in July 1995, the Company acquired the Avalanche. As a result, the
Company's results of operations for the year ended December 31, 1994 do not
include results of operations from Beacon or the Avalanche (except, in the case
of Beacon, for results of operations for the month of December 1994).
Similarly, the results of operations for the year ended December 31, 1995
include results of operations from the Avalanche only for the last six months.
In July 1995, the Company acquired one of the 26 franchises in the NHL at a cost
of approximately $75.8 million. The Company has moved the franchise to Denver
to
23
<PAGE>
share Denver's McNichols Arena with the Nuggets, where the team has commenced
play under the Colorado Avalanche name. The financial performance of the
Nuggets and the Avalanche are, to a large extent, dependent on their performance
in their respective leagues. In addition, due to the limitation of the
facilities available at McNichols Arena, the Company expects the Avalanche and
the Nuggets to experience operating losses as long as both teams play in
McNichols Arena. The Company has proposed the construction of a new sports
arena and entertainment complex in which the Nuggets and Avalanche would play,
which is expected to result in increased revenues and improved operating results
for both the Nuggets and the Avalanche.
As a result of the operating losses expected to be incurred by the Avalanche and
the Nuggets and operating expenses at Beacon, the Company expects to incur
operating losses on a consolidated basis through the end of 1997. However, the
Company expects to record positive earnings before income taxes, depreciation
and amortization and positive operating cash flow during this period.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following table sets forth certain data as a percentage of revenue for the
period indicated:
<TABLE>
<CAPTION>
1996 1995
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
(Dollars in thousands)
INCOME STATEMENT DATA
Revenue:
Multimedia Distribution . . . . . . . $ 167,976 65.1% $ 135,782 67.3%
Entertainment . . . . . . . . . . . . 90,144 34.9 66,036 32.7
-------- ----- -------- -----
Total. . . . . . . . . . . . . . . 258,120 100.0 201,818 100.0
Cost of services. . . . . . . . . . . . 217,949 84.4 154,676 76.6
Depreciation and amortization . . . . . 74,812 29.0 53,675 26.6
General and administrative. . . . . . . 9,678 3.8 10,002 5.0
Provision for restructuring . . . . . . - -- 10,866 5.4
-------- ----- -------- -----
Operating loss. . . . . . . . . . . . . (44,319) (17.2) (27,401) (13.6)
Other income (expense). . . . . . . . . 565 0.2 (2,070) (1.0)
Interest expense. . . . . . . . . . . . (10,715) (4.1) (759) (0.4)
Income tax benefit . . . . . . . . . . 11,957 4.6 9,835 4.9
Minority interest . . . . . . . . . . . 6,812 2.6 (628) (0.3)
Extraordinary loss, net . . . . . . . . (334) (0.1) - -
-------- ----- -------- -----
Net loss. . . . . . . . . . . . . . . . (36,034) (14.0)% $(21,023) (10.4)%
-------- ----- -------- -----
-------- ----- -------- -----
</TABLE>
REVENUE. Revenue increased by $56.3 million, or 27.9%, to $258.1 million for
the year ended December 31, 1996 from $201.8 million for the year ended December
31, 1995. Multimedia Distribution revenue increased by $32.2 million, or 23.7%,
to $168.0 million for the twelve months ended December 31, 1996 from $135.8
million for the twelve months ended December 31, 1995. While Revenues for the
year ended December 31, 1996 include $21.4 million from the SpectraVision assets
acquired by OCC in October, 1996, 1995 revenue includes $24.7 million of
revenues from the Company's Satellite Cinema business, which ceased operations
on December 31, 1995. Excluding the 1995 Satellite Cinema revenues and the
1996 SpectraVision revenues, MultiMedia distribution segment revenues increased
$35.3 million or 32% over 1995 revenues. This increase is primarily
attributable to the 29% growth in 1996 of OCV installed on-demand rooms (from
361,000 rooms at December 31, 1995 to 466,000 rooms at December 31, 1996.) In
addition, revenues increased at ANS due to revenues earned for services provided
under the NBC agreement for the MSNBC partial digital upgrade. Entertainment
revenue increased by $24.1 million, or 36.5%, to $90.1 million for the year
ended December 31, 1996 from $66.0 million
24
<PAGE>
for the year ended December 31, 1995 primarily as a result of revenues from the
Avalanche. The Avalanche, acquired in July 1995, reflected no revenues in the
first half of 1995 as compared to $26.4 million for the first six months of
1996. The increased Avalanche revenues was partially offset by lower revenues
at the Nuggets, primarily attributable to the absence of $9.2 million in NBA
expansion fees recognized in 1995 and by lower revenues at Beacon, as Beacon had
no movie releases in 1996 as compared to one in 1995.
COST OF SERVICES. Cost of services for Multimedia Distribution was $115.5
million, or 69% of Multimedia Distribution revenue, for the year ended December
31, 1996 compared to $87.5 million, or 64% of Multimedia Distribution revenue,
for the year ended December 31, 1995. The decline in Multimedia Distribution
margin is primarily attributable to one-time charges of $8.7 million at OCC for
costs associated with the integration of SpectraVision, the alignment of OCC's
operating practices and the establishment of OCC as a new public company. In
addition, OCC's margin also decreased due to increases in free-to-guest costs
and movie royalty expenses in 1996 as compared to 1995. Cost of services for
Entertainment was $102.4 million, or 114% of Entertainment revenue for the year
ended December 31, 1996, compared to $67.2 million, or 102% of Entertainment
revenue, for the year ended December 31, 1995. The decline in Entertainment
margin is attributable to increased operating losses at the Nuggets which is
primarily attributable to lower ticket revenues due to reduced attendance and
the absence of NBA expansion fees of $9.2 million recognized in 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for Multimedia
Distribution was $62.2 million, or 37% of Multimedia revenue for the year ended
December 31, 1996, compared to $45.4 million, or 33% of Multimedia revenue for
the year ended December 31, 1995. This increase in depreciation and
amortization is primarily attributable to the capital investment associated with
installing on-demand service systems in hotels and to a lesser extent, the
depreciation and amortization associated with assets acquired from the
SpectraVision acquisition. Depreciation and amortization for Entertainment was
$12.6 million, or 14.0% of Entertainment revenue, for the year ended December
31, 1996, compared to $8.3 million, or 12.6% of Entertainment revenue, for the
year ended December 31, 1995. This increase in depreciation and amortization is
attributable to the amortization of the intangible assets acquired in the
Avalanche acquisition for the entire calendar year of 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended December 31, 1996 were $9.7 million, or 3.8% of revenues,
compared to general and administrative expenses of $10.0 million, or 5% of
revenues for the year ended December 31, 1995. This decrease primarily reflects
the reduction of approximately $2.4 million in certain general and
administrative service charges from COMSAT offset by an increase in costs
associated with the relocation of the Company's headquarters to Denver and the
costs associated with being a publicly traded corporation in 1996.
OTHER INCOME (EXPENSE). Other income for the year ended December 31, 1996 was
$.6 million, an increase of $2.6 million from the year ended December 31, 1995
which reflected $2.1 million in other expense. Other income in 1996 includes a
gain of $1.9 million from the sale of investment securities in 1996 offset by a
$2.3 million loss in 1996 on its limited partnership investment in Elitch
Gardens. The improvement over 1995 is primarily due to the settlement of a
lawsuit in 1995 with a former employee of OCV of $1.5 million and a charge of
$.9 million for expenses in 1995 associated with the Company's portion of
certain site-specific plans for a new arena in Denver.
INTEREST EXPENSE AND EXTRAORDINARY LOSS. Interest expense for the year ended
December 31, 1996 was $10.7 million, an increase of $10.0 million from the year
25
<PAGE>
ended December 31, 1995. This increase is attributable to borrowings incurred
in conjunction with Ascent's initial public offering in December 1995 and the
additional borrowings incurred during 1996 to fund the Company's continuing
expansion of its businesses, primarily for capital expenditures at OCC and the
assumption of debt in connection with the SpectraVision acquisition. In
conjunction with the SpectraVision transaction, the Company and On Command each
obtained new credit agreements with a bank. The Company recorded an
extraordinary loss of $334,000, net of taxes, in the fourth quarter of 1996 in
connection with the extinguishment of its previous credit facility with its
former lender.
INCOME TAX BENEFIT. Income tax benefit for the year ended December 31, 1996 was
$12.0 million, compared to an income tax benefit of $9.8 million for the year
ended December 31, 1995. The Company's effective rate declined to 22 percent in
1996 from 32.5 percent in 1995. This decline in the Company's effective tax
rate is primarily attributable to the losses incurred by OCC during the fourth
quarter of 1996, 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 carryforward, prior to their expiration. See Note 8 of Notes to the
Consolidated Financial Statements.
NET INCOME (LOSS). As a result of the foregoing, net loss for the year ended
December 31, 1996 was $36.0 million, compared to net loss of $21.0 million for
the year ended December 31, 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The following table sets forth certain data as a percentage of revenue for the
period indicated:
<TABLE>
<CAPTION>
1995 1994
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
(Dollars in thousands)
INCOME STATEMENT DATA
Revenue:
Multimedia Distribution. . . . . . . . $135,782 67.3% $125,823 76.0%
Entertainment. . . . . . . . . . . . . 66,036 32.7 39,653 24.0
-------- ----- -------- -----
Total. . . . . . . . . . . . . . . . 201,818 100.0 165,476 100.0
Cost of services. . . . . . . . . . . . 154,676 76.6 107,452 64.9
Depreciation and amortization . . . . . 53,675 26.6 38,820 23.5
General and administrative. . . . . . . 10,002 5.0 9,203 5.6
Provision for restructuring . . . . . . 10,866 5.4 - -
-------- ----- -------- -----
Operating income (loss) . . . . . . . . (27,401) 13.6 10,001 6.0
Other income (expense). . . . . . . . . (2,070) (1.0) 1,021 0.6
Interest expense. . . . . . . . . . . . (759) (0.4) (326) (0.2)
Income tax benefit (expense). . . . . . 9,835 4.9 (4,831) (2.9)
Minority interest . . . . . . . . . . . (628) (0.3) (265) (0.1)
-------- ----- -------- -----
Net income (loss) . . . . . . . . . . . $(21,023) (10.4)% $ 5,600 3.4%
-------- ----- -------- -----
-------- ----- -------- -----
</TABLE>
REVENUE. Revenue increased by $36.3 million, or 21.9%, to $201.8 million for
the year ended December 31, 1995 from $165.5 million for the year ended December
31, 1994. Multimedia Distribution revenue increased by $10.0 million, or 7.9%,
to $135.8 million for the twelve months ended December 31, 1995 from $125.8
million for the twelve months ended December 31, 1994 as a result of a 46%
increase in installed on-demand rooms, offset in part by a 74% decrease in
installed scheduled service rooms (primarily as a result of conversion to OCV's
on-demand technology) and reduced revenue from NBC for network distribution
support services. See "Overview - Multimedia Distribution." Entertainment
revenue increased by $26.4 million, or 66.5%, to $66.0 million for the year
ended December 31, 1995 from $39.7 million for the year ended December 31, 1994
as a result of the Nuggets' share of NBA expansion fees of $9.2 million in
connection with the admission of two new teams to the NBA in 1995; the
acquisition of Beacon on December 1, 1994, which generated $6.5 million in
revenue; and the acquisition of the Colorado Avalanche in July 1995, which
generated revenue of $12.3 million during the last six months of 1995.
COST OF SERVICES. Cost of services for Multimedia Distribution was $87.5
million, or 64.4% of Multimedia Distribution revenue, for the year ended
December 31, 1995 compared to $72.8 million, or 57.9% of Multimedia Distribution
revenue, for the year ended December 31, 1994. The decline in Multimedia
Distribution margin is attributable to lower margins under the NBC contract and
the Company's Satellite Cinema division, offset in part by the growth in the
number of higher margin on-demand hotel rooms serviced by OCV. In connection
with the 1994 extension of the Company's agreement with NBC, the Company agreed
to reduce its margins under the NBC contract in connection with the extension of
such contract through 1999. Cost of services for Entertainment was $67.2
million, or 102% of Entertainment revenue, for the year ended December 31, 1995,
compared to $34.7 million, or 87.5% of Entertainment revenue, for the year ended
December 31, 1994. The decline in Entertainment margin is attributable to
negative operating margins for both Beacon and the Colorado Avalanche, partially
offset by NBA expansion fees.
26
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for Multimedia
Distribution was $45.4 million for the year ended December 31, 1995, compared to
$34.9 million for the year ended December 31, 1994. This increase in
depreciation and amortization is attributable to the capital investment
associated with installing on-demand service systems in hotels, coupled with
slightly higher installation costs per room as a result of the addition of
smaller hotels to the room base. Depreciation and amortization for
Entertainment was $8.3 million, or 12.6% of Entertainment revenue, for the year
ended December 31, 1995, compared to $3.9 million, or 9.8% of Entertainment
revenue, for the year ended December 31, 1994. This increase in depreciation
and amortization is attributable to the amortization of the intangible assets
acquired in the Beacon acquisition beginning in December 1994 and amortization
of the intangible assets acquired in the Avalanche acquisition beginning in July
1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended December 31, 1995 were $10.0 million, or 5.0% of revenues,
compared to general and administrative expenses of $9.2 million, or 5.6% of
revenues for the year ended December 31, 1994.
PROVISION FOR RESTRUCTURING. The provision for restructuring during the year
ended December 31, 1995 resulted from the discontinuation of Satellite Cinema's
lower margin, scheduled, satellite-delivered pay-per-view service. See Note 12
of Notes to Consolidated Financial Statements.
OPERATING INCOME. As a result of the above factors, operating income (excluding
the restructuring provision) for the Multimedia Distribution segment was $2.9
million, or 2.1% of Multimedia Distribution revenue, for the year ended December
31, 1995, compared to $18.1 million, or 14.4% of Multimedia Distribution
revenue, for the year ended December 31, 1994. Entertainment had an operating
loss of $9.4 million, or 14.2% of Entertainment revenue, for the year ended
December 31, 1995, compared to operating income of $1.1 million, or 2.8% of
Entertainment revenue, for the year ended December 31, 1994.
OTHER INCOME (EXPENSE). Other expense for the year ended December 31, 1995 was
$2.1 million, an increase of $3.1 million from the year ended December 31, 1994.
This increase is primarily due to the settlement of a lawsuit in 1995 with a
former employee of OCV and a charge for expenses associated with the Company's
portion of certain site-specific plans for a new arena in Denver.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1995 was $.8
million as compared to $.3 million for the year ended December 31, 1994. The
increase is attributable to interest incurred on certain severance obligations
of the Nuggets.
INCOME TAX BENEFIT (EXPENSE). Income tax benefit for the year ended December
31, 1995 was $9.8 million, compared to income tax expense of $4.8 million for
the year ended December 31, 1994. The Company's effective tax rate in 1995 was
33% as compared to 45% in 1994. In 1994, the Company generated operating income
of $10.0 million, a significant portion of which was attributable to OCV which,
at that time, was not included in the Company's consolidated tax group.
Accordingly, tax losses generated by the Company's other subsidiaries could not
be used to offset OCV's taxable income in 1994. See Note 8 of Notes to the
Consolidated Financial Statements.
NET INCOME (LOSS). As a result of the foregoing, net loss for the year ended
December 31, 1995 was $21.0 million, compared to net income of $5.6 million for
the year ended December 31, 1994.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of cash during the year ended December 31, 1996 were cash
from operations of $23.3 million, net borrowings under the Company's bank credit
facilities of $120.3 million, proceeds of $3.6 million from the sale of certain
investments owned by the Company and the collection of $6.7 million on notes and
other receivables. Cash was expended primarily for property and equipment as
the Company continued to make investments to support business growth.
Specifically, capital expenditures of $70.5 million were made by OCC for the
continuing installation of on-demand systems, $9.1 million for the development
of the proposed arena in Denver, $6.8 million by ANS for the partial digital
upgrade of the MSNBC network and the investment of $21.1 million in cash by
Beacon for the development and production of three major motion pictures.
The Company's negative working capital position increased by $190.5 million from
December 31, 1995 to December 31, 1996. This is primarily attributable to an
increase in short-term debt of $143.0 million used mainly for the acquisition of
long-term assets of $221.4 million.
The Company has access to short-term financing and OCC has access to short-term
and long-term financing under their respective Credit Facilities, as amended on
March 23, 1997. See Note 6 of Notes to the Consolidated Financial Statements.
As a result of these amendments, Ascent reduced the maximum amount available
under the Ascent Credit Facility from $200.0 million to $140.0 million and OCC
increased its available borrowings under its revolving credit facility from
$125.0 million to $150.0 million (see Note 6 of Notes to the Consolidated
Financial Statements). Based on these amendments and borrowings outstanding
at March 23, 1997, Ascent has $33.0 million available under the Ascent Credit
Facility and OCC has $47.0 million in available borrowings under the OCC
Credit Facility, subject to certain covenant restrictions.
The Amendment to the Ascent Credit Facility provides among other things,
that the facility will not be renewable for two additional one year options
beyond October 9, 1997 unless, prior thereto, Ascent has received not less than
$50.0 million in proceeds from a new debt financing which is subordinated to the
Ascent Credit Facility. Based on current market conditions, management of
Ascent currently believes that they will be successful in obtaining the
additional subordinated debt by October 9, 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 or that such financing
will be available on terms acceptable to Ascent. If Ascent were not able to
obtain the additional subordinated financing, Ascent could be required to
refinance the Ascent Credit Facility which could require Ascent to reduce or
reschedule planned capital investments, reduce capital outlays or sell assets.
The Company's cash requirements during 1997 are expected to include (i) the
continuing installation by OCC of on-demand systems, (ii) an investment in a new
arena and entertainment complex in Denver for use by the Nuggets and Avalanche,
(iii) the funding of the production of motion pictures at Beacon (iv) funding
the operating requirements of Ascent and its subsidiaries (excluding OCC), and
(v) the payment of interest under the Ascent and OCC credit facilities. The
Company anticipates that 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. While the Company
continues to plan to finance the construction of the new arena in Denver,
whereby the Company's equity participation would consist of expenditures
totaling $20-$25 million, of which approximately $11.5 million has been
incurred, any additional cash expenditures for such participation would be
delayed until the summer of 1997 due to continued delays in reaching an
agreement with the City and County of Denver. Beacon's capital requirements
with respect to the funding of its current movie productions are expected to
consist of expenditures totaling $30-35 million during the first three
quarters of 1997. Capital requirements with respect to the
28
<PAGE>
funding of additional productions at Beacon will be dependent upon the number,
nature and timing of these projects that the Company determines to pursue
during 1997. The Company will utilize the Universal Agreement when
appropriate, to 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 will be sufficient for the Company
and its subsidiaries to satisfy their growth and finance working capital
requirements through 1997.
In the COMSAT Corporate Agreement, Ascent agreed not to incur any indebtedness,
other than that under Ascent's previous $175 million revolving credit facility
(and refinancings thereof) and indebtedness incurred in the ordinary course of
business which together shall not exceed $175 million in the aggregate, without
COMSAT's consent. In September 1996, in connection with the combination of On
Command Video Corporation ("OCV") and the assets and certain liabilities of
SpectraVision, Inc. into On Command Corporation ("OCC"), and in consideration of
Ascent's other capital requirements, COMSAT consented to permit Ascent to incur
consolidated indebtedness (including indebtedness of OCC) of up to $216 million
under the COMSAT Corporate Agreement, provided that: (i) no more than $50
million of such indebtedness may constitute long term debt; and (ii)
indebtedness in excess of $175 million may only be incurred to satisfy funding
requirements for 1996. At that time, COMSAT also consented to Ascent entering
into a new credit facility with aggregate available borrowings of up to $200
million, and OCC entering into a $125 million credit facility, as discussed
above.
On November 15, 1996, COMSAT consented to increase the limitation on
consolidated indebtedness which Ascent may incur pursuant to the COMSAT
Corporate Agreement to $236 million; provided that: (i) no more than $50
million of such indebtedness may constitute long term debt; and (ii)
indebtedness in excess of Ascent's indebtedness existing at December 31, 1996
may only be used to satisfy Ascent's consolidated funding requirements through
June 30, 1997, as approved by the Ascent Board of Directors.
Also in connection with the SpectraVision transaction, Ascent and OCC entered
into a Corporate Agreement (the "OCC Corporate Agreement"), pursuant to which
OCC agreed, among other things, not to incur any indebtedness, other than under
OCC's Credit Facility (and refinancings thereof) and indebtedness incurred in
the ordinary course of business which together shall not exceed $100 million in
the aggregate, without Ascent's prior written consent.
A primary purpose of both the COMSAT Corporate Agreement and the OCC Corporate
Agreement is to require Ascent to coordinate its consolidated capital
requirements with COMSAT so that COMSAT can monitor compliance with the
regulations of the Federal Communications Commission ("FCC") applicable to the
capital structure and debt financing activities of COMSAT and its consolidated
subsidiaries. COMSAT is required to submit a financial plan to the FCC for
review annually. Under existing FCC guidelines, COMSAT is subject to a limit of
$200 million in short-term debt, a maximum long-term debt to total capital ratio
of 45%, and an interest coverage ratio of 2.3 to 1. The latter two guidelines
are measured at year end. In October 1996, the FCC approved a temporary
decrease in the interest coverage ratio to a minimum of 1.9 to 1, and an
increase in the short-term debt limit to $325 million for the 1996 plan year and
until the FCC acts on COMSAT's 1997 capital plan. COMSAT has informed Ascent
that COMSAT was in compliance with the FCC guidelines, as modified, at December
31, 1996.
As part of Ascent's 1997 operating and capital planning process, Ascent
management requested that COMSAT increase its debt limit beginning in January
1997, which
29
<PAGE>
resulted in the increase described above. On March 21, 1997, COMSAT consented
to increase the limitation on aggregate consolidated indebtedness which Ascent
may incur pursuant to the COMSAT Corporate Agreement to $270.0 million for the
remainder of 1997; provided that (i) no more than $50 million of such
indebtedness may constitute long term debt; and (ii) indebtedness subordinated
to indebtedness under Ascent's existing credit facility could only be incurred
on terms which did not adversely affect COMSAT's proposed tax-free
distribution of its interest in Ascent to COMSAT shareholders. In connection
with COMSAT's consent under the COMSAT Corporate Agreement, Ascent consented
under the OCC Corporate Agreement to increase OCC's limitation on indebtedness
to not more than $116,000,000 by June 30, 1997, and to $130,000,000 by
December 31, 1997; provided however, that (i) no more than $50,000,000 of such
indebtedness may constitute long term debt, and (ii) indebtedness may only be
incurred in compliance with the financial covenants contained in OCC's
existing $150,000,000 Credit Facility, with any amendments to such covenants
subject to the written consent of Ascent. Ascent management believes that the
$270.0 million aggregate limit and related restrictions on Ascent's
consolidated indebtedness will be adequate to fund its consolidated operations
through 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 operating performance of Ascent's
subsidiaries, unanticipated costs associated with the integration of
SpectraVision's and OCV's businesses, the level of ticket sales and other
revenues by Ascent's professional sports franchises, the timing of film
productions and releases, the timing of NBC's decision to grant ANS the
digital upgrade contract, and other market conditions.
Finally, on October 18, 1996 COMSAT announced that it intends to divest its
80.67% percent ownership interest in Ascent through a sale, spin-off or other
transaction. COMSAT has engaged Morgan Stanley & Co. Incorporated to act as its
financial advisor for the divestiture. On March 24, 1997, COMSAT announced that
in January 1997 it had filed for a ruling with the Internal Revenue Service to
allow the spin-off of Ascent as a tax-free dividend to its shareholders, and
that it expects to receive the ruling by May 1997. Pending the ruling, COMSAT
will continue efforts to identify a purchaser for its interest in Ascent.
Depending on COMSAT's form of divestiture, the impact to the ongoing operations
of Ascent may vary. However, as a result of a divestiture whereby Ascent is no
longer part of COMSAT's consolidated tax group, Ascent may be unable to
recognize tax benefits and in turn, receive cash payments from COMSAT resulting
from Ascent's anticipated operating losses during 1997.
Inflation has not significantly impacted the Company's financial position or
operations.
SEASONALITY
OCC's business is seasonal, with higher revenues realized during the summer
months and lower revenues realized during the winter months due to business and
vacation travel patterns. Conversely, because the NHL and NBA season extend
from the fall to late spring, the Company realizes the vast majority of its
revenues from the Nuggets and the Avalanche during such period.
30
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Ascent Entertainment Group, Inc.:
We have audited the accompanying consolidated balance sheets of Ascent
Entertainment Group, Inc. and its subsidiaries (the "Company") as of December
31, 1996 and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ascent Entertainment
Group and its subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects, the information set forth
therein.
/s/ Deloitte & Touche
Deloitte & Touche LLP
Denver, Colorado
March 23, 1997
31
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
December 31,
--------------------------
1996 1995
---- ----
Current assets:
Cash and cash equivalents . . . . . . . . $ 3,963 $ 11,012
Receivables, net (Note 3) . . . . . . . . 54,695 45,041
Deferred income taxes (Note 8). . . . . . 3,580 4,394
Income taxes receivable . . . . . . . . . 6,931 434
Prepaid expenses. . . . . . . . . . . . . 11,247 6,558
Other current assets. . . . . . . . . . . 3,324 3,656
---------- ----------
Total current assets. . . . . . . . . . 83,740 71,095
Property and equipment, net (Note 4) . . . . 301,498 220,602
Goodwill, net. . . . . . . . . . . . . . . . 132,805 47,393
Franchise rights, net. . . . . . . . . . . . 102,189 107,962
Film inventory, net (Note 5) . . . . . . . . 76,234 11,470
Investments. . . . . . . . . . . . . . . . . 9,150 6,628
Other assets, net. . . . . . . . . . . . . . 30,986 37,453
---------- ----------
Total assets . . . . . . . . . . . . . . . . $ 736,602 $ 502,603
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings (Note 6). . . . . . $ 143,000 $ -
Current portion of long-term debt . . . . - 207
Accounts payable. . . . . . . . . . . . . 19,992 6,783
Payable to COMSAT . . . . . . . . . . . . 4,662 7,217
Deferred income . . . . . . . . . . . . . 81,942 38,060
Other accrued liabilities . . . . . . . . 39,559 33,764
---------- ----------
Total current liabilities . . . . . . . 289,155 86,031
Long-term debt (Note 6). . . . . . . . . . . 50,000 70,000
Other long-term liabilities (Note 7) . . . . 14,645 13,843
Deferred income taxes (Note 8) . . . . . . . 5,742 3,593
---------- ----------
Total liabilities . . . . . . . . . . . 359,542 173,467
Minority interest (Note 2) . . . . . . . . . 107,475 27,867
Commitments and contingencies
(Notes 2, 4, 6, 9). . . . . . . . . . . . - -
Stockholders' equity (Note 10):
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, none
outstanding . . . . . . . . . . . . . . - -
Common stock, par value $.01 per share,
60,000,000 shares authorized,
29,754,000 issued and outstanding . . . 297 297
Additional paid-in capital. . . . . . . 307,569 304,571
Accumulated deficit . . . . . . . . . . (39,633) (3,599)
Unrealized gain on available for sale
securities, net of taxes. . . . . . . . 1,352 -
---------- ----------
Total stockholders' equity. . . . . . . 269,585 301,269
---------- ----------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . . . $ 736,602 $ 502,603
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues (Note 3 and Note 14 for related
party revenues) . . . . . . . . . . . $ 258,120 $ 201,818 $ 165,476
----------- ----------- -----------
Operating expenses:
Cost of services . . . . . . . . . . . 217,949 154,676 107,452
Depreciation and amortization. . . . . 74,812 53,675 38,820
General and administrative . . . . . . 9,678 10,002 9,203
Provision for restructuring (Note 11) - 10,866 -
Total operating expenses . . . . . . 302,439 229,219 155,475
----------- ----------- -----------
Income (loss) from operations. . . . . . (44,319) (27,401) 10,001
Other income (expense), net. . . . . . . 565 (2,070) 1,021
Interest expense . . . . . . . . . . . . (10,715) (759) (326)
----------- ----------- -----------
Income (loss) before taxes, minority
interest and extraordinary loss . . . (54,469) (30,230) 10,696
Income tax benefit (expense) (Note 8) . 11,957 9,835 (4,831)
----------- ----------- -----------
Income (loss) before minority interest
and extraordinary loss. . . . . . . . (42,512) (20,395) 5,865
Minority interest. . . . . . . . . . . . 6,812 (628) (265)
----------- ----------- -----------
Income (loss) before extraordinary
loss. . . . . . . . . . . . . . . . . (35,700) (21,023) 5,600
Extraordinary loss on early
extinguishment of debt, net of
taxes (Note 6). . . . . . . . . . . . (334) - -
----------- ----------- -----------
Net income (loss). . . . . . . . . . . . $ (36,034) $ (21,023) $ 5,600
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per common share:
Before extraordinary loss . . . . . . $ (1.20) $ (.87) $ .23
Extraordinary loss on early
extinguishment of debt, net of
taxes . . . . . . . . . . . . . . . (.01) - -
----------- ----------- -----------
Net income (loss) per share . . . . . $ (1.21) $ (.87) $ .23
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of common
shares outstanding . . . . . . . . . . 29,753,000 24,217,000 24,000,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Unrealized
Gain on
Additional Available- Total
Business Common Paid-in Accumulated for-Sale- Stockholders'
Equity Stock Capital Deficit Securities Equity
------ ----- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 . . . . . . . $ 181,181
Net income . . . . . . . . . . . . . . 5,600
Net transfers from COMSAT
and subsidiaries . . . . . . . . . . 81,416
-----------
Balance at December 31, 1994 . . . . . . 268,197
Net loss . . . . . . . . . . . . . . . (17,424)
Net transfers from COMSAT
and subsidiaries . . . . . . . . . . 115,110
-----------
Balance at December 17, 1995 . . . . . . 365,883
Net loss . . . . . . . . . . . . . . . $ (3,599) $(3,599)
Repayment of COMSAT loan . . . . . . . (140,000)
Incorporation of Ascent
Entertainment Group, Inc.. . . . . . (225,883) $ 240 $ 225,643 225,883
Net proceeds from initial
public offering on
December 18, 1995. . . . . . . . . . 57 78,928 78,985
----------- ------ ---------- ----------- -------- ----------
Balance at December 31, 1995 . . . . . . - 297 304,571 (3,599) 301,269
Net loss . . . . . . . . . . . . . . . (36,034) (36,034)
Investment in OCC adjustment
(Note 2) . . . . . . . . . . . . . . 1,178 1,178
Capital contribution from
COMSAT (Note 10) . . . . . . . . . . 1,820 1,820
Unrealized gain on available -
for-sale-securities, net of
taxes. . . . . . . . . . . . . . . . 1,352 1,352
----------- ------ ---------- ----------- -------- ----------
Balance at December 31, 1996 . . . . . . $ - $ 297 $ 307,569 $ (39,633) $ 1,352 $ 269,585
----------- ------ ---------- ----------- -------- ----------
----------- ------ ---------- ----------- -------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . $ (36,034) $ (21,023) $ 5,600
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . 74,812 53,675 38,820
Amortization of film inventory . . . . 8,442 4,904 -
Provision for loss on investments. . . 2,310 - -
Extraordinary loss on
extinguishment of debt, net . . . . . 334 - -
Provision for restructuring. . . . . . - 10,866 -
Changes in operating assets and
liabilities:
Current assets . . . . . . . . . . . . (2,723) (10,034) (7,860)
Current liabilities. . . . . . . . . . (19,203) 27,749 10,095
Noncurrent assets. . . . . . . . . . . (4,892) (1,872) (6,535)
Noncurrent liabilities . . . . . . . . (341) (1,280) (1,981)
Other . . . . . . . . . . . . . . . . . 572 786 421
-------- --------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . 23,277 63,771 38,560
-------- --------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from notes and other long-term
receivable. . . . . . . . . . . . . . 6,684 787 -
Proceeds from sale of investments . . . 3,608 - -
Net expenditures for film production
costs . . . . . . . . . . . . . . . . (21,050) (12,549) (181)
Purchase of property and equipment. . . (88,859) (89,487) (87,681)
Investment in unconsolidated
businesses. . . . . . . . . . . . . . (4,125) (3,625) -
Acquisitions of businesses. . . . . . . (9,572) (76,249) (33,148)
Other . . . . . . . . . . . . . . . . . - 600 1,035
-------- --------- --------
Net cash used in investing
activities. . . . . . . . . . . . . . (113,314) (180,523) (119,975)
-------- --------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings under former
credit facilities . . . . . . . . . . 75,000 70,000 -
Repayment of borrowings under former
credit facilities . . . . . . . . . . (145,000) (817) (1,348)
Proceeds from borrowings under revolving
credit loans. . . . . . . . . . . . . 205,537 -
Payments under revolving credit loans
and other notes payable . . . . . . (15,207) - -
Payment of assumed debt from
SpectraVision acquisition . . . . . . (40,000) - -
Capital Contribution from COMSAT. . . . 1,820 - -
Proceeds from issuance of subsidiary's
stock . . . . . . . . . . . . . . . . 2,587 209 1,486
Repayment of COMSAT note. . . . . . . . - (140,000) -
Net transfers from COMSAT and its
subsidiaries. . . . . . . . . . . . . - 115,110 81,416
Common stock issued . . . . . . . . . . - 78,985 -
Other . . . . . . . . . . . . . . . . . (1,749) 919 -
-------- --------- --------
Net cash provided by financing
activities. . . . . . . . . . . . . . 82,988 124,406 81,554
-------- --------- --------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . (7,049) 7,654 139
Cash and cash equivalents, beginning
of year . . . . . . . . . . . . . . . 11,012 3,358 3,219
-------- --------- --------
Cash and cash equivalents, end of
year. . . . . . . . . . . . . . . . . $ 3,963 $ 11,012 $ 3,358
-------- --------- --------
-------- --------- --------
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . $ 8,851 $ 166 $ 293
Income taxes paid . . . . . . . . . . - 1,482 7,271
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting practices of Ascent Entertainment Group, Inc. (the
"Company" or "Ascent") and its majority owned subsidiaries conform to generally
accepted accounting principles and prevailing industry practices. The following
is a summary of the Company's significant accounting and reporting policies.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION. The accompanying
financial statements present the financial position and results of operations of
COMSAT Video Enterprises, Inc. ("CVE") which, until April 1995, was a wholly
owned subsidiary of COMSAT Corporation ("COMSAT"). In April 1995, COMSAT formed
COMSAT Entertainment Group, Inc. ("CEG") and contributed 100% of the stock of
CVE to CEG. Subsequently, CEG changed its name to Ascent Entertainment Group,
Inc. ("Ascent"). Accordingly, the Company operated as CVE up to April 1995 and
as Ascent after that date. The consolidated financial statements include the
accounts of the Company and its majority-owned subsidiaries. Significant
intercompany transactions have been eliminated. Minority interest in the
financial statements consists of the interest of other stockholders in On
Command Corporation. The significant majority-owned subsidiaries of Ascent are
as follows:
On Command Corporation ("OCC") and its wholly-owned subsidiaries, On
Command Video Corporation ("OCV") and SpectraVision, Inc.
("SpectraVision")
Ascent Network Services, Inc. ("ANS"), (formerly CVE)
Denver Nuggets Limited Partnership ("Nuggets")
Beacon Communications Corp. ("Beacon")
Colorado Avalanche LLC ("Avalanche")
OCC provides video distribution and pay-per-view video entertainment services to
the lodging industry and has operating subsidiaries in the United States,
Canada, Mexico, Hong Kong, Singapore, Thailand and Australia. ANS provides
video distribution services to the National Broadcasting Company ("NBC")
television network and other private networks. The Nuggets own a franchise in
the National Basketball Association ("NBA"). The Avalanche own a franchise in
the National Hockey League ("NHL"). Beacon is a producer of motion pictures and
television programming.
Ascent executed an initial public offering (the "Offering") of a portion of its
common stock on December 18, 1995. Prior to the Offering, Ascent split each
share of common stock outstanding into 24,000,000 shares of common stock.
Earnings per share and share amounts for all prior periods have been restated to
reflect this stock split. After the Offering, COMSAT continues to own a
majority (80.67%) of Ascent's common stock and continues to control Ascent. In
addition, during 1996 Ascent's relationship with COMSAT was governed by
agreements entered into in connection with the Offering, including an
Intercompany Services Agreement, a Corporate Agreement and a Tax Sharing
Agreement. The Corporate Agreement restricts the Company from issuing
additional equity securities or incurring additional indebtedness without the
consent of COMSAT (See Notes 6 and 14.)
36
<PAGE>
CASH AND CASH EQUIVALENTS. Ascent considers highly liquid investments with a
maturity of three months or less at the time of purchase to be cash equivalents.
PROPERTY AND EQUIPMENT. Property and equipment is stated at cost, less
accumulated depreciation and amortization. Installed video systems consist of
video system equipment and related costs of installation at hotel locations.
Distribution systems to networks consist of equipment at network affiliates and
the related costs of installation. Construction in progress consists
principally of purchased and manufactured parts of partially constructed video
systems and the Company's expenditures through December 31, 1996 on the Denver
arena project (See Note 4.)
Depreciation and amortization are calculated using the straight-line method over
the estimated service life of each asset. The service lives for property and
equipment are: installed video systems, 3 to 7 years; distribution systems, 10
to 15 years; furniture, fixtures and equipment, 3 to 10 years; and buildings and
leasehold improvements, 20 years.
GOODWILL. The consolidated balance sheet includes goodwill related to the
acquisitions of SpectraVision by OCC, OCV by CVE, the Nuggets and Beacon.
Goodwill is amortized over 10 to 25 years. Accumulated goodwill amortization
was $13,801,000 and $8,593,000 at December 31, 1996 and 1995, respectively.
FRANCHISE RIGHTS. Franchise rights were recorded in connection with the
purchases of the Nuggets beginning in 1989 and the Avalanche beginning in 1995.
Such rights are being amortized over 25 years. The amounts shown on the
consolidated balance sheet are net of accumulated amortization of $18,172,000
and $13,398,000 at December 31, 1996 and 1995, respectively.
EVALUATION OF LONG-LIVED ASSETS. The Company evaluates the potential impairment
of long-lived assets and long-lived assets to be disposed of in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"). SFAS No. 121 establishes procedures for review of
recoverability, and measurement of impairment if necessary, of long-lived assets
and certain identifiable intangibles held and used by an entity. SFAS No. 121
requires that those assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be fully
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less estimated selling costs. As of January 1, 1996 and
December 31, 1996, management believes that there was not any impairment of the
Company's long-lived assets or any other such identifiable intangibles.
FILM INVENTORIES. Film inventories are stated at the lower of cost or net
realizable value. Revenue estimates and costs on a film-by-film basis are
reviewed periodically by management and are revised, if warranted, based upon
management's appraisal of current market conditions. When estimates of total
revenue indicate that a film will result in an ultimate loss, the entire loss is
recognized. It is reasonably possible that estimates of anticipated future
gross revenues and film carrying costs may be reduced materially in the near
term due to a significant degree of variability in the performance of theatrical
films.
36
<PAGE>
DEFERRED FINANCING COSTS. Costs incurred with the issuance of the Company's
current credit facilities are included in prepaid expenses, net of accumulated
amortization. Amortization is charged to operations over the respective lives
of the loan agreements and is included in interest expense. (See Note 6).
DEFERRED COMPENSATION COSTS. Certain current and former players of the Nuggets
and the Avalanche have contracts that provide for deferred compensation and
bonuses. Ascent records a charge to operations equal to the present value of
the future guaranteed payments in the period in which the compensation is
earned. In addition, certain players' contracts provide for guaranteed
compensation payments. (See Note 7).
REVENUE AND COST RECOGNITION. OCC installs pay-per-view video systems in
hotels, generally under five to seven year agreements, whereby revenues are
recognized at the time of viewing. Revenue from the sale of video systems is
recognized when the equipment is shipped, except for systems requiring
installation by the Company, which is recognized upon completion of the
installation. Revenues from video management services and royalties are
recognized when earned.
The Nuggets and Avalanche game admission and broadcasting revenues are
recognized as earned per home game during the teams' regular playing seasons,
generally from October to April of the following calendar year. Team and game
costs, principally gate assessments, arena rentals and user fees, are recorded
and expensed on the same basis. Team costs, principally player salaries,
related fringe benefits and insurance, are recognized on a per-day basis during
the teams' regular playing seasons. Accordingly, advance ticket sales and
advance payments on television, radio, concessionaire and marketing contracts,
and payments for team and game expenses not earned or incurred, are recorded as
deferred revenues and deferred game expenses, respectively, and amortized
ratably as regular season games are played.
Minimum guaranteed amounts from theatrical exhibition and revenues from home
videos, pay television and free television license agreements are recognized
when the applicable license period begins for each motion picture and such
motion picture is made available to the distributor for exploitation pursuant to
the terms of the applicable license agreement. Amounts in excess of the minimum
guarantee under such license agreements and other amounts (where no minimum
guarantee was given) are recognized when earned. Cash collected in advance of
the time of film availability is recorded as deferred revenue.
Film costs include the acquisition of story rights, the development of stories,
production, print and advertising costs (which benefit future periods) and
certain amounts of overhead related to production are capitalized as film
inventory. Such costs are amortized under the individual film forecast method.
Completed film costs are amortized in the proportion that each film's current
revenues bear to management's estimates of total remaining ultimate revenues
from all sources for such film. Estimated liabilities for royalties and profit
participations are accrued based upon recognized film revenues and expenses in
the same manner as film cost inventories.
Revenue from other services is recorded as services are provided.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses include
those costs incurred by the parent company, Ascent Entertainment Group, Inc.
Similar costs incurred by the Company's majority-owned subsidiaries are included
in cost of services in the accompanying statements
37
<PAGE>
of operations. For the years ended December 31, 1996, 1995 and 1994, the
Company's subsidiaries incurred related costs of $23,984,000, $10,844,000, and
$5,441,000, respectively.
INCOME TAXES. A current or deferred income tax liability or asset is recognized
for temporary differences which exist due to the recognition of certain income
and expense items for financial reporting purposes in periods different than for
tax reporting purposes. The provision for income taxes is based on the amount
of current and deferred income taxes payable or refundable at the date of the
financial statement as measured by the provisions of current tax laws.
NET INCOME (LOSS) PER SHARE. Net income (loss) per common share is calculated
using the weighted average number of common and common equivalent shares
outstanding in the respective years. Except when inclusion of such shares is
antidilutive, common equivalent shares include net shares issuable upon the
assumed exercise of options using the treasury stock method, assuming purchases
at average market values.
Common equivalent shares were not included in the calculation of income (loss)
per share for 1996 and 1995, because their inclusion would have been
antidilutive. There were no common equivalent shares in 1994.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs are charged to
operations as incurred. These costs are included in cost of services on the
income statements. The amounts charged were $4,628,000, $2,734,000 and
$2,882,000 for the years ended December 31 1996, 1995 and 1994, respectively.
Included in these amounts were amounts for services purchased from COMSAT
affiliates of $132,000 for the year ended December 31, 1994. No such services
were purchased in 1996 and 1995.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Such management estimates include the
allowance for doubtful accounts receivable, the estimated useful lives of video
systems and property and equipment, intangible assets, including goodwill, the
amortization of film costs based on future film revenues, the reduction in
construction in progress and film inventory to their net realizable value and
the amounts of certain accrued liabilities.
The Company participates in the highly competitive multimedia distribution and
entertainment industries and believes that changes in any of the following areas
could have a material adverse affect on the Company's future financial position
or results of operations: declines in hotel occupancy as a result of general
business, economic, or other factors; loss of one or more of its major hotel
chain customers; a decline in ticket sales and other revenues by the sports
franchises; the timing and success of film releases; ability to obtain
additional capital to finance capital expenditures and film production costs;
ability to retain senior management and key employees; disruption of
satellite service; and risks of technological obsolescence.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of cash and cash
equivalents, receivables, other current assets, accounts payable and other
accrued liabilities approximate their carrying value due to the short term
38
<PAGE>
nature of these financial instruments. The fair value of certain short-term and
long-term investments approximates their carrying value. The fair value of the
Company's bank borrowings and other long-term liabilities approximates their
carrying value due to the variable nature of the interest associated with those
obligations.
RECENTLY ISSUED ACCOUNTING STANDARD. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." 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. The Company has not yet
determined the impact of adopting this Statement on its reported net income
< loss > per common share.
RECLASSIFICATIONS. Certain amounts in prior periods have been reclassified to
conform with the current year's presentation, most notably OCC has reclassified
certain income statement amounts in OCV's historical financial statements to be
consistent with the presentation used by SpectraVision and to conform to a more
common presentation used by providers of in-room entertainment to the lodging
industry. Specifically, OCV previously reflected certain costs as a reduction
of revenues and now classifies such costs as a cost of service.
NOTE 2 - ACQUISITION AND INVESTMENTS
The Company completed one acquisition per year in 1994, 1995 and 1996. These
acquisitions have been accounted for under the purchase method and, accordingly,
the results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition. These
acquisitions are summarized as follows:
SPECTRAVISION, INC. - Effective October 8, 1996, Ascent through its newly formed
subsidiary, OCC, acquired the assets, properties and certain liabilities of
SpectraVision, Inc. (the "Acquisition") with an effective closing date of
October 8, 1996 (the "Closing Date"). The Acquisition was consummated
pursuant to an Acquisition Agreement dated August 13, 1996, among Ascent,
OCC, SpectraVision and the other parties named therein (the "Acquisition
Agreement"). Pursuant to the Acquisition Agreement, OCC acquired all of the
outstanding capital stock of SpectraDyne, Inc. ("SpectraDyne") the primary
operating subsidiary of SpectraVision, together with certain other assets of
SpectraDyne and its affiliates. SpectraDyne subsequently changed its name to
SpectraVision, Inc. Prior to the Closing Date, OCV, formerly an 84% owned
subsidiary of Ascent (approximately 78.4% owned on a fully diluted basis),
was merged (the "Merger") with a subsidiary of OCC and became a wholly owned
subsidiary of OCC pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") by and among OCC, SpectraVision, OCV and On Command Merger
Corporation also dated August 13, 1996. The Acquisition Agreement and the
Merger Agreement were entered into to effect the terms of the Agreement dated
April 19, 1996 entered into among Ascent, OCV, SpectraVision and the other
parties named therein and to effectuate the transactions contemplated
thereby. In accordance with Emerging Issues Task Forces Issue No. 95-19,
"Determination of the Measurement Date for the Market Price of Securities
Issued in a Purchase Business Combination," the fair value of the Acquisition
consideration was determined
39
<PAGE>
as of April 19, 1996. The fair value was based on an independent appraisal of
the net assets acquired.
At the Closing Date, Ascent and the minority stockholders of OCV received
21,750,000 shares of OCC common stock (72.5% of the initial outstanding OCC
common stock). Of these shares, Ascent received 17,149,766 shares. In
consideration of the acquisition of the assets and properties of SpectraVision
by OCC, 8,041,618 shares of OCC common stock were issued to the SpectraVision
bankruptcy estate for distribution to SpectraVision's creditors. Additionally,
208,382 shares were held in reserve pending finalization of closing balance
sheet pursuant to the Acquisition Agreement. Of these, 196,382 shares of
reserved stock were distributed to the SpectraVision bankruptcy estate for the
benefit of SpectraVision's creditors with the remaining 12,000 shares
distributed to Ascent and OCV minority stockholders. Ascent owns approximately
57.2% of the outstanding common stock of OCC at December 31, 1996.
In connection with the Acquisition and the Merger, OCC also issued warrants
representing the right to purchase a total of 7,500,000 shares of OCC common
stock (20% of the outstanding common stock of OCC, after exercise of the
warrants). The warrants have a term of 7 years and an exercise price of $15.27
per share. Series A warrants to purchase on a cashless basis up to 1,425,000
shares of OCC common stock were issued to former OCV shareholders, of which
Ascent received warrants to purchase 1,123,823 shares; Series B warrants to
purchase for cash an aggregate of 2,625,000 shares of OCC common stock were
issued to the SpectraVision bankruptcy estate for distribution to creditors; and
Series C warrants were issued to OCC's investment advisors to purchase for cash
an aggregate of 3,450,000 shares of OCC common stock in consideration for
certain banking and advisory services provided in connection with the
transactions.
The aggregate purchase consideration has been allocated to the acquired assets
and assumed liabilities of SpectraVision, based on their respective fair market
values. The fair value of tangible assets acquired and liabilities assumed was
approximately $66,000,000 and $67,000,000, respectively. In addition,
$2,000,000 of the purchase price was allocated to purchased technology. The
balance of the purchase price, $90,636,000, was recorded as goodwill and is
being amortized over twenty years on a straight-line basis. The accompanying
financial statements reflect the preliminary allocation of the purchase price as
the purchase price allocation has not been finalized. The assets acquired and
liabilities assumed are as follows (in thousands):
Estimated fair value of assets acquired
(including intangibles of $92,636) $ 158,916
Liabilities assumed (67,282)
---------
Net assets acquired at estimated fair value 91,634
Cash paid (net of cash received of $257) (9,572)
---------
Common stock and warrants issued $ 82,062
---------
---------
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1996 and 1995 are presented as if the SpectraVision
acquisition had been made at the beginning of each period presented. The
unaudited pro forma information is not necessarily indicative of either the
results of operations that would have occurred had the purchase been made during
the periods presented or the future results of the combined operations.
40
<PAGE>
Year Ended December,31
----------------------
(in thousands)
1996 1995
---- ----
Revenues . . . . . . . . . $ 343,420 $ 325,804
Net loss . . . . . . . . . $ (42,982) $ (34,749)
Loss per common share. . . $ (1.45) $ (1.44)
In connection with this transaction, the Company recorded an increase in
additional paid-in capital of $1,178,000 as a result of the exchange of it's
investment in OCV for its investment in OCC.
COLORADO AVALANCHE LLC. In July 1995, Ascent acquired a NHL franchise and
related player contracts, management contracts and certain other assets from Le
Club de Hockey Les Nordiques located in Quebec, Canada. The franchise was
relocated to Denver, Colorado in time for the 1995-1996 NHL season, renamed the
Colorado Avalanche, and its results since July 1, 1995 have been included in the
accompanying consolidated financial statements.
The cost of the acquisition was $75,840,000 which was allocated principally to
franchise rights and player contracts. As part of the purchase, Ascent assumed
contractual commitments to players aggregating $24,625,000 over three years.
BEACON COMMUNICATIONS CORP. In December 1994, Ascent acquired the assets of
Beacon, a film and television production company based in Los Angeles. The
acquisition has been accounted for as a purchase and, accordingly, Beacon's
results of operations have been included in the accompanying consolidated
financial statements beginning on December 1, 1994. The cost of this
acquisition was $29,133,000, which was allocated to the net assets acquired,
principally a development, production and domestic distribution agreement (the
"Distribution Agreement"), two feature films and goodwill, based on their
estimated fair market values. The purchase price consisted of $16,180,000 in
cash and liabilities assumed of $12,953,000. The purchase agreement also calls
for future cash consideration, which is contingent on the production and
performance of up to thirteen motion pictures during the next five years, with a
total pay-out not to exceed $16,900,000. The contingent payments, if made, will
be accounted for in part, as additional costs of the acquired assets and in
part, as additional costs of the movies to be made. During 1996 and 1995,
$1,000,000 and $800,000 of contingent payments were paid in cash, respectively.
If Beacon had been acquired as of January 1, 1994, unaudited proforma
consolidated revenues would have been $183,205,000 for 1994 and the unaudited
proforma consolidated net loss would have been $9,677,000 for 1994,
respectively. The unaudited proforma consolidated loss per share would have
been $.40 for 1994.
OTHER INVESTMENTS. Other Investments consist of the following of December 31,
1996 and 1995:
1996 1995
---- ----
(in thousands)
Marketable equity securities . . . . . $ 2,080 $ -
Investment in MagiNet Corporation . . . 1,265 1,265
Investments in partnerships or
joint ventures:
41
<PAGE>
Elitch Gardens. . . . . . . . . . . . . 2,379 3,041
NBA partnerships. . . . . . . . . . . . 2,657 1,825
Colorado Studios. . . . . . . . . . . . 769 497
-------- --------
Total other investments.. . . . . . . . $ 9,150 $ 6,628
-------- --------
-------- --------
At December 31, 1996, the Company's investment in marketable equity securities
consists of its investment in MetroMedia International Group. This investment
is considered to be available-for-sale and accordingly, the net unrealizable
holding gain, net of deferred income taxes, is reported as a separate
component of stockholders' equity. In 1996, the gross realized gain from the
sale of a portion of these available-for-sale securities was $1,892,000 and is
included in other income (expense) in the accompanying financial statements.
The Company's investment in MagiNet Corporation, a private company, is accounted
for at cost (See Note 14.) Investments in partnerships and joint ventures are
accounted for using the equity method.
The Company's investment in the limited partnership owning Elitch Gardens, an
amusement park in Denver, Colorado, was increased from 13% to 26% in March 1996,
when Ascent purchased all of The Anschutz Corporation's (TAC's) interest in the
limited partnership for $4,125,000 in cash (see Note 4). Subsequently, in
September, 1996, the Company recorded a $1,800,000 loss on its limited
partnership investment in Elitch Gardens, based on the announced sale of the
amusement park to Premier Parks, Inc. The Company's share of proceeds from the
sale, which closed on October 30, 1996, are subject to certain future
adjustments. In December 1996, the Company recorded an additional loss of
$510,000 on its investment due to the Company's concerns over the liquidation of
the partnership. Prior to December 31, 1996, the Company had received
distributions of $1,716,000 and in January 1997, the Company received an
additional $1,900,000 of partnership distributions. Management of the Company
believes its remaining investment in Elitch's is likely to be recovered through
an additional partnership distribution to be received in the first half of 1997.
NOTE 3 - RECEIVABLES AND CONCENTRATION OF CREDIT RISK
Receivables consist of the following at December 31, 1996 and 1995:
1996 1995
---- ----
(in thousands)
Trade receivables . . . . . . . . . . . $ 52,426 $ 44,571
Current portion of notes and long-term
receivables . . . . . . . . . . . . . 4,405 3,710
Less allowance for doubtful accounts. . 2,136 3,240
--------- ---------
Receivables, net . . . . . . . . . . $ 54,695 $ 45,041
--------- ---------
--------- ---------
Ascent generates a substantial portion of its revenues from OCC and from hotel
guest's usage of OCC pay-per-view video systems located in various hotels
primarily throughout the United States, Canada, Mexico and the Far East. OCC
performs periodic credit evaluations of its installed hotel locations and
generally requires no collateral. While the Company does maintain allowances
for potential credit losses, actual bad debt losses have not been significant.
The Company invests its cash in high-credit quality instruments. These
instruments are short-term in nature and, therefore, bear minimal risk.
OCC has one customer, including its affiliates, which accounted for 14%, 16% and
14% of consolidated revenues in 1996, 1995 and 1994, respectively. A second
customer of OCC accounted for 17% of consolidated revenues in 1994. No
42
<PAGE>
other customer accounted for more than 10% of consolidated revenues during
1996, 1995 and 1994.
Included in other long-term assets is a long term receivable of $5,655,000 and
$9,714,000 at December 31, 1996 and 1995, respectively.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996 and 1995:
1996 1995
---- ----
(in thousands)
Land . . . . . . . . . . . . . . . . . $ 2,000 $ -
Buildings and leasehold improvements. . 2,997 883
Installed video systems . . . . . . . . 343,475 249,845
Distribution systems to networks. . . . 95,334 104,204
Furniture, fixtures and equipment . . . 16,836 13,068
---------- ----------
Total. . . . . . . . . . . . . . . . 460,642 368,000
Less accumulated depreciation and
amortization. . . . . . . . . . . . . 200,452 181,648
---------- ----------
Net property and equipment in service. 260,190 186,352
Construction in progress. . . . . . . . 41,308 34,250
---------- ----------
Property and equipment, net . . . $ 301,498 $ 220,602
---------- ----------
---------- ----------
DENVER ARENA PROJECT. 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 a 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 TAC an additional $5,000,000 and grant a paid-up suite license,
both contingent on the construction and occupancy of the proposed arena. This
obligation, net of discount, has been accrued and is included in the
accompanying balance sheet in other accrued liabilities ($2,500,000) and other
long-term liabilities ($2,000,000) at December 31, 1996. The Company has
classified costs of $11,540,000 and $2,445,000, representing the total
expenditures on the proposed arena at December 31, 1996 and 1995, respectively,
in Construction-in-Progress.
On March 28, 1996, the Company entered into a Land Purchase Agreement with
Southern Pacific Transportation Company ("SPT"), a company related to TAC,
pursuant to which the Company would purchase approximately 49 acres in Denver
as the site for the proposed arena for $20,000,000. Pursuant to the Land
Purchase Agreement, the closing of the land purchase had to have occurred on
or before June 28, 1996. The closing did not take place by this time and the
Land Purchase Agreement terminated. Although there can be no assurance, it is
management's belief that SPT will reinstate the Land Purchase Agreement on
substantially similar terms and the
43
<PAGE>
closing date for the Land Purchase Agreement will be extended. Consummation
of the transaction is subject to several conditions, including obtaining
satisfactory financing and reaching agreements with the City and County of
Denver regarding the construction of the proposed arena and the release of the
Nuggets and the Avalanche from their existing leases at the City and County of
Denver's current arena, McNichols Arena. The Agreement also provides for SPT
to effect a state-approved environmental clean-up plan on the site, and
provide continuing partial indemnification with regard to certain
environmental liabilities. Management believes that these negotiations will
be successfully concluded, but there can be no assurance that Ascent will be
able to reach acceptable terms for the construction of the new arena.
NOTE 5 - FILM INVENTORY
Film inventory consists of the following at December 31, 1996 and 1995:
1996 1995
---- ----
(in thousands)
Films released, less amortization . . . $ 3,382 $ 6,330
Films in process and development. . . . 69,732 2,786
Development . . . . . . . . . . . . . . 3,120 2,354
---------- ----------
Total film inventory . . . . . . . . $ 76,234 $ 11,470
---------- ----------
---------- ----------
The Company estimates that approximately 97% of unamortized released film cost
will be amortized over the next three fiscal years. In 1996, the Company
increased film inventory and deferred revenues by approximately $49,852,000 in
connection with the distribution rights relating to certain films under
development at December 31, 1996.
NOTE 6 - NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following at December 31, 1996
and 1995:
1996 1995
---- ----
(in thousands)
OCC revolving credit facility . . . . . $ 98,000 $ -
Ascent revolving credit facility. . . . 95,000 -
Note payable to OCV minority stockholders,
paid August 1996. . . . . . . . . . . - 207
Former Ascent credit facility, paid
October 1996. . . . . . . . . . . . . - 70,000
---------- ----------
Total . . . . . . . . . . . . . . . 193,000 70,207
Less: Short-term borrowings. . . . . . 143,000 -
Current maturities . . . . . . . - 207
---------- ----------
Total long-term debt. . . . . . . . $ 50,000 $ 70,000
---------- ----------
---------- ----------
OCC REVOLVING CREDIT FACILITY. In conjunction with the SpectraVision
acquisition, OCC obtained a $125 million revolving credit facility, (the "OCC
Credit Facility"). The OCC Credit Facility consists of (i) a 364-day revolving
credit and competitive advance facility which, subject to certain conditions,
will be renewable for four 364-day periods, and (ii) a five year revolving
credit and competitive advance facility; provided, however, that any amounts
borrowed under the five year facility will reduce the amount available under the
364-day facility. At December 31, 1996, $50,000,000 was outstanding
44
<PAGE>
as a long-term revolving loan and is repayable in 2001, while $48,000,000 is
considered a short-term borrowing.
Revolving loans extended under the OCC Credit Facility generally will bear
interest at the London Interbank Offering Rate ("LIBOR") plus a spread that may
range from 0.375% to 0.625% depending on certain operating ratios of OCC. At
December 31, 1996, the weighted average interest rate on the OCC Credit Facility
was 6.17%. In addition, a fee ranging from .1875% to .25% per annum is charged
on the unused portion of the OCC Credit Facility, depending on certain OCC
operating ratios.
The OCC Credit Facility contains customary covenants, including, among other
things, compliance by OCC with certain financial covenants. At December 31,
1996, OCC was in compliance with these covenants. The OCC Credit Facility
limits OCC's ability to incur indebtedness or pay dividends, but does not
preclude OCC from paying cash dividends on its Common Stock.
Upon the closing of the SpectraVision acquisition, OCC borrowed $92.0 million
under its credit facility to (i) pay-off debt obligations of SpectraVision of
approximately $40.0 million, (ii) pay-off intercompany obligations of OCV to
Ascent and other OCC obligations of approximately $43.6 million and (iii) to pay
certain administrative claims and other bankruptcy costs of SpectraVision and
its affiliated debtors of approximately $8.4 million.
On March 23, 1997, OCC entered into an amendment to the OCC Credit Facility (the
"OCC Amendment"). Under the OCC Amendment, the amount available under the OCC
Credit Facility was increased from $125.0 million to $150.0 million, and certain
other terms were amended to clarify such terms. At March 23, 1997, there was
$47.0 million of available borrowings under the amended OCC Credit Facility,
subject to certain covenant restrictions.
ASCENT REVOLVING CREDIT FACILITY. In October 1996, Ascent also entered into a
new revolving credit facility (the "Ascent Credit Facility") with the same bank
as OCC. The Ascent Credit Facility provided for borrowings of up to $200
million, consisting of a 364-day secured revolving credit facility. This
facility, subject to certain conditions, was to be renewable for two 364-day
periods on October 9, 1997 and October 8, 1998 respectively. At December 31,
1996, the Company has classified all of its outstanding borrowings under the
Ascent credit facility as short-term borrowings.
Revolving loans extended under the Ascent Credit Facility generally will bear
interest at LIBOR plus a spread that may range from 1.75% to 2.50% depending on
certain operating ratios of Ascent. A fee of .5% per annum is charged on the
unused portion of the Ascent Credit Facility. At December 31, 1996, the
weighted average interest rate on the Ascent Credit Facility was 8.05%. The
Ascent Credit Facility provides that at no time will amounts outstanding under
the facility exceed (a) $125.0 million, until Ascent shall have received consent
from the NBA and NHL to pledge Ascent's interests in the Nuggets and Avalanche,
respectively, and thereafter (b) the sum of (i) up to $100 million secured by
first priority pledges of, and liens on, the equity interests in all of Ascent's
subsidiaries (excluding OCC), plus (ii) 50% of the value of the OCC Common Stock
owned by Ascent, secured by a pledge of such stock. The Company expects to
obtain the consents from the NBA and NHL during the second quarter of 1997.
Upon the closing of the Ascent Credit Facility, Ascent extinguished borrowings
of $145.0 million outstanding under its then existing $175.0 million credit
45
<PAGE>
facility with a different bank. The Company utilized funds received from OCC of
$39.3 million and borrowed $110.0 million under its new credit facility to
extinguish its outstanding bank obligations, including accrued interest, and
other Ascent obligations. The Company recorded an extraordinary loss of
approximately $334,000 net of tax during the fourth quarter of 1996 in
connection with the extinguishment of its previous credit facility.
The Ascent Credit Facility also contained covenants requiring Ascent and OCC to
maintain certain financial covenants, limited Ascent's ability to incur
indebtedness and precludes Ascent from paying cash dividends on its Common
Stock. At December 31, 1996, Ascent was in compliance with these covenants. In
addition, the failure of Ascent to commence construction on the Denver Arena
Complex (see Note 4) prior to August 31, 1997 is an event of default under the
Ascent Credit Facility.
On March 23, 1997, Ascent entered into an amendment to the Ascent Credit
Facility (the "Ascent Amendment"). The Ascent Amendment provides, among other
things, that the Ascent Credit Facility will not be renewable for two additional
one year options beyond October 9, 1997 unless, prior thereto, Ascent has
received not less than $50.0 million in proceeds from a new debt financing which
is subordinated to the Ascent 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 receipt of NBA and NHL consents; that those
financial covenants contained in the Ascent 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. Based on current market conditions, management of Ascent
currently believes that they will be successful in obtaining the additional
subordinated debt by October 9, 1997. In addition, management currently
believes that they will have commenced construction on the Denver Arena Project
prior to August 31, 1997 or they will have made sufficient progress on the
negotiations involving the Denver Arena Project to enable Ascent to obtain an
extension under the Ascent Credit Facility. 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 negotiations with the City and
County of Denver on the Denver Arena Project will have been completed or
progressed significantly. If Ascent were not able to obtain the additional
subordinated financing, Ascent could be required to refinance the Ascent Credit
Facility which could require Ascent to reduce or reschedule planned capital
investments, reduce capital outlays, sell assets or equity. At March 23, 1997,
there was $33.0 million of available borrowings under the amended Ascent credit
facility.
OTHER. As a consolidated subsidiary of COMSAT, Ascent is subject to
restrictions on its debt structure as a result of Federal Communications
Commission regulations applicable to COMSAT (see Note 14).
NOTE 7 - DEFERRED COMPENSATION
Deferred compensation, which is included in other long-term liabilities on the
accompanying balance sheet, consists of the following at December 31, 1996 and
1995:
46
<PAGE>
1996 1995
---- ----
(in thousands)
Deferred compensation contracts payable, at
varying interest rates, through 2002. $ 3,914 $ 3,571
Less: Imputed interest . . . . . . . . 720 808
Current maturities . . . . . . . 439 349
---------- ----------
Total. . . . . . . . . . . . . . $ 2,755 $ 2,414
---------- ----------
---------- ----------
Total annual payments on long-term deferred compensation for the years
subsequent to December 31, 1996 are as follows (in thousands):
1997. . . . . . . . . . . . . . . . . . . . . . . . . . $ 439
1998. . . . . . . . . . . . . . . . . . . . . . . . . . 1,154
1999. . . . . . . . . . . . . . . . . . . . . . . . . . 749
2000. . . . . . . . . . . . . . . . . . . . . . . . . . 800
2001. . . . . . . . . . . . . . . . . . . . . . . . . . 550
Thereafter. . . . . . . . . . . . . . . . . . . . . . . 222
--------
Total . . . . . . . . . . . . . . . . . . . . . . $ 3,914
--------
--------
NOTE 8 - INCOME TAXES
For the periods presented in these financial statements, Ascent has been a
member of COMSAT's consolidated tax group for federal income tax purposes. OCV,
however, filed separate returns until the third quarter of 1995, at which time
Ascent's ownership interest increased to 84.7% (see Note 2). However, in
conjunction with the formation of OCC and acquisition of SpectraVision, Ascent's
ownership in OCC decreased to 57%. Accordingly, OCC will file a separate return
commencing on October 9, 1996. Ascent has prepared its tax provision based on
it's inclusion in COMSAT's consolidated return. For years 1993 and thereafter,
the provision as calculated would approximate the provision if prepared on a
separate return basis. In connection with the Offering, Ascent and COMSAT
entered into a tax allocation agreement that provides for cross indemnification
with respect to these periods.
In connection with the SpectraVision Acquisition, OCC has until July 15, 1997 to
determine whether it will elect under Internal Revenue Code Section 338(h)(10)
to treat the transaction as a purchase of assets for tax purposes. The
computation of deferred taxes for OCC has been made on the assumption that OCC
will make this election. However, management will continue to evaluate the
alternative tax treatments for the Acquisition and may choose to treat it as a
taxable stock purchase whereby the Company would assume carryover basis in
SpectraVision's assets, including net operating losses.
The current and deferred tax expenses have been allocated according to each
entity's separately computed tax liability. Taxes payable or receivable are
settled with COMSAT annually. For the years ended December 31, 1996 and 1995,
Ascent's federal taxes receivable from COMSAT were $12,623,000 and $2,247,000,
respectively. These amounts due from COMSAT are shown net of income tax
obligations at OCC of $5,692,000 and $1,813,000 at December 31, 1996 and 1995,
respectively, in the accompanying consolidated balance sheets.
The components of income tax expense (benefit) for the years ended December 31,
1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
(in thousands)
Federal:
Current . . . . . . . . $ (15,695) $ (1,589) $ 4,386
Deferred. . . . . . . . 3,130 (8,125) 116
State and local . . . . . 110 (121) 329
Foreign . . . . . . . . . 498 - -
----------- ---------- --------
Total. . . . . . . . . $ (11,957) $ (9,835) $ 4,831
----------- ---------- --------
----------- ---------- --------
The difference between tax expense (benefit) computed at the statutory federal
tax rate and Ascent's effective tax rate is:
1996 1995 1994
---- ---- ----
47
<PAGE>
(in thousands)
Federal income taxes (benefit) computed
at the statutory rate. . . . . . . . . $ (19,063) $ (10,580) $ 3,743
State income taxes, net of federal income
tax (benefit). . . . . . . . . . . . . (573) (72) 214
Goodwill . . . . . . . . . . . . . . . . 860 831 742
Foreign. . . . . . . . . . . . . . . . . 498 - -
Valuation allowance. . . . . . . . . . . 5,333 - -
Other. . . . . . . . . . . . . . . . . . 988 (14) 132
---------- ---------- --------
Income tax expense (benefit). . . . . $ (11,957) $ (9,835) $ 4,831
---------- ---------- --------
---------- ---------- --------
The net current and net non-current components of deferred tax assets and
liabilities, tax effected, as shown on the balance sheet at December 31, 1996
and 1995 are:
1996 1995
---- ----
(in thousands)
Current deferred tax asset. . . . . . . . $ 3,580 $ 4,394
Non-current deferred tax liability. . . . (5,742) (3,593)
--------- ---------
Net asset (liability). . . . . . . . . $ (2,162) $ 801
--------- ---------
--------- ---------
The deferred tax assets and liabilities at December 31, 1996 and 1995 are:
1996 1995
---- ----
(in thousands)
Assets:
Alternative minimum tax credit . . . . . . $ 11,137 $ 9,145
Other accrued liabilities. . . . . . . . . 8,471 4,607
Amortization of intangibles. . . . . . . . 4,261 2,539
Net operating loss carryforwards . . . . . 2,876 -
Other. . . . . . . . . . . . . . . . . . . 847 543
Contract revenue . . . . . . . . . . . . . 582 649
Post retirement benefits . . . . . . . . . - 608
Tax basis in excess of book basis
(338 election) . . . . . . . . . . . . . 52,397 -
Valuation allowance. . . . . . . . . . . . (56,885) -
---------- ---------
Total deferred tax assets. . . . . . . . . 23,686 18,091
---------- ---------
Liabilities:
Property and equipment . . . . . . . . . . (13,242) (10,380)
Franchise rights . . . . . . . . . . . . . (11,620) (6,593)
Other. . . . . . . . . . . . . . . . . . . (986) (317)
---------- ---------
Total deferred tax liabilities . . . . . . . (25,848) (17,290)
---------- ---------
Net asset (liability). . . . . . . . . . . . $ (2,162) $ 801
---------- ---------
---------- ---------
OCC has federal net operating loss carryforwards of approximately $6,100,000,
which expire beginning in 2012. In addition, OCC has California net operating
loss carryforwards of approximately $15,000,000 which expire beginning in 2000
and may be subject to limitation in the event of certain defined changes in
stock ownership. Alternative minimum tax credit carryforwards of approximately
$1,700,000 and $250,000 are available to offset future regular federal and state
tax liabilities, respectively.
The Internal Revenue Service ("IRS") has examined the COMSAT returns through
1989 and is currently examining federal income tax returns for 1990 through
1994. In the opinion of Ascent, adequate provision has been made for income
taxes for all periods through 1996.
48
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AND CONSULTING AGREEMENTS. Ascent has employment and consulting
agreements with certain officers and entertainment talent. Virtually all of the
player agreements provide for guaranteed payments. Other contracts provide for
payments upon the fulfillment of their contractual terms and conditions, which
generally relate only to normal performance of employment duties.
Amounts required to be paid under such agreements (including approximately
$118,821,000 relating to player agreements) are as follows at December 31, 1996
(in thousands):
1997. . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,550
1998. . . . . . . . . . . . . . . . . . . . . . . . . . 43,407
1999. . . . . . . . . . . . . . . . . . . . . . . . . . 27,370
2000. . . . . . . . . . . . . . . . . . . . . . . . . . 17,015
2001. . . . . . . . . . . . . . . . . . . . . . . . . . 8,670
Thereafter. . . . . . . . . . . . . . . . . . . . . . . 9,284
---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 165,296
---------
---------
FACILITY AND EQUIPMENT LEASES - Ascent leased its Corporate headquarters from
COMSAT through June, 1996. In connection with Ascent's relocation to Denver in
June of 1996, the Company entered into an operating lease for its corporate
headquarters which expires in August 1998.
OCC leases its principal facilities from one of its minority stockholders under
a non-cancelable operating lease which expires in December 2003. In addition to
lease payments, OCC is responsible for taxes, insurance and maintenance of the
leased premises. OCC also leases certain other office space from unrelated
parties.
The Nuggets and the Avalanche have an agreement with the City and County of
Denver (the "City") for use of the City's playing facility, McNichols Arena, as
well as offices and training rooms. The lease for the Nuggets extends through
June 30, 2008 and requires an annual rent payment of 5% of ticket sales revenue
with minimum and maximum guaranteed amounts of $250,000 and $350,000 per year,
respectively, through June 30, 1998. Thereafter, the $350,000 maximum payment
is no longer applicable. The term of the lease shall be shortened by one year,
with a maximum of two years, for each regular season that the Avalanche plays
its home games at McNichols Arena. The lease for the Avalanche is for two years
beginning with the 1995-1996 season with two one-year options (at the discretion
of the Avalanche). The rent is a maximum of $350,000 per season in the first
two years, and $400,000 per season in the option years. The total payment for
McNichols Arena was $700,000, $667,000 and $350,000 for the years ended December
31, 1996 and 1995 and 1994, respectively.
The Company also leases equipment under non-cancelable operating leases,
primarily those assumed in conjunction with the SpectraVision transaction (see
Note 2), which extend through 2000.
The future minimum rental commitments under the Company's facility and equipment
leases at December 31, 1996 are as follows (in thousands):
1997. . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,334
1998. . . . . . . . . . . . . . . . . . . . . . . . . . 13,161
49
<PAGE>
1999. . . . . . . . . . . . . . . . . . . . . . . . . . 12,212
2000. . . . . . . . . . . . . . . . . . . . . . . . . . 6,710
2001. . . . . . . . . . . . . . . . . . . . . . . . . . 1,677
Thereafter. . . . . . . . . . . . . . . . . . . . . . . 4,175
---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 52,269
---------
---------
Rental payments to COMSAT and the OCC minority stockholder referred to above
were approximately $911,000, $1,635,000, and $1,473,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. Rental expense under all non-
cancelable leases was approximately $5,774,000, $3,125,000, and $2,566,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
CONCESSION AGREEMENT. In conjunction with the purchase of the Nuggets, Ascent
assumed the rights and obligations of a concessions agreement (the "Concessions
Agreement") with Ogden Allied Leisure Services, Inc. ("Ogden") and the City.
The Concessions Agreement expires in 2001 and provides for the Nuggets and the
City to share in concession revenues according to formulas contained in the
Agreement. At December 31, 1996, under the terms of the Concessions Agreement,
the Nuggets were contingently liable for approximately $2,333,000, plus other
reasonable damages, if the Nuggets terminate the agreement. The Nuggets have no
present intention of terminating this agreement so long as the Nuggets continue
to play in McNichols Arena, and Ogden has expressed its willingness to enter
into a new agreement if the Nuggets relocate to a new arena in Denver.
PROPERTY AND EQUIPMENT. As of December 31, 1996, OCC had noncancelable
commitments to purchase video systems totaling $6,600,000.
FILM RIGHTS. As of December 31, 1996, the Company had a purchase commitment for
undelivered film product of approximately $9,629,000.
OFF BALANCE SHEET RISKS. At December 31, 1996, Ascent was contingently liable
to banks for $389,000 for outstanding letters of credit securing performance of
certain contracts. These guarantees expire in 1997. The estimated fair value
of these instruments is not significant.
LITIGATION. The Company is a party to certain legal proceedings in the ordinary
course of its business. However, the Company does not believe that any such
legal proceedings will have a material adverse effect on the Company's financial
position or results of operations. In addition, through its ownership of the
Nuggets and the Avalanche, the Company is a defendant along with other NBA and
NHL owners in various lawsuits incidental to the operations of the two
professional sports leagues. The Company will generally be liable, jointly and
severally, with all other owners of the NBA or NHL, as the case may be, for the
costs of defending such lawsuits and any liabilities of the NBA or NHL which
might result from such lawsuits. The Company does not believe that any such
lawsuits, individually or in the aggregate, will have a material adverse effect
on the Company's financial condition or results of operations. The Nuggets,
along with three other teams, have also agreed to indemnify the NBA, its member
teams and other related parties against certain American Basketball Association
("ABA") related obligations and litigation, including costs to defend such
actions. Management of Ascent believes that the ultimate disposition and the
costs of defending these or any other incidental NBA or NHL legal matters or of
reimbursing related costs, if any, will not have a material adverse effect on
the financial statements of the Company.
50
<PAGE>
In 1990, a lawsuit was filed against OCV by a former employee alleging wrongful
termination and breach of contract. In March 1995, a verdict in a jury trial
was entered against OCV. In consideration for not appealing the verdict, OCV
entered into a settlement agreement with the plaintiff and recorded the $856,000
after-tax cost of the settlement in the first quarter of 1995.
In 1995, OCV filed suit against a competitor alleging patent infringement and
seeking unspecified damages. In 1996, the competitor filed a counter suit
against OCV alleging patent infringement and seeking unspecified damages. OCV
intends to contest the counter suit vigorously and believes the claim is without
merit and will not result in a material adverse effect to OCV's financial
position or results of operations or cash flows.
NOTE 10 - STOCKHOLDERS' EQUITY
STOCK OPTION PLANS. Ascent adopted the 1995 Key Employee Stock Plan and the
1995 Non-Employee Directors Stock Plan (the "Ascent Plans") contemporaneously
with the Offering. The Ascent Plans provide for the issuance of stock options,
restricted stock awards, stock appreciation rights and other stock based awards.
Options granted under the Ascent Plans expire in 2006. For each of the
Ascent plans, options are generally granted at prices not less than the fair
market value of the Company's stock at the date of grant. Under the terms of
the Ascent Plans, options vest over either a three year or five year period from
the date of grant. However, so long as COMSAT owns at least 80% of the common
stock of the Company, no options will vest until three years after the date of
the grant and accordingly, no options are exercisable at December 31, 1996. The
weighted average remaining contractual life of the options outstanding at
December 31, 1996 is approximately 10 years. The following is a summary of
changes in shares under option.
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------
Options Weighted
Available for Number of Average
Grant Shares Exercise Price
----- ----- --------------
<S> <C> <C> <C>
Balances, December 18, 1995. . . . . . . . . 1,610,000 - $ -
Granted (weighted average fair
value of $9.01) . . . . . . . . . . . . . (949,750) 949,750 15.00
--------- ---------- ----------
Balances, December 31, 1995. . . . . . . . . 660,250 949,750 15.00
Granted (weighted average fair
value of $8.63) . . . . . . . . . . . . . (397,500) 397,500 18.14
Exercised . . . . . . . . . . . . . . . . - - -
Canceled/expired. . . . . . . . . . . . . 3,000 (3,000) 15.00
--------- ---------- ----------
Balances, December 31, 1996. . . . . . . . . 265,750 1,344,250 $ 15.93
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the Ascent Plans. Had
compensation cost for the Ascent Plans been determined based on the fair value
at the grant date for awards in 1995 and 1996 consistent with the provisions of
SFAS No. 123, the Company's net loss and loss per common share in 1996 would
have been reduced to the proforma amounts as indicated below (in thousands,
except per share information).
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Net loss - as reported $ (36,034)
Net loss - pro forma $ (37,668)
Loss per share - as reported $ (1.21)
Loss per share - pro forma $ (1.27)
The proforma amounts for 1995 would not differ significantly from the reported
amounts in 1995 as the awards granted in 1995 were granted on December 18, 1995.
Under SFAS 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options
without vesting restrictions, which significantly differ from the Company's
stock option awards. These models also require subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated values and in which the Company has no significant
history or established trends. The Company's calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions for 1996: expected life, 12-24 months following the last vesting
date of the award; stock volatility, 57.6%; risk free interest rates, 5.9%; and
no dividends during expected term. The Company's calculations are based on an
option valuation approach and forfeitures are recognized as they occur.
OCC also has adopted a stock incentive plan (the "OCC Plan"), expiring in 2006,
under which employees of OCC may be granted stock options, restricted stock
awards, stock appreciation rights and other stock based awards. Under the OCC
plan options generally are granted at fair market value on the date of grant.
At December 31, 1996, the OCC plan has 3,000,000 shares reserved for issuance
and options to purchase 2,181,565 shares outstanding under the plan. OCC has
also adopted the disclosure only provisions of SFAS 123. The Company's share
of OCC's pro forma compensation cost for 1996 would be approximately $475,000
or an additional loss of $.02 per share to the proforma amounts above.
STOCK INCENTIVE PLANS. COMSAT Corporation ("COMSAT") has stock incentive
plans which provide for the issuance of stock options, restricted stock
awards, stock appreciation rights and restricted stock units. Qualifying
employees of the Company have been participants of these plans. The amount of
expense charged to the Company for participation in these plans in 1996, 1995
and 1994 was $1,471,000, $865,000 and $1,231,000, respectively.
OTHER MATTERS. In August 1996, the Company, OCV and Hilton Hotels Corporation
("Hilton") entered into a letter agreement ("Letter Agreement") providing for
the cancellation of approximately 1,336,000 shares of OCV common stock issued
to Ascent pursuant to the Contribution Agreement entered into between OCV and
the Company in September 1995 ("Contribution Agreement"). The Contribution
Agreement set forth the terms and conditions of the transaction whereby OCV
acquired certain assets from Ascent (see Note 14). As a result of the
cancellation of these shares, Ascent's ownership interest in OCV was reduced
from 84% to 83% (prior to the consummation of the SpectraVision transaction
- -see Note 2). Pursuant to the Corporate Agreement between COMSAT and Ascent,
COMSAT had indemnified Ascent with respect to the adjustment effected by the
Letter Agreement and accordingly, COMSAT contributed $1,820,000 to the Company
in the fourth quarter of 1996 in accordance with this obligation.
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<PAGE>
The Letter Agreement also provided for an extension of the date on which the
exercise price of approximately 1,166,000 warrants previously issued to Hilton
by OCV would expire from June 1, 1996 to the later of (i) 90 days after the
closing or the abandonment of the proposed transaction with SpectraVision or
(ii) December 1, 1996. On October 7, 1996, Hilton exercised its warrants under
the terms of the letter agreement and OCV received consideration of
approximately $10,685,000. In turn, OCV distributed a pro rata dividend to its
stockholders, consisting of a cash dividend to its minority stockholders of
$1,781,000 and a promissory note in the amount of $8,904,000 (which OCV had
received from Hilton) for Ascent's portion of the dividend, pursuant to the
letter agreement. In December 1996, Ascent received full payment on the
promissory note from Hilton.
The Letter Agreement also provided Hilton the right to put to Ascent all, but
not less than all, of the shares acquired from exercise of the Hilton Warrants
and still held by Hilton on the date 90 days after the closing of the
Acquisition of SpectraVision at the same exercise price at which Hilton
exercised its warrants. On January 5, 1997, this put right expired unexercised.
NOTE 11 - EMPLOYEE BENEFIT PLANS
SAVINGS PLANS. OCC, ANS, the Nuggets, the Avalanche and Beacon each participate
in various 401(k) plans for qualifying employees. A portion of employee
contributions is matched by the respective entity. Matching contributions for
the years ended December 31, 1996, 1995 and 1994 were $1,266,000, $600,000 and
$557,000, respectively.
In conjunction with the amendment to the Intercompany Services Agreement with
COMSAT (see Note 13), the Company has established the Ascent Employee Benefit
Plan to cover Ascent employees at Beacon, ANS and the Corporate office. These
defined contribution plans did not have significant activity in 1996.
COMSAT PLANS. On January 1, 1996, Ascent elected to terminate its participation
in the COMSAT defined benefit pension plan, COMSAT's postretirement benefit plan
and the COMSAT supplemental pension plan for executives discussed below.
COMSAT sponsored a noncontributory defined benefit pension plan for qualifying
employees at ANS and Beacon. Pension benefits were based on years of service
and compensation prior to retirement. Ascent's policy was to fund the minimum
actuarially computed contributions required by law as determined by COMSAT's
actuaries. Ascent contributions to the plan charged to expense were $126,000
and $271,000 in 1995 and 1994, respectively.
COMSAT also sponsored an unfunded supplemental pension plan for executives.
Ascent's expense for this plan was $56,000 in 1995. No expense was recorded in
1994.
COMSAT provided health and life insurance benefits to qualifying retirees. The
expected cost of these benefits was recognized during the years in which
employees rendered service. COMSAT charged Ascent $314,000 and $425,000 in 1995
and 1994, respectively, for Ascent's share of postretirement benefit expense.
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<PAGE>
NUGGETS. The Nuggets contribute annually to the NBA's General Manager, Coaches
and Trainers Pension Plan as well as the NBA Players Association Players'
Pension Plan (collectively, the "NBA Plans"). These multi-employer plans are
administered by the NBA and require the Nuggets to make annual contributions to
the NBA Plans equal to an amount stated pursuant to the actuarial valuation.
Contributions to the General Manager, Coaches and Trainers Plan charged to
expense were $134,000, $94,000 and $45,000 for the periods ended December 31,
1996, 1995 and 1994, respectively. Contributions to the Players' Plan charged
to expense were $159,000, $132,000 and $78,000 for the periods ended December
1996, 1995 and 1994, respectively. The Nuggets policy is to fund pension costs
determined by the NBA actuaries.
The NBA, in conjunction with the NBA Players Association, has established a Pre-
Pension Benefit Plan which is designed to pay benefits to players subsequent to
their retirement from the NBA but prior to the age of qualification for the
normal players' pension plan. There were no contributions charged to expense
under this plan for the years ended December 31, 1996, 1995 and 1994,
respectively.
AVALANCHE. The Avalanche contributes monthly to the National Hockey League
Pension Society ("NHL Plan") for the benefit of its players. This multi-
employer plan is administered by the NHL and requires the Avalanche to make
contributions to the NHL Plan for the applicable playing season equal to an
amount stated pursuant to an actuarial valuation. Contributions to the NHL Plan
charged to expense were $210,000 and $130,000 for the periods ended December 31,
1996 and 1995, respectively.
The Avalanche is also required by the NHL to provide a pension or equivalent
benefit for its general manager and head coach. This benefit corresponds to an
established annual amount for each year of service beginning the season
following age 60. The Avalanche has chosen to fund this benefit separately from
the NHL plan for its various participants. The Avalanche is also required by
the NHL to provide a pension benefit to other participants, however, the
Avalanche makes available an employer matching contribution in conjunction with
its' 401(k) plan which satisfies this funding requirement.
NOTE 12 - PROVISION FOR RESTRUCTURING
During the third quarter of 1995, management of the Company decided to
discontinue the Satellite Cinema scheduled movie operations. As a result of
this decision, a restructuring charge of $10,866,000 was recorded in the third
quarter of 1995. The components of this restructuring charge included a write-
down of property and equipment of $5,140,000 to their estimated salvage value,
an accrual for severance costs of $1,010,000 and a charge of $4,716,000 for
costs related to contractual commitments that would not be fulfilled. Through
December 31, 1996, the Company has made cash payments for severance costs and
contractual commitment costs totaling $4,787,000 and has written-off other
assets of $5,433,000 relating to contractual commitments. In the fourth quarter
of 1996, the Company evaluated its remaining restructuring accruals, which are
primarily for severance and contractual obligations to be paid through September
1997, and reduced such accruals by $300,000. Although subject to future
adjustment, management of Ascent believes its' remaining reserves of $346,000 as
of December 31, 1996, are adequate to complete the restructuring plan of
Satellite Cinema's operations. During the years ended December 31, 1995 and
1994, Satellite Cinema operations reflected revenues of $24,682,000 and
$34,753,000 and an operating income (loss), before allocation
53
<PAGE>
of general and administrative expenses, of $(16,156,000) and $3,897,000,
respectively.
In December 1995, certain assets and contracts relating to Satellite Cinema
customers were sold by OCV for a $4,000,000 promissory note due in June 1996.
As of December 31, 1995, Ascent did not record the note receivable due to the
uncertainty of its collection and included the net book value of the assets sold
of $1,689,000 in Other Long Term Assets in the accompanying balance sheet. In
1996, OCV received payments totaling approximately $3,300,000 representing a
negotiated settlement of the $4,000,000 promissory note.
NOTE 13 - BUSINESS SEGMENT INFORMATION
Ascent reports operating results and financial data in two business segments:
multimedia distribution and entertainment. The multimedia distribution segment
includes video distribution and on-demand video entertainment services to the
lodging industry, and video distribution services to the NBC television network
and other private networks. The results of ANS and OCC are reported in the
multimedia distribution segment. The entertainment segment includes the Denver
Nuggets and the Colorado Avalanche franchises in the NBA and NHL,
respectively, and Beacon, a producer of theatrical films and television
programming.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Revenue:
Multimedia Distribution . . . . . . . . . $ 167,976(1) $ 135,782 $ 125,823
Entertainment . . . . . . . . . . . . . . 90,144(2) 66,036(2) 39,653
------------- ----------- ----------
Total . . . . . . . . . . . . . . . . $ 258,120 $ 201,818 $ 165,476
------------- ----------- ----------
------------- ----------- ----------
Operating income (loss):
Multimedia Distribution . . . . . . . . . $ (9,775)(1) $ 2,885 $ 18,140
Entertainment . . . . . . . . . . . . . . (24,812) (9,418) 1,064
General and administrative. . . . . . . . (9,732) (10,002) (9,203)
Restructuring Reserve . . . . . . . . . . - (10,866)(3) -
------------- ----------- ----------
Total . . . . . . . . . . . . . . . . $ (44,319) $ (27,401) $ 10,001
------------- ----------- ----------
------------- ----------- ----------
Identifiable assets:
Multimedia Distribution . . . . . . . . . $ 457,398 $ 279,591 $ 251,724
Entertainment . . . . . . . . . . . . . . 266,216 207,172 114,761
Other corporate . . . . . . . . . . . . . 12,988 15,840 6,095
------------- ----------- ----------
Total . . . . . . . . . . . . . . . . $ 736,602 $ 502,603 $ 372,580
------------- ----------- ----------
------------- ----------- ----------
Capital expenditures:
Multimedia Distribution . . . . . . . . . $ 78,793 $ 82,903 $ 89,073
Entertainment . . . . . . . . . . . . . . 10,066 2,208 980
------------- ----------- ----------
Total . . . . . . . . . . . . . . . . $ 88,859 $ 85,111 $ 90,053
------------- ----------- ----------
------------- ----------- ----------
Depreciation and amortization:
Multimedia Distribution . . . . . . . . . $ 62,232 $ 45,392 $ 34,891
Entertainment . . . . . . . . . . . . . . 12,580 8,283 3,929
------------- ----------- ----------
Total . . . . . . . . . . . . . . . . $ 74,812 $ 53,675 $ 38,820
------------- ----------- ----------
------------- ----------- ----------
</TABLE>
(1) The Multimedia distribution segment for 1996 reflects the acquisition of
SpectraVision by OCC in October 1996 (see Notes 2 and 15).
(2) Entertainment revenues in 1995 include $9,200,000 of NBA expansion fees
and in 1996, include a full year of operations for the Avalanche.
(3) Applies to Multimedia Distribution segment.
NOTE 14 - RELATED PARTY TRANSACTIONS
Ascent is charged by COMSAT for certain general and administrative services,
such as treasury services, pension and insurance administration, legal services,
tax services, internal audit review, payroll and personnel benefits
administration, public relations and various other general corporate functions.
Prior to the Offering, the cost of administering these services was allocated to
Ascent using a formula which considered Ascent's proportionate share of sales,
payroll and properties. The amounts charged to Ascent under this method for
services were $4,540,000 and $3,073,000 for the years ended December 31, 1995
and 1994, respectively. Management believes that the allocation methods with
respect to all charges were reasonable. In 1996, charges for these services
from COMSAT were determined pursuant to the Intercompany Services Agreement
("Services Agreement") with charges totaling $2,000,000 plus other incidental
charges. On December 18, 1996, the Services Agreement was amended whereby
COMSAT will provide limited administrative and support services on a month-to-
month basis to the Company commencing in January 1997. Monthly charges for
these services will be approximately $15,000.
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<PAGE>
In conjunction with Ascent's Offering (see Note 1), the Company and COMSAT
entered into a Corporate Agreement (the "Corporate Agreement"), pursuant to
which, among other things, the Company has agreed with COMSAT not to incur
any indebtedness without COMSAT's prior consent, other than indebtedness
under the Company's amended Credit Facilities (see Note 6), and indebtedness
incurred in the ordinary course of operations which together shall not exceed
$270.0 million in the aggregate; provided that not more than $50.0 million of
such indebtedness may constitute long-term debt.
From April through July 1995, Ascent loaned $2,000,000 to one of its directors.
The loan, plus interest thereon at the prime rate plus one percent, was repaid
in full in November 1995.
During the third quarter of 1995, the Company entered into a Contribution
Agreement with OCV, whereby the Company contributed various assets and
liabilities (primarily installed video systems and related construction in
progress, accounts receivable, deferred income taxes and other assets) to OCV
with a net book value of approximately $56,539,000 in exchange for
approximately 5,337,000 shares of common stock of OCV. This transfer of net
assets and shares between companies under common control has been accounted
for at historical cost. During the second quarter of 1996, the Company
contributed some additional assets and liabilities (installed video systems
and related deferred income taxes and other assets) to OCV in connection with
the aforementioned contribution agreement. These assets and liabilities had
a net book value of approximately $1,385,000. In August 1996, the Company,
OCV and Hilton entered into a letter of agreement providing for the
cancellation of 1,336,470 shares of common stock of OCV issued to Ascent
pursuant to the Contribution Agreement (see Note 10).
In conjunction with the Acquisition and Merger (see Note 2), Ascent and OCC
entered into a corporate agreement (the "OCC Corporate Agreement"), pursuant
to which, among other things, OCC has agreed not to incur any indebtedness
without Ascent's prior consent, other than indebtedness under OCC's amended
credit facility (see Note 6), and indebtedness incurred in the ordinary
course of operations which together shall not exceed $116 million through
June 30, 1997, and shall not exceed $130 million through December 31, 1997;
provided however, that (i) no more than $50,000,000 of such indebtedness may
constitute long term debt and (ii) indebtedness may only be incurred in
compliance with the financial covenants contained in OCC's existing credit
facility (see Note 6), with any amendments to such covenants subject to the
written consent of Ascent.
OCC earned revenues of approximately $18,900,000, $15,000,000 and $12,400,000 in
1996, 1995 and 1994, respectively, from Hilton and its affiliates. Hilton is a
minority stockholder of OCC.
OCC earned revenues of $4,944,000, and $3,362,000 for the years ended December
31, 1996 and 1995 respectively, from MagiNet Corporation, which is a related
party by virtue of OCC's investment in its preferred stock (see Note 2).
Accounts receivable from MagiNet at December 31, 1996 were approximately
$1,000,000.
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<PAGE>
NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Dec. 31 Sept. 30 June 30 March 31
------- -------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1996 (1)
Revenues. . . . . . . . . . . . . . . . . . . . $ 91,594 $ 38,141 $ 56,045 $ 72,340
Operating Expenses. . . . . . . . . . . . . . . 91,820 28,333 46,921 60,553
Depreciation and Amortization . . . . . . . . . 26,175 16,939 15,966 15,732
Operating loss. . . . . . . . . . . . . . . . . (26,401)(2) (7,131) (6,842) (3,945)
Loss before extraordinary item. . . . . . . . . (19,134) (6,035) (6,256) (4,275)
Net Loss. . . . . . . . . . . . . . . . . . . . (19,468) (6,035) (6,256) (4,275)
Loss per share. . . . . . . . . . . . . . . . . (.65) (.20) (.21) (.14)
1995 (1)
Revenues. . . . . . . . . . . . . . . . . . . . $ 59,710 $ 39,952 $ 52,601 $ 49,555
Operating Expenses. . . . . . . . . . . . . . . 56,263 32,888 34,004 41,523
Depreciation and Amortization . . . . . . . . . 14,925 14,545 12,442 11,763
Provision for restructuring . . . . . . . . . . - 10,866 (3) - -
Operating income (loss) . . . . . . . . . . . . (11,478) (18,347) 6,155 (4) (3,731)
Net income (loss) . . . . . . . . . . . . . . . (7,855) (13,733) 3,898 (3,333)
Income (loss) per share . . . . . . . . . . . . (.32) (.57) .16 (.14)
</TABLE>
(1) The Company has restated its Consolidated Financial Statements for the Year
ended December 31, 1995 and for the first three quarters of 1996. The net
effect of the restatement was to increase the previously reported 1995
operating loss by $2,410,000, net loss by $1,567,000 (net of a tax benefit
of $843,000) and loss per common share by $.07. The impact of the
restatement on previously reported 1996 quarterly information is not
material, and results in decreasing the previously reported net losses in
each of the first three quarters of 1996 by $67,000. The previously
reported quarterly information for 1995 and 1996 in the above tables has
been restated. For further information see the Company's Form 10-K/A filed
on February 19, 1997.
(2) Results for the fourth quarter of 1996 include $8.7 million of non-
recurring charges incurred by OCC and operating losses incurred by
SpectraVision since the date of acquisition. These non-recurring charges
include costs relating to asset write-downs, reserve and expense accruals
associated with the integration of SpectraVision, the alignment of the
OCC's operating practices for OCV and SpectraVision and the establishment
of OCC as a new public company.
(3) In the third quarter of 1995, a $10.9 restructuring charge was incurred
resulting from the discontinuation of Satellite Cinema's lower margin,
schedule, satellite delivered pay-per-view service (see Note 12).
(4) In the second quarter of 1995, the Company recognized an $8.8 million NBA
expansion fee payable to the Nuggets (an additional $.4 million was
recognized in the fourth quarter of 1995 upon resolution of certain
contingencies).
NOTE 16 - SUBSEQUENT EVENTS
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<PAGE>
On January 11, 1997, SpectraVision experienced an interruption in service caused
by the loss of communication with a satellite used to deliver pay-per-view
programming to 950 of OCC's approximately 3,100 hotels. Of the hotels affected,
approximately 410 hotels continued to provide limited pay-per-view services
through alternate disk or tape-based systems.
By February 9, 1997, OCC was able to obtain alternate satellite service and had
restored full service to all the hotels affected. The Company believes the loss
of service will result in approximately $4,000,000 of decreased revenues and
incremental expenses in the first quarter of 1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
Except for the portion of Item 10 relating to Executive Officers which is
included in Part I of this Report, the information called for by Items 10
through 13 is incorporated by reference from the Ascent Entertainment Group,
Inc. 1996 Annual Meeting of Stockholders - Notice and Proxy Statement - (to be
filed pursuant to Regulation 14A not later than 120 days after the close of the
fiscal year) which meeting involves the election of directors, in accordance
with General Instruction G to the Annual Report on Form 10-K.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report.
1. Consolidated Financial Statements and Supplementary Data of
Registrant
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and 1994
(b) REPORTS ON FORM 8-K.
Current Report on Form 8-K (File no. 0-27192) filed on October 17, 1996
and including a discussion regarding (i) the election of Allen Flower as
a director of the Company; (ii) the terms of the Spectravision acquisition;
(iii) COMSAT's consent to an increase in the Company's debt
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<PAGE>
limitation under the COMSAT Corporate Agreement to $216 million; and (iv)
the terms of the Ascent and OCC credit facilities.
Current Report on Form 8-K (File no. 0-27192) filed on November 14, 1996
and including pro forma financial information filed in connection with
the Spectravision acquisition.
Current Report on Form 8-K (File no. 0-27192) filed on November 27, 1996
and including a discussion regarding COMSAT's consent to an increase in
the Company's debt limitation under the COMSAT Corporate Agreement to $236
million.
Current Report on Form 8-K (File No. 0-27192) filed on February 21, 1997
and including the Registrant's press release reporting its 1996 financial
performance.
(c) EXHIBITS: The following exhibits are listed according
to the number assigned in the table in Item
601 of Regulation S-K.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant*
3.2 Amended and Restated Bylaws of the Registrant**
10.1 Development, Production and Domestic Distribution Agreement,
dated as of April 15, 1993 and amended as of
August 11, 1993 and November 12, 1993, between Beacon
Communications Corp. and SONY Pictures Entertainment,
Inc. (Confidential treatment granted).***
10.1a Second Amendment to Development, Production and Domestic
Distribution Agreement between Beacon Communications Corp.
and Sony Pictures Entertainment, Inc. dated as of July 22, 1996,
incorporated by reference from exhibit 10.6 to Amendment No. 2 to
the Registration Statement on Form S-4 of On Command Corporation
(No. 333-10407) filed on September 26, 1996 (Confidential
treatment granted).
10.2 Assignment, Assumption, Consent and Amendment, dated as
of October 27, 1994, by and among Beacon Communications
Corp., BCC Funding Corporation, COMSAT Corporation and
SONY Pictures Entertainment, Inc. (Confidential
treatment granted).***
10.3(*) Form of Employment Agreement between On Command Corporation and
Robert Kavner, incorporated by reference from exhibit 10.6 to
Amendment No. 2 to the Registration Statement on Form S-4 of On
Command Corporation (No. 333-10407) filed on September 26, 1996.
10.4(*) Employment Agreement, dated as of December 1, 1994, by
and among COMSAT Corporation, BCC Funding Corporation
and Armyan Bernstein.**
10.5(*) Employment Agreement, dated as of December 1, 1994, by
and among COMSAT Corporation, BCC Funding Corporation
and Marc Abraham.**
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<PAGE>
10.6 Master Services Agreement, dated as of August 3, 1993,
by and between Marriott International, Inc., Marriott
Hotel Services, Inc. and On Command Video (Confidential
treatment granted).***
10.7 Consent Agreement, dated as of July 1, 1995, by and
among the National Hockey League, Le Club de Hockey Les
Nordiques, Les Nordiques de Quebec 1988, Marcel Aubut,
COMSAT Hockey Enterprises, LLC, COMSAT Video Enterprises,
Inc., the Registrant and COMSAT Corporation.**
10.8 Basketball Agreement, dated as of July 15, 1992, by and
between the City and County of Denver and the Denver
Nuggets Limited Partnership.**
10.9 Amendatory Agreement by and between the City and County
of Denver and the Denver Nuggets Limited Partnership.**
10.10 User Agreement by and between the City and County of
Denver and the Colorado Avalanche LLC.**
10.11(*) Employment Agreement, dated as of June 3, 1996, between the
Registrant and James A. Cronin, III.
10.12 Corporate Agreement by and between the Registrant and
COMSAT Corporation, incorporated by reference from the exhibit of
the same number to the Annual Report on Form 10-K of Registrant
(No. 0-27192) filed on March 29, 1996.
10.13 Tax Sharing Agreement by and between the Registrant and
COMSAT Corporation, incorporated by reference from the exhibit of
the same number to the Annual Report on Form 10-K of Registrant
(No. 0-27192) filed on March 29, 1996.
10.14(*) Amended and Restated Employment Agreement between the Registrant
and Charles Lyons.
10.15(*) Ascent Entertainment Group, Inc. 1995 Key Employee Stock
Plan, incorporated by reference from the exhibit of the same
number to the Annual Report on Form 10-K of Registrant (No. 0-
27192) filed on March 29, 1996.
10.16(*) Ascent Entertainment Group, Inc. 1995 Non-Employee
Directors Stock Plan, incorporated by reference from the exhibit
of the same number to the Annual Report on Form 10-K of
Registrant (No. 0-27192) filed on March 29, 1996.
10.17 Agreement between Beacon Communications Corp. and Universal
Pictures, a division of Universal City Studios, Inc. dated as of
July 10, 1996, incorporated by reference from exhibit 10.5 to the
Quarterly Report on Form 10-Q of Registrant (No. 0-27192) filed
on November 13, 1996 as amended by Registrant's Quarterly Report
on Form 10-Q/A filed on January 6, 1997.
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10.18 First Amended and Restated $140,000,000 Credit Agreement dated as
of March 23, 1997 among the Registrant, the lenders named therein
and NationsBank of Texas, N.A., as administrative agent.
10.19 $125,000,000 Credit Agreement dated as of October 8, 1996 among
On Command Corporation, the lenders named therein and NationsBank
of Texas, N.A., as administrative agent, marked to show changes
from the credit agreement filed with the Registrant's Current
Report on Form 8-K (File No. 0-27192) filed on October 17, 1996.
10.19a First Amendment to Credit Agreement dated March 23, 1997 among
On Command Corporation, the lenders named therein and NationsBank
of Texas, N.A., as administrative agent.
10.20(*) Employment Agreement between the Registrant and Ellen Robinson.
10.21(*) Letter Agreement between the Registrant and Wesley D. Minami.
10.22 Corporate Agreement dated as of October 8, 1996 between the
Registrant and On Command Corporation.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
(*) Compensatory plan or arrangement.
* Incorporated by reference from the exhibit of the
same number to Amendment No. 4 to the Registrant's Registration
Statement on Form S-1 (No. 33-98502) filed on December 12, 1995
** Incorporated by reference from the exhibit of the same number to
the Registrant's Registration Statement on Form S-1 (No. 33-
98502) filed on October 23, 1995.
*** Incorporated by reference from the exhibit of the same number to
Amendment No. 2 to the Registrant's Registration Statement on
Form S-1 (No. 33-98502) filed on November 13, 1995.
61
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City and County
of Denver, State of Colorado on March 31, 1997.
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ Charles Lyons
-----------------
Charles Lyons
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities indicated on March
31, 1997.
/s/ Charles Lyons
-----------------
Charles Lyons
President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ James A. Cronin, III
------------------------
James A. Cronin, III
Executive Vice President, Finance and
Chief Operating Officer
(Principal Financial Officer)
/S/ David A. Holden
-------------------
David A. Holden
Controller
(Principal Accounting Officer)
/s/ C.J. Silas
--------------
C. J. Silas
Chairman of the Board
/s/ Edwin I. Colodny
--------------------
Edwin I. Colodny (Director)
/s/ Charles M. Lillis
---------------------
Charles M. Lillis (Director)
/s/ Charles M. Neinas
---------------------
Charles M. Neinas (Director)
/s/ Robert G. Schwartz
----------------------
Robert G. Schwartz (Director)
/s/ Allen E. Flower
-------------------
Allen E. Flower (Director)
62
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ASCENT ENTERTAINMENT GROUP, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged Charged Balance
beginning to to other Deductions at end
of year expenses accounts(a) (b) of year
------- -------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
1994: Allowance for loss on
accounts receivable . . . . . . . . . . . $ 4,461 $ 660 $ (818) $ (410) $ 3,893
-------- ------ ---------- ---------- --------
-------- ------ ---------- ---------- --------
1995: Allowance for loss on
accounts receivable . . . . . . . . . . . $ 3,893 $ 711 $ (94) $ (1,270) $ 3,240
-------- ------ ---------- ---------- --------
-------- ------ ---------- ---------- --------
1996: Allowance for loss on
accounts receivable . . . . . . . . . . $ 3,240 $ 758 $ (1,775) $ (87) $ 2,136
-------- ------ ---------- ---------- --------
-------- ------ ---------- ---------- --------
</TABLE>
(a) Recoveries of amounts previously reserved and other adjustments.
(a) Uncollectible amounts written off.
63
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INDEX TO EXHIBITS
Exhibit
No. Description
- -------- -----------
10.11 Employment Agreement between the Registrant and James A. Cronin,
III.
10.14 Amended and Restated Employment Agreement between the Registrant
and Charles Lyons.
10.18 First Amended and Restated $140,000,000 Credit Agreement dated as of
March 23, 1997 among the Registrant, the lenders named therein and
NationsBank of Texas, N.A., as administrative agent.
10.19 $125,000,000 Credit Agreement dated as of October 8, 1996 among On
Command Corporation, the lenders named therein and NationsBank of
Texas, N.A., as administrative agent, marked to show changes from
the credit agreement filed with the Registrant's Current Report on
Form 8-K (File No. 0-27192) filed on October 17, 1996.
10.19a First Amendment to Credit Agreement dated March 23, 1997 among On
Command Corporation, the lenders named therein and NationsBank of
Texas, N.A., as administrative agent.
10.20 Employment Agreement between the Registrant and Ellen Robinson
10.21 Letter Agreement between the Registrant and Wesley D. Minami
10.22 Corporate Agreement dated as of October 8, 1996 between the
Registrant and On Command Corporation.
21.1 Subsidiaries of Ascent Entertainment Group, Inc.
23.1 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
64
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This AGREEMENT made as of June 3, 1996, by and between Ascent Entertainment
Group, Inc., a Delaware corporation ("Ascent"), a Delaware corporation, and
James A. Cronin, III, a resident of the State of Colorado(the "Executive").
WHEREAS, Ascent desires to employ the Executive as Executive Vice
President, Finance and Chief Operating Officer of Ascent, and the Executive
desires to accept such employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, Ascent and the Executive
agree as follows:
1. EMPLOYMENT; DUTIES.
(a) EMPLOYMENT AND EMPLOYMENT PERIOD. Ascent shall employ the
Executive pursuant to this Agreement for a period (the "Employment Period")
commencing on June 3, 1996 (the "Effective Date") and continuing thereafter for
a term of four years until June 3, 2000, to serve as Executive Vice President,
Finance and Chief Operating Officer of Ascent or its successor entity unless
terminated in accordance with the provisions of this Agreement. In the event
that Ascent desires to extend the employment of the Executive, it must give
written notice of such desire by the third anniversary of the Effective Date,
and after such notice the parties shall enter into an exclusive negotiation
period of not less than six months, unless otherwise mutually agreed upon by the
parties in writing. Each 12 month period ending on the anniversary date of the
Effective Date is sometimes referred to herein as a "year of the Employment
Period."
(b) OFFICES, DUTIES AND RESPONSIBILITIES. Effective on June 21,
1996, Executive shall be elected Executive Vice President, Finance and Chief
Operating Officer of Ascent. The Executive shall report directly and solely to
the Chief Executive Officer and the Board of Directors of Ascent (the "Board");
provided that so long as Charlie Lyons is Chief Executive Officer and/or
Chairman of the Board, the Executive shall report solely to Mr. Lyons and the
Board. The
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Executive's offices shall be located at Ascent's headquarters, which are
presently located in Denver, Colorado. The Executive shall have all duties and
authority customarily accorded a chief operating officer, including, without
limitation, the lead responsibility with full autonomy, subject to the customary
authority and direction of the Board (and the Chief Executive Officer), to
direct and develop the operating capabilities and performance of Ascent. The
Executive shall be a member of any senior executive/management committees which
may be established from time to time by the Board. The Executive shall not be
required to perform services other than those comparable in scope, dignity and
stature to those customarily performed by chief operating officers and chief
financial officers of companies similar to Ascent.
(c) DEVOTION TO INTERESTS OF ASCENT. During the Employment Period,
the Executive shall render his business services solely in the performance of
his duties hereunder. The Executive shall use his best efforts to promote the
interests and welfare of Ascent. Notwithstanding the foregoing, the Executive
shall be entitled to undertake such outside activities (E.G., charitable,
educational, personal interests, board of directors membership, and so forth,
that do not compete with the Entertainment Business) as exist on the Effective
Date or do not unreasonably or materially interfere with the performance of his
duties hereunder as reasonably determined by the Board in consultation with the
Executive.
2. COMPENSATION AND FRINGE BENEFITS.
(a) BASE COMPENSATION. Ascent shall pay the Executive a base salary
("Base Salary") at the rate of $400,000 per year during the Employment Period
with payments made in installments in accordance with Ascent's regular practice
for compensating executive personnel, PROVIDED that in no event shall such
payments be made less frequently than twice per month. The Base Salary for the
Executive shall be reviewed for increases each year during the Employment Period
commencing the second year of the Employment Period. Any Base Salary increases
shall be approved by the Board in its sole discretion.
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<PAGE>
(b) BONUS COMPENSATION. The Executive will be eligible to receive
bonuses ("Annual Bonus") during the Employment Period in accordance with the
following parameters: (i) the target bonus for each year during the Employment
Period shall be 75% of Base Salary for achieving 100% of the target level for
the performance measures; and (ii) the performance measures, the relative weight
to be accorded each performance measure and the amount of bonus payable in
relation to the target bonus for achieving more or less than 100% of the target
level for the performance measures shall be determined for each year during the
Employment Period by the Compensation Committee after consultation with the
Executive. As part of the consultation process set forth in the preceding
sentence, the Executive shall assist Ascent's Chief Executive Officer in
preparing, before the end of each fiscal year ending during the Employment
Period, a business plan for Ascent with respect to at least the following three
year period. The Board shall consider and approve such plans on an annual
basis, subject to such modifications as are otherwise consistent with this
Agreement, and each fiscal year the current plan shall be considered by the
Compensation Committee as the basis for establishing the bonus standards for
such year with such reasonable modifications as the Compensation Committee may
reasonably determine and which are consistent with this Agreement. During the
final partial fiscal year of the Employment Period, the Annual Bonus shall be
based on the standards set by the Compensation Committee for that fiscal year
and pro rated for the period during which the Executive is employed.
(c) FRINGE BENEFITS. The Executive also shall be entitled to
participate in group health, dental and disability insurance programs, and any
group profit sharing, deferred compensation, supplemental life insurance or
other benefit plans as are generally made available by Ascent to the senior
executives of Ascent on a favored nations basis, which benefits shall be
comparable, in the aggregate, to the benefits available to senior executives of
similarly situated companies. Such benefits shall include reimbursement of (i)
documented expenses reasonably incurred in connection with travel and
entertainment related to Ascent's business and affairs, (ii) Executive's
reasonable legal fees and costs incurred in connection with the drafting,
negotiation and execution of this Agreement; provided that such fees and costs
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shall not exceed $5,000, and (iii) a monthly payment for or reimbursement of
automobile and other transportation related expenses of $1,100 per month. All
benefits described in the foregoing (i) and (ii) that are reportable as earned
or unearned income will be "grossed up" by Ascent in connection with federal and
state tax obligations to provide Executive with appropriate net tax coverage so
that the benefits received by the Executive from the foregoing clauses (i) and
(ii) shall be net of income and employment taxes thereon. Without limiting any
of the foregoing, as soon as practicable Ascent will gather information
regarding nature and scope of benefit plans (E.G., profit sharing, deferred
compensation, supplemental life insurance) offered to executives of comparable
or otherwise relevant entertainment companies (including spinoffs and recent
issuers of initial public offerings), and the Board will determine in 1996
whether and to what extent to implement any such programs. Ascent reserves the
right to modify or terminate from time to time the fringe benefits provided to
the senior management group, PROVIDED that the fringe benefits provided to the
Executive shall not be materially reduced on an overall basis during the
Employment Period. Notwithstanding the foregoing, until such time as Ascent
shall implement group-health, dental and disability insurance plans for its
executives, or for a period of one year following the IPO, whichever is less,
Executive will be entitled to participate in the group health, dental, and
disability insurance plans made available to the senior management group of
COMSAT Corporation ("COMSAT").
(d) STOCK OPTIONS. Ascent hereby grants to Executive as of the
Effective Date options ("Options") to purchase 297,500 shares of Ascent's common
stock, par value $0.01 per share, each such Option exercisable at $18.25 per
share, which was the fair market value of the common stock on the Effective
Date. The Options shall be exercisable by Executive according to the following
schedule:
(i) 10% of the Options on or after the commencement of the
second year of the Employment Period;
(ii) 15% of the Options on or after the commencement of the
third year of the Employment Period;
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<PAGE>
(iii) 25% of the Options on or after the commencement of the
fourth year of the Employment Period;
(iv) 25% of the Options on or after the commencement of the
fifth year of the Employment Period;
(v) 25% of the Options on or after the completion of the fifth
year of the Employment Period; provided, however, that for so long as COMSAT
owns at least 80% of Ascent, Executive shall not be entitled to exercise any of
the Options prior to the third anniversary of the Effective Date.
Notwithstanding the foregoing, 100% of the Options shall immediately vest and
become immediately exercisable, without any further action by the Executive,
upon the occurrence of any "change of control" as defined in Section 7(a) below,
or upon the occurrence of any event that results in Ascent's Common Stock no
longer being traded on any of the New York Stock Exchange, American Stock
Exchange or NASDAQ National Market System (including, without limitation, as a
result of any "going private" transaction with Ascent). Such options shall be
represented by a stock option agreement containing appropriate terms consistent
with the provisions of this Agreement. The Options, to the extent they remain
unexercised, shall automatically and without further notice terminate and become
of no further force and effect at the time of the earliest of the following to
occur:
(x) Three months after the date upon which a termination for
cause by Ascent (as provided in Section 5(b)) shall have become effective and
final; or
(y) Ten years after the Effective Date.
In the event of any stock split, stock dividend, spin-off,
reclassification, recapitalization, merger, consolidation, subdivision,
combination or other change which affects the character or amount of Ascent's
common stock after the Effective Date and prior to the exercise and/or
expiration of all of the Options, the number and exercise price of and/or the
formula for determining the value of such unissued or unexercised Options shall
be adjusted in order to make such Options, as nearly as may be practicable,
equivalent in nature and value to the Options that would have existed had such
change not taken place. In addition, if Ascent adopts a stock
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<PAGE>
option plan that in Executive's sole judgment provides for any term(s) more
favorable to the grantee than any term(s) set forth above, Executive will be
entitled to the benefit of such more favorable term(s) with respect to the
Options, other than with respect to the vesting schedule thereof, but in no
event will any term(s) applicable to the Options be less favorable to Executive
than those set forth above.
During the Employment Period, the Executive shall be granted additional
non-statutory stock options as determined by the Compensation Committee in its
sole discretion, PROVIDED that no additional stock options shall be granted to
the Executive within three years from the Effective Date. Notwithstanding any
other provision of this Agreement except Section 5(b), the Compensation
Committee may in its discretion provide that any stock options granted to the
Executive which have not vested prior to his termination of employment shall
continue to vest in accordance with their original terms as if the Executive's
employment had not terminated.
(e) CONSULTING COMPENSATION. If the Executive is still employed by
Ascent on the date preceding the sixth anniversary of the Effective Date, and if
by such date the Executive and Ascent have not executed a written agreement for
an additional term of employment, then the Employment Period shall expire and,
in addition to and without limitation of any rights of either party under this
Agreement or otherwise, Ascent shall retain the Executive as a non-exclusive
consultant and, as compensation for such consulting services, shall pay the
Executive an amount equal to one hundred percent (100%) of his then current Base
Salary for an additional period of eighteen (18) months (the "Consulting
Period"), and during the Consulting Period the Executive shall continue to
receive Fringe Benefits (as defined below), and to vest in any employee stock
options previously awarded to the Executive, but the Executive shall not be
entitled to receive any Base Salary increases, bonuses, or further awards of
stock options. Without limiting any of the Executive's other rights under this
Agreement or otherwise, if the Executive is still employed by Ascent on the date
preceding the fourth anniversary of the Effective Date and is retained as a
consultant and is entitled to the compensation and benefits set forth in the
immediately preceding sentence, then such compensation and benefits shall
constitute the Executive's
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sole compensation resulting from the expiration of this Agreement, and the
Executive waives any claims to any additional compensation other than as a
result of Ascent's breach of this Agreement.
(f) PERFORMANCE-BASED COMPENSATION; CONFLICTING PROVISIONS. The
parties agree to use their best efforts in the administration of this Agreement
to take actions so as to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") to ensure, to the extent
possible consistent with the other terms of this Agreement and the Options, the
Federal tax deductibility under that section of compensation paid to the
Executive pursuant to performance-based compensation. Solely to the extent of
any conflict between the provisions of this Agreement and the provisions of any
agreement between Executive, on the one hand, and COMSAT, Ascent and/or any
affiliated or related entity of either of them, on the other hand, relating to
stock options (including the Options), life insurance, health insurance, any
other employee equity participation, profit sharing or retirement plan, group
health plan or other employee benefits (individually and collectively referred
to herein as the "Fringe Benefits"), the provisions of this Agreement will
control.
3. TRADE SECRETS; RETURN OF DOCUMENTS AND PROPERTY.
(a) Executive acknowledges that during the course of his employment
he will receive secret, confidential and proprietary information ("Trade
Secrets") of Ascent and of other companies with which Ascent does business on a
confidential basis and that Executive will create and develop Trade Secrets for
the benefit of Ascent. Trade Secrets shall include, without limitation, (i)
literary, dramatic or other works, screenplays, stories, adaptations, scripts,
treatments, formats, "bibles," scenarios, characters, titles of any kind and any
rights therein, custom databases, "know-how," formulae, secret processes or
machines, inventions, computer programs (including documentation of such
programs) (collectively, "Technical Trade Secrets"), and (ii) matters of a
business nature, such as customer data and proprietary information about costs,
profits, markets and sales, customer databases, and other information of a
similar nature to the extent not available to the public, and plans for future
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development (collectively, "Business Trade Secrets"). All Trade Secrets
disclosed to or created by Executive shall be deemed to be the exclusive
property of Ascent (as the context may require). Executive acknowledges that
Trade Secrets have economic value to Ascent due to the fact that Trade Secrets
are not generally known to the public or the trade and that the unauthorized use
or disclosure of Trade Secrets is likely to be detrimental to the interests of
Ascent and its subsidiaries. Executive therefore agrees to hold in strict
confidence and not to disclose to any third party any Trade Secret acquired or
created or developed by Executive during the term of this Agreement except
(i) when Executive is required to use or disclose any Trade Secret in the proper
course of the Executive's rendition of services to Ascent hereunder, (ii) when
such Trade Secret becomes public knowledge other than through a breach of this
Agreement, or (iii) when Executive is required to disclose any Trade Secret
pursuant to any valid court order in which the Executive is compelled to
disclose such Trade Secret. The Executive shall notify Ascent immediately of
any such court order in order to enable Ascent to contest such order's validity.
For a period of two (2) years after termination of the Employment Period for all
Business Trade Secrets and for a period of five (5) years after termination of
the Employment Period for all Technical Trade Secrets, the Executive shall not
use or otherwise disclose Trade Secrets unless such information (x) becomes
public knowledge or is generally known in the entertainment or sports industry
among executives comparable to the Executive other than through a breach of this
Agreement, (y) is disclosed to the Executive by a third party who is entitled to
receive and disclose such Trade Secret, or (z) is required to be disclosed
pursuant to any valid court order, in which case the Executive shall notify
Ascent immediately of any such court order in order to enable Ascent to contest
such order's validity.
(b) Upon the effective date of notice of the Executive's or Ascent's
election to terminate this Agreement, or at any time upon the request of Ascent,
the Executive (or his heirs or personal representatives) shall deliver to Ascent
(i) all documents and materials containing or otherwise relating to Trade
Secrets or other information relating to Ascent's business and affairs, and
(ii) all documents, materials and other property belonging to Ascent, which in
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either case are in the possession or under the control of the Executive (or his
heirs or personal representatives). The Executive shall be entitled to keep his
personal records relating to Ascent's business and affairs except to the extent
those contain documents or materials described in clause (i) or (ii) of the
preceding sentence, in which case Executive may retain copies for his personal
and confidential use.
4. DISCOVERIES AND WORKS. All discoveries and works made or conceived by
the Executive during his employment by Ascent pursuant to this Agreement,
jointly or with others, that relate to Ascent's activities ("Discoveries and
Works") shall be owned by Ascent. Discoveries and Works shall include, without
limitation, literary, dramatic or other works, screenplays, stories,
adaptations, scripts, treatments, formats, "bibles," scenarios, characters,
titles of any kind and any rights therein, other works of authorship,
inventions, computer programs (including documentation of such programs),
technical improvements, processes and drawings. The Executive shall
(i) promptly notify, make full disclosure to, and execute and deliver any
documents reasonably requested by, Ascent to evidence or better assure title to
such Discoveries and Works in Ascent, (ii) assist Ascent in obtaining or
maintaining for itself at its own expense United States and foreign copyrights,
trade secret protection or other protection of any and all such Discoveries and
Works, and (iii) promptly execute, whether during his employment by Ascent or
thereafter, all applications or other endorsements necessary or appropriate to
maintain copyright and other rights for Ascent and to protect their title
thereto. Any Discoveries and Works which, within sixty days after the
termination of the Executive's employment by Ascent, are made, disclosed,
reduced to a tangible or written form or description, or are reduced to practice
by the Executive and which pertain to work performed by the Executive while with
Ascent shall, as between the Executive and Ascent be presumed to have been made
during the Executive's employment by Ascent.
5. TERMINATION. This Agreement shall remain in effect during the
Employment Period, and this Agreement and Executive's employment with Ascent may
be terminated only as follows:
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(a) By the Executive (an "Executive Election") at any time upon sixty
(60) days advance written notice to Ascent upon an "Executive Election Event"
(as defined below). In such event or if the Executive's employment is
terminated by Ascent without "cause" (as defined below), there will be no
forfeiture, penalty, reduction or other adverse effect upon any rights or
interests relating to any Fringe Benefits, all of which will fully vest, to the
extent not previously vested, immediately upon such termination becoming
effective and final. Without limiting the foregoing, in the event of an
Executive Election or if the Executive's employment is terminated without
"cause," the Executive shall be entitled to receive the following benefits
through the longer of (a) the remainder of the Employment Period as if this
Agreement had remained in effect until the end of such four-year Employment
Period and (B) one year following the date of such termination (the "Duration
Period"): (i) his then current Base Salary; (ii) an Annual Bonus equal to
seventy-five percent (75%) of his then current Base Salary; and (iii) all other
benefits provided pursuant to Sections 2(c), (d) and (e) of this Agreement;
PROVIDED, HOWEVER, that in no event will the amounts payable under clauses (i)
and (ii) above be referable to less than one full year of the Employment Period.
The Executive shall have no obligation to seek other employment in the event of
his termination pursuant to this paragraph (a), PROVIDED, HOWEVER, that his
compensation from any such employment obtained shall offset up to fifty percent
(50%) of Ascent's obligations under clauses (i) and (ii) above, but only after
payments pursuant to clauses (i) and (ii) are made with respect to a one year
period following termination. Ascent shall have the option at any time during
the Duration Period to pay to the Executive in a lump sum the amounts remaining
under clauses (i) and (ii) of this paragraph (a), PROVIDED that the amount of
such lump sum payment shall be reduced up to fifty percent (50%) by the
compensation payable to the Executive from other employment for the time period
remaining on Ascent's payment obligation hereunder at the time such payment is
made. If Ascent exercises such option, Ascent shall have no further
compensation payment obligations under clauses (i) and (ii) above. The
Executive shall have the right to instruct Ascent to decrease any such payment
or other benefit due under this paragraph (a) to an amount not to exceed an
amount to be designated by the Executive in writing for the purpose of providing
that such payment (together with
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any other benefits provided to the Executive) shall not constitute a "parachute
payment" as defined in Section 280G of the Code; provided, however, that
Ascent's agreement to decrease such payment shall not result in any liability
from Ascent to the Executive with respect to any excise tax under Section 4999
of the Code (or any similar state or local provision), or any penalties or
interest with respect to such excise tax. Ascent shall place an amount
equivalent to its obligations owed to the Executive in connection with this
Section 5(a) in an escrow account to be administered by an unrelated third
party, or shall provide some other comparable form of security (e.g., an
irrevocable letter of credit) for such obligations reasonably acceptable to the
Executive. In all circumstances of termination under this Section 5(a), Ascent
shall remain obligated under clause (iii) and all stock options (including the
Option) will remain exercisable for the maximum period provided in each
applicable grant.
An "Executive Election Event" shall be any of the following: (I) any
substantial reduction (except in connection with the termination of his
employment voluntarily by the Executive or by Ascent for "cause" as defined
below) by Ascent, without the Executive's express written consent, of his
responsibilities as Executive Vice President, Finance and Chief Operating
Officer of Ascent; (II) any change in the reporting structure set forth in
Section 1(b) above; (III) any reduction in Executive's title such that he is no
longer either the chief operating officer nor chief financial officer, or the
functional equivalent thereof; (IV) a "Change of Control Event" (as defined in
Section 7(a) below); provided that in such event, the 50% offset from subsequent
employment set forth in the preceding paragraph shall be increased to 100% and
such offset shall apply during the first year after termination as well; (V) any
other material default of this Agreement which continues for ten (10) business
days following Ascent's receipt of written notice from the Executive specifying
the manner in which Ascent is in default of this Agreement; (VI) the Board's
requiring Executive to be based at any office location other than the principal
offices of Ascent, or the relocation, without Executive's consent, of such
principal offices to a location outside the greater Denver area prior to the
second anniversary of the Effective Date; or (VII) any purported termination of
Executive's
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employment otherwise than as expressly permitted by the Agreement.
(b) By Ascent at any time for "cause." For purposes of this
Agreement, Ascent shall have "cause" to terminate the Executive's employment
hereunder upon (i) the continued and deliberate failure of the Executive to
perform his material duties, in a manner substantially consistent with the
manner reasonably prescribed by the Board and in accordance with the terms of
this Agreement (other than any such failure resulting from his incapacity due to
physical or mental illness), which failure continues for ten (10) business days
following the Executive's receipt of written notice from the Board specifying
the manner in which the Executive is in default of his duties, (ii) the engaging
by the Executive in intentional serious misconduct that is materially and
demonstrably injurious to Ascent or its reputation, which misconduct, if it is
reasonably capable of being cured, is not cured by the Executive within ten (10)
business days following the Executive's receipt of written notice from the Board
specifying the serious misconduct engaged in by the Executive, (iii) the
conviction of the Executive of commission of a felony, whether or not such
felony was committed in connection with Ascent's business, or (iv) any material
breach by the Executive of Section 8 hereof. If Ascent shall terminate the
Executive's employment for "cause," there will be no forfeiture, penalty,
reduction or other adverse effect upon any vested rights or interests relating
to any Fringe Benefits. In such event, Ascent, in full satisfaction of all of
Ascent's obligations under this Agreement and in respect of the termination of
the Executive's employment with Ascent, shall pay the Executive his Base Salary,
a prorated Annual Bonus and all other compensation, benefits and reimbursement
through the date of termination of his employment, PROVIDED that the Options and
any other stock options granted to the Executive under the Ascent option or any
successor plan shall terminate three months after the date of termination of his
employment for "cause".
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6. DISABILITY; DEATH.
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform substantially his duties by
reason of disability or impairment of health for at least six consecutive
calendar months, Ascent shall have the right to terminate this Agreement by
giving sixty (60) days written notice to the Executive to that effect, but only
if at the time such notice is given such disability or impairment is still
continuing. Following the expiration of the notice period, the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given and a prorated Annual Bonus through such month,
and there will be no forfeiture, penalty, reduction or other adverse effect upon
any vested rights or interests relating to any Fringe Benefits. In the event of
a dispute as to whether the Executive is disabled within the meaning of this
paragraph (a), or the duration of any disability, either party may request a
medical examination of the Executive by a doctor appointed by the Chief of Staff
of a hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree, and the written medical opinion of such doctor shall be
conclusive and binding upon the parties as to whether the Executive has become
disabled and the date when such disability arose. The cost of any such medical
examinations shall be borne by Ascent.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, Ascent shall pay to the Executive's estate his
Base Salary and a prorated Annual Bonus through the end of the month in which
the Executive's death occurred, at which time the Employment Period shall
terminate without further notice and there will be no forfeiture, penalty,
reduction or other adverse effect upon any vested rights or interests relating
to any Fringe Benefits; PROVIDED that the Options and any other stock options
granted to the Executive under the Ascent option plan or any successor plan
shall become fully vested and shall terminate one year after the date of
termination of the Executive's employment for death, notwithstanding the
limitations of Section 2(e) of this Agreement.
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(c) Nothing contained in this Section 6 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of Ascent which may be adopted by the Board.
7. CHANGE OF CONTROL.
(a) If, prior to the termination of the Employment Period, there is a
"Change of Control Event" (as hereinafter defined in this paragraph (a)), the
Executive shall have the right to exercise his Executive Election in accordance
with Section 5(a), but shall not have the right to give notice in accordance
with Section 5(a) in any event later than 120 days following such Change of
Control Event. Prior to any "change of control" (as hereinafter defined in this
paragraph (a)), and from time to time thereafter at the Executive's request upon
relevant changed circumstances in the ownership or management of Ascent, the
Executive and the Board will mutually determine whether such "change of control"
or changed circumstances would be reasonably likely to have a materially
detrimental effect on the condition, reputation or future prospects of Ascent or
its successor entity, the day-to-day circumstances of the Executive's employment
or the compensation payable to the Executive hereunder. An affirmative
determination with respect to either of the foregoing by the Executive and the
Board, or by an arbitrator as provided below, shall be referred to herein as a
"Change of Control Event", it being agreed that the arbitrator shall award the
Executive costs and attorneys' fees under Section 11(c) if the Executive has
submitted the matter to arbitration with a reasonable basis for doing so, even
if the Executive is not the prevailing party therein. If the Executive and the
Board are unable to agree on such determination, the Executive shall have the
right: (i) to submit to arbitration pursuant to Section 11 below the
determination of whether the "change of control" or changed circumstances would
be reasonably likely to have either of the materially detrimental effects
mentioned above, and an affirmative determination by the arbitrator shall
constitute a "Change of Control Event"; (ii) to accept continued employment with
Ascent or its successor entity on the terms of this Agreement; or (iii) to
terminate this Agreement by giving sixty (60) days written notice to Ascent to
that effect. If the Executive elects to terminate this Agreement pursuant to
clause (iii) of this paragraph (a),
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following the expiration of the notice period provided therein, the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given. "Change of control" for purposes of this
paragraph (a) shall mean any event as a result of which COMSAT no longer owns
more than fifty percent (50%) of the voting stock of Ascent, PROVIDED that any
Ascent voting stock which is publicly held shall be considered as owned by
COMSAT for this purpose.
(b) In the event that COMSAT or Ascent adopts any "change of control"
provisions applicable to any COMSAT or Ascent benefits plans, respectively,
providing for the accelerated vesting and/or payment of any benefits for its
senior management group, to the extent that such provisions give Executive
greater rights than those provided in paragraph (a) above, such provisions shall
apply to the Executive to the same extent as other Ascent senior executives or
COMSAT senior executives on a favored nations basis with respect to the benefits
affected by such COMSAT or Ascent provisions, respectively.
8. NON-COMPETITION.
(a) As an inducement for Ascent to enter into this Agreement, the
Executive agrees that for a period commencing as of the Effective Date and
running through the earlier of (i) the end of the Employment Period if the
Executive remains employed by Ascent for the entire Employment Period or
(ii) one year following termination of the Executive's employment by Ascent for
"cause" as defined in Section 5(b) hereof, or by the Executive for any reason
(other than an Executive Election Event or an event described in Section
7(a)(iii) above, in which case the provisions of this paragraph (a) shall not
apply) (the "Non-Competition Period"), the Executive shall not, without the
prior written consent of the Board, engage or participate, directly or
indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other individual capacity whatsoever, in the conduct or
management of, or own any stock or any other equity investment in or debt of,
any business which is competitive with any business conducted by Ascent,
including the Entertainment Business.
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For the purpose of this Agreement, a business shall be considered to
be competitive with any business of Ascent only if such business is engaged in
providing services or products (i) similar to (A) any service or product
currently provided by Ascent during the Employment Period; (B) any service or
product which evolves from or results from enhancements in the ordinary course
during the Non-Competition Period to the services or products provided by Ascent
as of the date hereof or during the Employment Period; or (C) any future service
or product of Ascent as to which the Executive materially and substantially
participated in the development or enhancement, and (ii) to customers,
distributors or clients of the type served by Ascent during the Non-Competition
Period.
(b) NON-SOLICITATION OF EMPLOYEES. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than Ascent) solicit, or assist any person or entity
other than Ascent to solicit, any officer, director, executive or employee
(other than an administrative or clerical employee) of Ascent to leave his or
her employment.
(c) REASONABLENESS; INTERPRETATION. The Executive acknowledges and
agrees, solely for purposes of determining the enforceability of this Section 8
(and not for purposes of determining the amount of money damages or for any
other reason), that (i) the markets served by Ascent are national and
international and are not dependent on the geographic location of executive
personnel or the businesses by which they are employed; (ii) the length of the
Non-Competition Period is linked to the term of the Employment Period and the
severance benefit provided for in Section 5(a); and (iii) the above covenants
are manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of Ascent. In the event that the covenants in this
Section 8 shall be determined by any court of competent jurisdiction in any
action to be unenforceable by reason of their extending for too great a period
of time or over too great a geographical area or by reason of their being too
extensive in any other respect, they shall be interpreted to extend only over
the maximum period of time for which they may be enforceable, and/or over the
maximum geographical area as
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to which they may be enforceable and/or to the maximum extent in all other
respects as to which they may be enforceable, all as determined by such court in
such action.
(d) INVESTMENT. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with Ascent,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
9. INDEMNIFICATION; LIABILITY INSURANCE. The Executive shall be entitled
to indemnification and coverage under Ascent's liability insurance policy for
directors and officers to the same extent as other directors and officers of
Ascent. During and after the term of employment, Ascent hereby agrees to
indemnify and hold Executive harmless against any and all claims arising from or
in connection with his employment by or service to Ascent to the full extent
permitted by law and, in connection therewith, to advance the expenses of
Executive incurred in defending against such claims subject to such limitations
as may actually be required by law.
10. ENFORCEMENT; JOINT AND SEVERAL LIABILITY. The Executive acknowledges
that a breach of the covenants or provisions contained in Sections 3, 4 and 8 of
this Agreement will cause irreparable damage to the Entertainment Business and
Ascent, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the
Executive agrees that if the Executive breaches or threatens to breach any of
the covenants or provisions contained in Sections 3, 4 and 8 of this Agreement,
in addition to any other remedy which may be available at law or in equity,
Ascent shall be entitled to seek specific performance and injunctive relief.
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11. ARBITRATION.
(a) Subject to Ascent's right to enforce Sections 3, 4 and 8 hereof
by an injunction issued by a court having jurisdiction (which right shall
prevail over and supersede the provisions of this Section 11), any dispute
relating to this Agreement, including the enforceability of this Section 11,
arising between the Executive and Ascent shall be settled by arbitration which
shall be conducted in Denver, Colorado, or any other location where the
Executive then resides at Ascent's request, before a single arbitrator in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA"). Within 90 days after the Effective Date, the parties shall
mutually agree upon three possible arbitrators, one of whom shall be selected by
the AAA within 2 days after notice of a dispute to be arbitrated under this
Section 11. The parties shall instruct the arbitrator to use his or her best
efforts to conclude the arbitration within 60 days after notice of the dispute
to AAA.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state court
sitting in Denver, Colorado or any other location where the Executive then
resides at Ascent's request.
(c) Subject to Section 7(a), the parties will bear their own costs
associated with arbitration and will each pay one-half of the arbitration costs
and fees of AAA; however, the arbitrator may in his sole discretion determine
that the costs of the arbitration proceedings, including attorneys' fees, shall
be paid entirely by one party to the arbitration if the arbitrator determines
that the other party is the prevailing party in such arbitration.
12. SEVERABILITY. Should any provision of this Agreement be determined to
be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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13. ASSIGNMENT. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. Ascent's rights and
obligations under this Agreement shall not be assignable by Ascent except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of Ascent. In the event of any such assignment by Ascent, all
rights of Ascent hereunder shall inure to the benefit of the assignee.
14. NOTICES. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to Executive, addressed to:
James A. Cronin, III
18947 E. Hinsdale Ave.
Aurora, Colorado 80016
If to Ascent, addressed to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Charlie Lyons
Telecopier No. (303) 595-0823
With a copy to:
Ascent Entertainment Group
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Arthur M. Aaron
Telecopier No. (303) 595-0127
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15. MISCELLANEOUS. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Colorado. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ James A. Cronin, III,
---------------------------------------
James A. Cronin, III, Executive
ASCENT ENTERTAINMENT GROUP, INC.
By: Charles Lyons
---------------------------------------
Title: President and Chief Executive Officer
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EXHIBIT 10.14
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED AGREEMENT made as of December 18, 1995, and
amended as of November 18, 1996, by and between Ascent Entertainment Group,
Inc., a Delaware corporation ("Ascent"), successor in interest to COMSAT
Entertainment Group ("CEG"), a Delaware corporation, and Charles Lyons, a
resident of the State of Colorado(the "Executive").
WHEREAS, COMSAT Video Enterprises, Inc. ("CVE") a wholly owned subsidiary
of COMSAT Corporation, a District of Columbia corporation ("COMSAT") previously
owned and operated the sports and entertainment businesses of COMSAT which
comprised the Entertainment segment of COMSAT for purposes of its reports on
Form 10-K and 10-Q (and any amendments thereto) filed with the Securities and
Exchange Commission (the "Entertainment Business");
WHEREAS, COMSAT has created CEG as a holding company to own and operate the
Entertainment Business;
WHEREAS, the Executive currently serves as the President of CEG and CVE;
WHEREAS Ascent succeeded to all of the assets of CEG and CVE;
WHEREAS, Ascent caused an initial public offering (the "IPO") of
approximately 19.3% of the shares of the common stock of Ascent on December 18,
1995 (the "IPO Date"); and
WHEREAS, Ascent desires to employ the Executive as President and Chief
Executive Officer of Ascent, and the Executive desires to accept such
employment, on the terms and conditions set forth herein;
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NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, Ascent and the Executive
agree as follows:
1. EMPLOYMENT; DUTIES.
(a) EMPLOYMENT AND EMPLOYMENT PERIOD. Ascent shall employ the
Executive to serve as President and Chief Executive Officer of Ascent or its
successor entity for a period (the "Employment Period") commencing on December
18, 1995 (the "Effective Date") and continuing thereafter for a term of five
years until December 18, 2000 unless terminated in accordance with the
provisions of this Agreement. The Executive shall also continue to serve as
President of CVE but shall not receive any compensation for such position in
addition to the compensation provided in this Agreement. In the event that
Ascent desires to extend the employment of the Executive, it must give written
notice of such desire by the third anniversary of the Effective Date, and after
such notice the parties shall enter into an exclusive negotiation period of not
less than six months, unless otherwise mutually agreed upon by the parties in
writing. Each 12 month period ending on the anniversary date of the Effective
Date is sometimes referred to herein as a "year of the Employment Period."
(b) Offices, Duties and Responsibilities. Effective on the Effective
Date, Executive shall be elected President and Chief Executive Officer of
Ascent. The Executive shall report directly and solely to the Board of
Directors of Ascent (the "Board"). Throughout the Employment Period, Ascent
shall cause Executive to be a member of the Board. In addition, the Executive
shall be a member of all committees of the Board (including any executive
committee or nominating committee) other than the Audit Committee and the
Compensation Committee, and other than any special committees on which he might
be regarded as a self-interested member. The Executive's offices initially
shall be located at the Company's headquarters, which are presently located in
Denver, Colorado. The Executive shall have all duties and authority
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customarily accorded a chief executive officer, including, without limitation,
the lead responsibility with full autonomy, subject to the customary authority
and direction of the Board, to direct and develop the capabilities and
performance of Ascent. The Executive shall be a member and the chairman of any
senior executive/management committees which may be established from time to
time by the Board. The services to be rendered by the Executive as President of
Ascent shall be generally consistent with the services previously rendered by
the Executive as President of CVE. All employees of Ascent shall report,
directly or indirectly, to the Executive and the Executive shall have the
authority to hire and fire all such employees within established budget
parameters, PROVIDED that the Board shall approve (i) any salary actions
(including hiring decisions) for employees of Ascent which result in an annual
salary in excess of the amount established by the Board from time to time, but
in no event less than $150,000, and (ii) any bonuses to be awarded to employees
of Ascent, in excess of the amount established by the Board from time to time,
and PROVIDED FURTHER that the Board reserves the right to take any such salary
or bonus actions to the Compensation Committee of the Board (the "Compensation
Committee") for approval. The Executive's management of Ascent shall be (x) in
accordance with the policies of the Board and Ascent's Policies and Procedures,
both as in effect from time to time, and (y) within the limits of an annual
budget for Ascent which shall be approved by the Board at least 30 days before
the beginning of the fiscal year to which such budget relates. The annual
budget shall provide adequate resources for Executive to operate the
Entertainment Business in a manner substantially consistent with the customary
day to day operations of comparable first-class businesses in the United States
entertainment industry. If the Executive proposes the expenditure of any
amounts which exceed the applicable annual budgets for Ascent, such excess
amounts shall not be committed to Executive's authority unless and until
specifically authorized and approved by the Board.
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(c) DEVOTION TO INTERESTS OF ASCENT. During the Employment Period,
the Executive shall render his business services solely in the performance of
his duties hereunder. The Executive shall use his best efforts to promote the
interests and welfare of Ascent and the Entertainment Business. Notwithstanding
the foregoing, the Executive shall be entitled to undertake such outside
activities (E.G., charitable, educational, personal interests, board of
directors membership, and so forth, that do not compete with the Entertainment
Business) as do not unreasonably or materially interfere with the performance of
his duties hereunder as reasonably determined by the Board in consultation with
the Executive.
2. COMPENSATION AND FRINGE BENEFITS.
(a) BASE COMPENSATION. Ascent shall pay the Executive a base salary
("Base Salary") at the rate of $500,000 per year during the Employment Period
with payments made in installments in accordance with Ascent's regular practice
for compensating executive personnel, PROVIDED that in no event shall such
payments be made less frequently than twice per month. The Base Salary for the
Executive shall be reviewed for increases each year during the Employment Period
commencing the second year of the Employment Period. Any Base Salary increases
shall be approved by the Board in its sole discretion.
(b) BONUS COMPENSATION. The Executive will be eligible to receive
bonuses ("Annual Bonus") during the Employment Period in accordance with the
following parameters: (i) the target bonus for each year during the Employment
Period shall be 70% of Base Salary for achieving 100% of the target level for
the performance measures; and (ii) the performance measures, the relative weight
to be accorded each performance measure and the amount of bonus payable in
relation to the target bonus for achieving more or less than 100% of the target
level for the performance measures shall be determined for each year during the
Employment Period by the
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Compensation Committee after consultation with the Executive. As part of the
consultation process set forth in the preceding sentence, the Executive shall
prepare before the end of each fiscal year ending during the Employment Period a
business plan for Ascent with respect to at least the following three year
period. The Board shall consider and approve such plans on an annual basis,
subject to such modifications as are otherwise consistent with this Agreement,
and each fiscal year the current plan shall be considered by the Compensation
Committee as the basis for establishing the bonus standards for such year with
such reasonable modifications as the Compensation Committee may reasonably
determine and which are consistent with this Agreement.
(c) FRINGE BENEFITS. The Executive also shall be entitled to
participate in group health, dental and disability insurance programs, and any
group profit sharing, deferred compensation, supplemental life insurance or
other benefit plans as are generally made available by Ascent to the senior
executives of Ascent on a favored nations basis, which benefits shall be
comparable, in the aggregate, to the benefits available to senior executives of
similarly situated companies. Such benefits shall include reimbursement of (i)
documented expenses reasonably incurred in connection with travel and
entertainment related to Ascent's business and affairs (including, without
limitation, all expenses and losses incurred in connection with the sale of
Executive's home in Bethesda, Maryland, the acquisition of a home in the Denver,
Colorado area and relocation of Executive and his family to the Denver area),
(ii) Executive's reasonable legal fees and costs incurred in connection with the
drafting, negotiation and execution of this Agreement, Irell & Manella's rates
for fees and costs being deemed reasonable, and (iii) a monthly payment for or
reimbursement of automobile and other transportation related expenses of $1,200
per month. All benefits described in the foregoing (i) and (ii) that are
reportable as earned or unearned income will be "grossed up" by ASCENT in
connection with federal and state tax obligations to provide Executive with
appropriate net tax coverage so that
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the benefits received by the Executive from the foregoing clauses (i) and (ii)
shall be net of income and employment taxes thereon. Without limiting any of
the foregoing, as soon as practicable Ascent will gather information regarding
nature and scope of benefit plans (E.G., profit sharing, deferred compensation,
supplemental life insurance) offered to executives of comparable or otherwise
relevant entertainment companies (including spinoffs and recent issuers of
initial public offerings), and the Board will determine in 1996 whether and to
what extent to implement any such programs. Ascent reserves the right to modify
or terminate from time to time the fringe benefits provided to the senior
management group, PROVIDED that the fringe benefits provided to the Executive
shall not be materially reduced on an overall basis during the Employment
Period. Notwithstanding the foregoing, until such time as Ascent shall
implement group-health, dental and disability insurance plans for its
executives, or for a period of one year following the IPO, whichever is less,
Executive will be entitled to participate in the group health, dental, and
disability insurance plans made available to the senior management group of
COMSAT.
(d) FINANCIAL PLANNING. The Executive shall be entitled to receive
financial counseling and planning services provided by Ascent consistent with
similar services provided to the COMSAT senior management group.
(e) STOCK OPTIONS. Ascent hereby grants to Executive as of the
Effective Date options ("Options") to purchase 297,500 shares of Ascent's common
stock, par value $0.01 per share (I.E., one percent (1%) of the shares of Ascent
common stock outstanding immediately following the IPO (including any shares
outstanding as a result of the underwriter's exercise of their over-allotment
option)), each such Option exercisable at the per-share price to public at the
IPO (the "IPO Per-Share Price"). The Options shall be exercisable by Executive
according to the following schedule:
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(i) 10% of the Options on or after the commencement of the
second year of the Employment Period;
(ii) 15% of the Options on or after the commencement of the third
year of the Employment Period;
(iii)25% of the Options on or after the commencement of the
fourth year of the Employment Period;
(iv) 25% of the Options on or after the commencement of the fifth
year of the Employment Period;
(v) 25% of the Options on or after the completion of the fifth
year of the Employment Period; provided, however, that for so long as COMSAT
owns at least 80% of Ascent, Executive shall not be entitled to exercise any of
the Options prior to the third anniversary of the Effective Date.
Notwithstanding the foregoing, 100% of the Options shall immediately vest and
become immediately exercisable, without any further action by the Executive,
upon the occurrence of any "change of control" as defined in Section 7(a) below,
or upon the occurrence of any event that results in Ascent's Common Stock no
longer being traded on any of the New York Stock Exchange, American Stock
Exchange or NASDAQ National Market System (including, without limitation, as a
result of any "going private" transaction with Ascent). Such options shall be
represented by a stock option agreement containing appropriate terms consistent
with the provisions of this Agreement. The Options, to the extent they remain
unexercised, shall automatically and without further notice terminate and become
of no further force and effect at the time of the earliest of the following to
occur:
(x) Three months after the date upon which a termination for
cause by Ascent (as provided in Section 5(b)) shall have become effective and
final; or
(y) Ten years after the Effective Date.
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In the event of any stock split, stock dividend, spin-off,
reclassification, recapitalization, merger, consolidation, subdivision,
combination or other change which affects the character or amount of Ascent's
common stock after the Effective Date and prior to the exercise and/or
expiration of all of the Options, the number and exercise price of and/or the
formula for determining the value of such unissued or unexercised Options shall
be adjusted in order to make such Options, as nearly as may be practicable,
equivalent in nature and value to the Options that would have existed had such
change not taken place. In addition, if Ascent adopts a stock option plan that
in Executive's sole judgment provides for any term(s) more favorable to the
grantee than any term(s) set forth above, Executive will be entitled to the
benefit of such more favorable term(s) with respect to the Options, other than
with respect to the vesting schedule thereof, but in no event will any term(s)
applicable to the Options be less favorable to Executive than those set forth
above.
During the Employment Period, the Executive shall be granted additional
non-statutory stock options as determined by the Compensation Committee in its
sole discretion, PROVIDED that no additional stock options shall be granted to
the Executive within three years from the Effective Date. Notwithstanding any
other provision of this Agreement except Section 5(b), the Compensation
Committee may in its discretion provide that any stock options granted to the
Executive which have not vested prior to his termination of employment shall
continue to vest in accordance with their original terms as if the Executive's
employment had not terminated.
(f) COMSAT BENEFITS. After the Effective Date, the Executive shall cease
to participate in COMSAT's Key Employee Stock Plans, Insurance and Retirement
Plan for Executives, Directors and Executives Deferred Compensation Plan (the
"Deferred Compensation Plan"), Split Dollar Insurance Plan, Annual Incentive
Plan ("AIP") and Educational Grant Program (collectively, the "COMSAT Executive
Benefit Plans"), and
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shall forfeit any and all rights and interests under the COMSAT Executive
Benefit Plans; PROVIDED, HOWEVER, that (i) the Executive shall retain the stock
options, restricted stock awards, restricted stock units and phantom stock units
previously granted to him under the Key Employee Stock Plans and the AIP
(together with Executive's deferred compensation account referred to in (iii)
below, collectively, the "COMSAT Stock Awards"), which shall continue to vest in
accordance with their original terms as long as the Executive remains employed
by Ascent; (ii) the Executive shall be entitled to receive a bonus with respect
to 1995 under the AIP as determined in the sole discretion of the Committee on
Compensation and Management Development of the COMSAT Board of Directors; and
(iii) the disposition of the balance in the Executive's deferred compensation
account in the Deferred Compensation Plan as of the Effective Date shall be
mutually determined by COMSAT and the Executive no later than December 31, 1996,
PROVIDED that such account shall continue to be maintained in the Deferred
Compensation Plan with the crediting of interest at the applicable rates until
such disposition occurs, and PROVIDED FURTHER that in no event shall the
disposition of such account result in a taxable event to the Executive at the
time of such disposition. Notwithstanding the foregoing, the Company shall use
its best efforts to cause 100% of the COMSAT Stock Awards to vest immediately
and to become immediately exercisable, without any further action by the
Executive, upon the occurrence of any Achange of control@ as defined in Section
7(a) below.
(g) CONSULTING COMPENSATION. If the Executive is still employed
by Ascent on the date preceding the sixth anniversary of the Effective Date, and
if by such date the Executive and Ascent have not executed a written agreement
for an additional term of employment, then the Employment Period shall expire
and, in addition to and without limitation of any rights of either party under
this Agreement or otherwise, Ascent shall retain the Executive as a
non-exclusive consultant and, as compensation for such consulting services,
shall pay the Executive an amount equal to one hundred percent
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(100%) of his then current Base Salary for an additional period of eighteen (18)
months (the "Consulting Period"), and during the Consulting Period the Executive
shall continue to receive Fringe Benefits (as defined below), and to vest in any
employee stock options previously awarded to the Executive, but the Executive
shall not be entitled to receive any Base Salary increases, bonuses, or further
awards of stock options. Without limiting any of the Executive's other rights
under this Agreement or otherwise, if the Executive is still employed by Ascent
on the date preceding the fourth anniversary of the Effective Date and is
retained as a consultant and is entitled to the compensation and benefits set
forth in the immediately preceding sentence, then such compensation and benefits
shall constitute the Executive's sole compensation resulting from the expiration
of this Agreement, and the Executive waives any claims to any additional
compensation other than as a result of Ascent's breach of this Agreement.
(h) PERFORMANCE-BASED COMPENSATION; CONFLICTING PROVISIONS. The
parties agree to use their best efforts in the administration of this Agreement
to take actions so as to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") to ensure, to the extent
possible consistent with the other terms of this Agreement and the Options, the
Federal tax deductibility under that section of compensation paid to the
Executive pursuant to performance-based compensation. Solely to the extent of
any conflict between the provisions of this Agreement and the provisions of any
agreement between Executive, on the one hand, and COMSAT, Ascent and/or any
affiliated or related entity of either of them, on the other hand, relating to
stock options (including the Options), life insurance, health insurance, any
other employee equity participation, profit sharing or retirement plan, group
health plan or other employee benefits (individually and collectively, together
with the COMSAT Stock Awards, referred to herein as the "Fringe Benefits"), the
provisions of this Agreement will control.
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3. TRADE SECRETS; RETURN OF DOCUMENTS AND PROPERTY.
(a) Executive acknowledges that during the course of his employment
he will receive secret, confidential and proprietary information ("Trade
Secrets") of Ascent and of other companies with which Ascent does business on a
confidential basis and that Executive will create and develop Trade Secrets for
the benefit of Ascent. Trade Secrets shall include, without limitation, (a)
literary, dramatic or other works, screenplays, stories, adaptations, scripts,
treatments, formats, "bibles," scenarios, characters, titles of any kind and any
rights therein, custom databases, "know-how," formulae, secret processes or
machines, inventions, computer programs (including documentation of such
programs) (collectively, "Technical Trade Secrets"), and (b) matters of a
business nature, such as customer data and proprietary information about costs,
profits, markets and sales, customer databases, and other information of a
similar nature to the extent not available to the public, and plans for future
development (collectively, "Business Trade Secrets"). All Trade Secrets
disclosed to or created by Executive shall be deemed to be the exclusive
property of Ascent (as the context may require). Executive acknowledges that
Trade Secrets have economic value to Ascent due to the fact that Trade Secrets
are not generally known to the public or the trade and that the unauthorized use
or disclosure of Trade Secrets is likely to be detrimental to the interests of
Ascent and its subsidiaries. Executive therefore agrees to hold in strict
confidence and not to disclose to any third party any Trade Secret acquired or
created or developed by Executive during the term of this Agreement except (i)
when Executive is required to use or disclose any Trade Secret in the proper
course of the Executive's rendition of services to Ascent hereunder, (ii) when
such Trade Secret becomes public knowledge other than through a breach of this
Agreement, or (iii) when Executive is required to disclose any Trade Secret
pursuant to any valid court order in which the Executive is compelled to
disclose such Trade Secret. The Executive shall
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notify Ascent immediately of any such court order in order to enable Ascent to
contest such order's validity. For a period of two (2) years after termination
of the Employment Period for all Business Trade Secrets and for a period of five
(5) years after termination of the Employment Period for all Technical Trade
Secrets, the Executive shall not use or otherwise disclose Trade Secrets unless
such information (x) becomes public knowledge or is generally known in the
entertainment or sports industry among executives comparable to the Executive
other than through a breach of this Agreement, (y) is disclosed to the Executive
by a third party who is entitled to receive and disclose such Trade Secret, or
(z) is required to be disclosed pursuant to any valid court order, in which case
the Executive shall notify Ascent immediately of any such court order in order
to enable Ascent to contest such order's validity.
(b) Upon the effective date of notice of the Executive's or Ascent's
election to terminate this Agreement, or at any time upon the request of Ascent,
the Executive (or his heirs or personal representatives) shall deliver to Ascent
(i) all documents and materials containing or otherwise relating to Trade
Secrets or other information relating to Ascent's business and affairs, and (ii)
all documents, materials and other property belonging to Ascent, which in either
case are in the possession or under the control of the Executive (or his heirs
or personal representatives). The Executive shall be entitled to keep his
personal records relating to Ascent's business and affairs except to the extent
those contain documents or materials described in clause (i) or (ii) of the
preceding sentence, in which case Executive may retain copies for his personal
and confidential use.
4. DISCOVERIES AND WORKS. All discoveries and works made or
conceived by the Executive during his employment by Ascent pursuant to this
Agreement, jointly or with others, that relate to Ascent's activities
("Discoveries and Works") shall be owned by Ascent. Discoveries and Works shall
include, without limitation, literary, dramatic or other
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works, screenplays, stories, adaptations, scripts, treatments, formats,
"bibles," scenarios, characters, titles of any kind and any rights therein,
other works of authorship, inventions, computer programs (including
documentation of such programs), technical improvements, processes and drawings.
The Executive shall (i) promptly notify, make full disclosure to, and execute
and deliver any documents reasonably requested by, Ascent to evidence or better
assure title to such Discoveries and Works in Ascent, (ii) assist Ascent in
obtaining or maintaining for itself at its own expense United States and foreign
copyrights, trade secret protection or other protection of any and all such
Discoveries and Works, and (iii) promptly execute, whether during his employment
by Ascent or thereafter, all applications or other endorsements necessary or
appropriate to maintain copyright and other rights for Ascent and to protect
their title thereto. Any Discoveries and Works which, within sixty days after
the termination of the Executive's employment by Ascent, are made, disclosed,
reduced to a tangible or written form or description, or are reduced to practice
by the Executive and which pertain to work performed by the Executive while with
Ascent, COMSAT, CEG and CVE shall, as between the Executive and Ascent, COMSAT,
CEG and CVE be presumed to have been made during the Executive's employment by
Ascent, COMSAT, CEG and CVE.
5. TERMINATION. This Agreement shall remain in effect during the
Employment Period, and this Agreement and Executive's employment with Ascent may
be terminated only as follows:
(a) By the Executive (an "Executive Election") at any time upon sixty
(60) days advance written notice to Ascent upon an "Executive Election Event"
(as defined below). In such event or if the Executive's employment is
terminated by Ascent without "cause" (as defined below), there will be no
forfeiture, penalty, reduction or other adverse effect upon any rights or
interests relating to any Fringe Benefits, all of which will fully vest, to the
extent not previously vested,
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immediately upon such termination becoming effective and final. Without
limiting the foregoing, in the event of an Executive Election or if the
Executive's employment is terminated without "cause," the Executive shall be
entitled to receive the following benefits through the longer of (a) the
remainder of the Employment Period as if this Agreement had remained in effect
until the end of such five-year Employment Period and (B) one year following the
date of such termination (the "Duration Period"): (i) his then current Base
Salary; (ii) an Annual Bonus equal to seventy percent (70%) of his then current
Base Salary; and (iii) all other benefits provided pursuant to Sections 2(c),
(d) and (e) of this Agreement; PROVIDED, HOWEVER, that in no event will the
amounts payable under clauses (i) and (ii) above be referable to less than one
full year of the Employment Period. The Executive shall have no obligation to
seek other employment in the event of his termination pursuant to this paragraph
(a), PROVIDED, HOWEVER, that his compensation from any such employment obtained
shall offset up to fifty percent (50%) of Ascent's obligations under clauses (i)
and (ii) above, but only after payments pursuant to clauses (i) and (ii) are
made with respect to a one year period following termination. Ascent shall have
the option at any time during the Duration Period to pay to the Executive in a
lump sum the amounts remaining under clauses (i) and (ii) of this paragraph (a),
PROVIDED that the amount of such lump sum payment shall be reduced up to fifty
percent (50%) by the compensation payable to the Executive from other employment
for the time period remaining on Ascent's payment obligation hereunder at the
time such payment is made. If Ascent exercises such option, Ascent and COMSAT
shall have no further compensation payment obligations under clauses (i) and
(ii) above. The Executive shall have the right to instruct Ascent to decrease
any such payment or other benefit due under this paragraph (a) to an amount not
to exceed an amount to be designated by the Executive in writing for the purpose
of providing that such payment (together with any other benefits provided to the
Executive) shall not constitute a "parachute payment" as defined in Section 280G
of the Code; provided, however, that
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Ascent's agreement to decrease such payment shall not result in any liability
from Ascent to the Executive with respect to any excise tax under Section 4999
of the Code (or any similar state or local provision), or any penalties or
interest with respect to such excise tax. Ascent shall place an amount
equivalent to its obligations owed to the Executive in connection with this
Section 5(a) in an escrow account to be administered by an unrelated third
party, or shall provide some other comparable form of security (e.g., an
irrevocable letter of credit) for such obligations reasonably acceptable to the
Executive. In all circumstances of termination under this Section 5(a), Ascent
shall remain obligated under clause (iii) and all stock options (including the
Option) will remain exercisable for the maximum period provided in each
applicable grant.
An "Executive Election Event" shall be any of the following: (I) any
substantial reduction (except in connection with the termination of his
employment voluntarily by the Executive or by Ascent for "cause" as defined
below) by Ascent, without the Executive's express written consent, of his
responsibilities as President and Chief Executive Officer of Ascent; (II) any
change in the reporting structure set forth in Section 1(b) above; (III) any
requirement that Executive perform material services of lesser stature than
those typically performed by the president and CEO of comparably sized companies
in the entertainment industry; (IV) any reduction in Executive's title; (V) a
"Change of Control Event" (as defined in Section 7(a) below); PROVIDED that in
such event, the 50% offset from subsequent employment set forth in the preceding
paragraph shall be increased to 100% and such offset shall apply during the
first year after termination as well; (VI) any other material default of this
Agreement which continues for ten (10) business days following Ascent's receipt
of written notice from the Executive specifying the manner in which Ascent is in
default of this Agreement; (VII) the Board's requiring Executive to be based at
any office location other than the principal offices of
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Ascent, or the relocation, without Executive's consent, of such principal
offices to a location outside the greater Denver area prior to the second
anniversary of the Effective Date; or (VIII) any purported termination of
Executive's employment otherwise than as expressly permitted by the Agreement.
(b) By Ascent at any time for "cause." For purposes of this
Agreement, Ascent shall have "cause" to terminate the Executive's employment
hereunder upon (i) the continued and deliberate failure of the Executive to
perform his material duties, in a manner substantially consistent with the
manner reasonably prescribed by the Board and in accordance with the terms of
this Agreement (other than any such failure resulting from his incapacity due to
physical or mental illness), which failure continues for ten (10) business days
following the Executive's receipt of written notice from the Board specifying
the manner in which the Executive is in default of his duties, (ii) the engaging
by the Executive in intentional serious misconduct that is materially and
demonstrably injurious to Ascent or its reputation, which misconduct, if it is
reasonably capable of being cured, is not cured by the Executive within ten (10)
business days following the Executive's receipt of written notice from the Board
specifying the serious misconduct engaged in by the Executive, (iii) the
conviction of the Executive of commission of a felony involving a crime of moral
turpitude, whether or not such felony was committed in connection with Ascent's
business, or (iv) any material breach by the Executive of Section 8 hereof. If
Ascent shall terminate the Executive's employment for "cause," there will be no
forfeiture, penalty, reduction or other adverse effect upon any vested rights or
interests relating to any Fringe Benefits. In such event, Ascent, in full
satisfaction of all of Ascent's obligations under this Agreement and in respect
of the termination of the Executive's employment with Ascent, shall pay the
Executive his Base Salary, a prorated Annual Bonus and all other compensation,
benefits and reimbursement through the date of termination of his employment,
PROVIDED that the Options and any other stock options granted to the Executive
under the
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Ascent option or any successor plan or under COMSAT's Key Employee Stock Plans
shall terminate three months after the date of termination of his employment for
"cause".
6. DISABILITY; DEATH.
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform substantially his duties by
reason of disability or impairment of health for at least six consecutive
calendar months, Ascent shall have the right to terminate this Agreement by
giving sixty (60) days written notice to the Executive to that effect, but only
if at the time such notice is given such disability or impairment is still
continuing. Following the expiration of the notice period, the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given and a prorated Annual Bonus through such month,
and there will be no forfeiture, penalty, reduction or other adverse effect upon
any vested rights or interests relating to any Fringe Benefits. In the event of
a dispute as to whether the Executive is disabled within the meaning of this
paragraph (a), or the duration of any disability, either party may request a
medical examination of the Executive by a doctor appointed by the Chief of Staff
of a hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree, and the written medical opinion of such doctor shall be
conclusive and binding upon the parties as to whether the Executive has become
disabled and the date when such disability arose. The cost of any such medical
examinations shall be borne by Ascent.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, Ascent shall pay to the Executive's estate his
Base Salary and a prorated Annual Bonus through the end of the month in which
the Executive's death occurred, at which time the Employment Period shall
terminate without further notice and there will be no forfeiture, penalty,
reduction or other adverse effect
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upon any vested rights or interests relating to any Fringe Benefits; PROVIDED
that the Options and any other stock options granted to the Executive under the
Ascent option plan or any successor plan shall become fully vested and shall
terminate one year after the date of termination of the Executive's employment
for death, notwithstanding the limitations of Section 2(e) of this Agreement.
(c) Nothing contained in this Section 6 shall impair or otherwise
affect any rights and interests of the Executive under any compensation plan or
arrangement of Ascent which may be adopted by the Board.
7. CHANGE OF CONTROL.
(a) If, prior to the termination of the Employment Period, there is a
"Change of Control Event" (as hereinafter defined in this paragraph (a)), the
Executive shall have the right to exercise his Executive Election in accordance
with Section 5(a), but shall not have the right to give notice in accordance
with Section 5(a) in any event later than 120 days following such Change of
Control Event. Prior to any "change of control" (as hereinafter defined in this
paragraph (a)), and from time to time thereafter at the Executive's request upon
relevant changed circumstances in the ownership or management of Ascent, the
Executive and the Board will mutually determine whether such "change of control"
or changed circumstances would be reasonably likely to have a materially
detrimental effect on the condition, reputation or future prospects of Ascent or
its successor entity, the day-to-day circumstances of the Executive's employment
or the compensation payable to the Executive hereunder. An affirmative
determination with respect to either of the foregoing by the Executive and the
Board, or by an arbitrator as provided below, shall be referred to herein as a
"Change of Control Event", it being agreed that the arbitrator shall award the
Executive costs and attorneys' fees under Section 11(c) if the Executive has
submitted the matter to arbitration with a reasonable basis for doing so, even
if the Executive is
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not the prevailing party therein. If the Executive and the Board are unable to
agree on such determination, the Executive shall have the right: (i) to submit
to arbitration pursuant to Section 11 below the determination of whether the
"change of control" or changed circumstances would be reasonably likely to have
either of the materially detrimental effects mentioned above, and an affirmative
determination by the arbitrator shall constitute a "Change of Control Event";
(ii) to accept continued employment with Ascent or its successor entity on the
terms of this Agreement; or (iii) to terminate this Agreement by giving sixty
(60) days written notice to Ascent to that effect. If the Executive elects to
terminate this Agreement pursuant to clause (iii) of this paragraph (a),
following the expiration of the notice period provided therein, the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given. "Change of control" for purposes of this
paragraph (a) shall mean any event as a result of which COMSAT no longer owns
more than fifty percent (50%) of the voting stock of Ascent, PROVIDED that any
Ascent voting stock which is publicly held shall be considered as owned by
COMSAT for this purpose.
(b) In the event that COMSAT or Ascent adopts any "change of control"
provisions applicable to any COMSAT or Ascent benefits plans, respectively,
providing for the accelerated vesting and/or payment of any benefits for its
senior management group, to the extent that such provisions give Executive
greater rights than those provided in paragraph (a) above, such provisions shall
apply to the Executive to the same extent as other Ascent senior executives or
COMSAT senior executives on a favored nations basis with respect to the benefits
affected by such COMSAT or Ascent provisions, respectively.
8. NON-COMPETITION.
(a) As an inducement for Ascent to enter into this Agreement, the
Executive agrees that for a period commencing
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as of the Effective Date and running through the earlier of (i) the end of the
Employment Period if the Executive remains employed by Ascent for the entire
Employment Period or (ii) one year following termination of the Executive's
employment by Ascent for "cause" as defined in Section 5(b) hereof, or by the
Executive for any reason (other than an Executive Election Event or an event
described in Section 7(a)(iii) above, in which case the provisions of this
paragraph (a) shall not apply) (the "Non-Competition Period"), the Executive
shall not, without the prior written consent of the Board, engage or
participate, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual capacity whatsoever,
in the conduct or management of, or own any stock or any other equity investment
in or debt of, any business which is competitive with any business conducted by
Ascent, including the Entertainment Business.
For the purpose of this Agreement, a business shall be considered to
be competitive with any business of Ascent only if such business is engaged in
providing services or products (i) similar to (A) any service or product
currently provided by Ascent during the Employment Period; (B) any service or
product which evolves from or results from enhancements in the ordinary course
during the Non-Competition Period to the services or products provided by Ascent
as of the date hereof or during the Employment Period; or (C) any future service
or product of Ascent as to which the Executive materially and substantially
participated in the development or enhancement, and (ii) to customers,
distributors or clients of the type served by Ascent during the Non-Competition
Period.
(b) NON-SOLICITATION OF EMPLOYEES. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than Ascent) solicit, or assist any person or entity
other than Ascent to solicit, any officer, director, executive or
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employee (other than an administrative or clerical employee) of Ascent to leave
his or her employment.
(c) REASONABLENESS; INTERPRETATION. The Executive acknowledges and
agrees, solely for purposes of determining the enforceability of this Section 8
(and not for purposes of determining the amount of money damages or for any
other reason), that (i) the markets served by Ascent are national and
international and are not dependent on the geographic location of executive
personnel or the businesses by which they are employed; (ii) the length of the
Non-Competition Period is linked to the term of the Employment Period and the
severance benefit provided for in Section 5(a); and (iii) the above covenants
are manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of Ascent. In the event that the covenants in this
Section 8 shall be determined by any court of competent jurisdiction in any
action to be unenforceable by reason of their extending for too great a period
of time or over too great a geographical area or by reason of their being too
extensive in any other respect, they shall be interpreted to extend only over
the maximum period of time for which they may be enforceable, and/or over the
maximum geographical area as to which they may be enforceable and/or to the
maximum extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
(d) INVESTMENT. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with Ascent,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
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9. INDEMNIFICATION; LIABILITY INSURANCE. The Executive shall be entitled
to indemnification and coverage under Ascent's liability insurance policy for
directors and officers to the same extent as other directors and officers of
Ascent. During and after the term of employment, Ascent hereby agrees to
indemnify and hold Executive harmless against any and all claims arising from or
in connection with his employment by or service to Ascent to the full extent
permitted by law and, in connection therewith, to advance the expenses of
Executive incurred in defending against such claims subject to such limitations
as may actually be required by law.
10. ENFORCEMENT; JOINT AND SEVERAL LIABILITY. The Executive acknowledges
that a breach of the covenants or provisions contained in Sections 3, 4 and 8 of
this Agreement will cause irreparable damage to the Entertainment Business and
Ascent, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the
Executive agrees that if the Executive breaches or threatens to breach any of
the covenants or provisions contained in Sections 3, 4 and 8 of this Agreement,
in addition to any other remedy which may be available at law or in equity,
Ascent shall be entitled to seek specific performance and injunctive relief.
11. ARBITRATION.
(a) Subject to Ascent's right to enforce Sections 3, 4 and 8 hereof
by an injunction issued by a court having jurisdiction (which right shall
prevail over and supersede the provisions of this Section 11), any dispute
relating to this Agreement, including the enforceability of this Section 11,
arising between the Executive and Ascent shall be settled by arbitration which
shall be conducted in Denver, Colorado, or any other location where the
Executive then resides at Ascent's request, before a single arbitrator in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA"). Within 90 days after the Effective Date, the parties shall
mutually agree upon three
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possible arbitrators, one of whom shall be selected by the AAA within 2 days
after notice of a dispute to be arbitrated under this Section 11. The parties
shall instruct the arbitrator to use his or her best efforts to conclude the
arbitration within 60 days after notice of the dispute to AAA.
(b) The award of any such arbitrator shall be final. Judgment upon
such award may be entered by the prevailing party in any federal or state court
sitting in Denver, Colorado or any other location where the Executive then
resides at Ascent's request.
(c) Subject to Section 7(a), the parties will bear their own costs
associated with arbitration and will each pay one-half of the arbitration costs
and fees of AAA; however, the arbitrator may in his sole discretion determine
that the costs of the arbitration proceedings, including attorneys' fees, shall
be paid entirely by one party to the arbitration if the arbitrator determines
that the other party is the prevailing party in such arbitration.
12. SEVERABILITY. Should any provision of this Agreement be determined to
be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
13. ASSIGNMENT. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. Ascent's rights and
obligations under this Agreement shall not be assignable by Ascent except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of Ascent. In the event of any such assignment by Ascent, all
rights of Ascent hereunder shall inure to the benefit of the assignee.
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14. NOTICES. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to Executive, addressed to:
Charles Lyons
4681 W. Hanoverian Way
Littleton, Colorado 80123
With a copy to:
Irell & Manella
Suite 900
1800 Avenue of the Stars
Los Angeles, California 90067
Attention: Ed Zeldow, Esq.
Telecopier No.: (310) 203-7199
If to Ascent, addressed to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Telecopier No. (303) 595-0823
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With a copy to:
Ascent Entertainment Group
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Arthur M. Aaron
Telecopier No. (303) 595-0127
15. MISCELLANEOUS. This Agreement constitutes the entire agreement, and
supersedes all prior agreements, of the parties hereto relating to the subject
matter hereof, and there are no written or oral terms or representations made by
either party other than those contained herein. No amendment, supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. The validity, interpretation,
performance and enforcement of the Agreement shall be governed by the laws of
the State of Maryland. The headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ Charles Lyons
----------------------------------------
Charles Lyons, Executive
ASCENT ENTERTAINMENT GROUP, INC.
By: C.J. Silas
----------------------------------------
Title: Chairman
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- --------------------------------------------------------------------------------
$140,000,000
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 23, 1997
AMONG
ASCENT ENTERTAINMENT GROUP, INC.
AS THE BORROWER
AND
THE LENDERS NAMED HEREIN
AND
NATIONSBANK OF TEXAS, N.A.
AS THE ADMINISTRATIVE AGENT
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<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A - Form of Administrative Questionnaire
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Borrowing Request
Exhibit D - Form of Application for a Letter of Credit
Exhibit E - Form of Compliance Certificate
Exhibit F - Subordinated Indebtedness Terms and Conditions
SCHEDULES
- ---------
Schedule 1.01 - Films Not Included in Film Cash Flow
Schedule 2.01 - Lenders and Commitments
Schedule 3.08 - Subsidiaries
Schedule 3.09 - Litigation
Schedule 3.10 - Restrictive Material Agreements
Schedule 3.18 - Insurance
Schedule 3.20 - Environmental Matters
Schedule 3.23 - Film Inventory
Schedule 6.01 - Subsidiary Indebtedness
Schedule 6.02 - Liens
Schedule 6.04 - Investments
Schedule 6.03 - Permitted Sale Leaseback
Schedule 6.05 - Capital Stock owned by the Borrower Permitted to be
Sold
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms............................................ 1
SECTION 1.02. Terms Generally.......................................... 24
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments.............................................. 25
SECTION 2.02. Loans.................................................... 25
SECTION 2.03. Borrowing Procedure...................................... 28
SECTION 2.04. Evidence of Debt; Repayment of Loans..................... 28
SECTION 2.05. Fees..................................................... 29
SECTION 2.06. Interest on Loans........................................ 30
SECTION 2.07. Default Interest......................................... 31
SECTION 2.08. Alternate Rate of Interest............................... 31
SECTION 2.09. Termination and Reduction of Commitments; Termination
of the Term Loan; Extension of Maturity Date............. 31
SECTION 2.10. Conversion and Continuation of Borrowings................ 33
SECTION 2.11. Prepayment............................................... 34
SECTION 2.12. Reserve Requirements; Change in Circumstances............ 36
SECTION 2.13. Change in Legality....................................... 37
SECTION 2.14. Indemnity................................................ 38
SECTION 2.15. Sharing of Payments...................................... 39
SECTION 2.16. Sharing of Setoffs....................................... 39
SECTION 2.17. Payments................................................. 40
SECTION 2.18. Taxes.................................................... 40
SECTION 2.19. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate......................................... 44
SECTION 2.20. Letters of Credit........................................ 45
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers..................................... 49
SECTION 3.02. Authorization............................................ 49
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SECTION 3.03. Enforceability........................................... 50
SECTION 3.04. Governmental Approvals................................... 50
SECTION 3.05. Financial Statements..................................... 50
SECTION 3.06. No Material Adverse Change............................... 50
SECTION 3.07. Title to Properties; Possession Under Leases............. 50
SECTION 3.08. The Subsidiaries and On Command Corp..................... 51
SECTION 3.09. Litigation; Compliance with Laws......................... 51
SECTION 3.10. Agreements............................................... 52
SECTION 3.11. Federal Reserve Regulations.............................. 52
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act.............................................. 52
SECTION 3.13. Use of Proceeds.......................................... 52
SECTION 3.14. Tax Returns.............................................. 52
SECTION 3.15. No Material Misstatements................................ 53
SECTION 3.16. Employee Benefit Plans................................... 53
SECTION 3.17. Solvency................................................. 53
SECTION 3.18. Insurance................................................ 54
SECTION 3.19. Labor Matters............................................ 54
SECTION 3.20. Environmental Matters.................................... 54
SECTION 3.21. Ownership of the Franchises.............................. 55
SECTION 3.22. Strikes.................................................. 55
SECTION 3.23. Film Inventory........................................... 56
SECTION 3.24. Survival of Representations and Warranties, etc.......... 56
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. All Credit Events........................................ 56
SECTION 4.02. First Credit Event....................................... 57
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties..................... 60
SECTION 5.02. Insurance................................................ 60
SECTION 5.03. Obligations and Taxes.................................... 60
SECTION 5.04. Financial Statements, Reports, etc....................... 61
SECTION 5.05. Litigation and Other Notices............................. 62
SECTION 5.06. Employee Benefits........................................ 62
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections.............................................. 63
ii
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SECTION 5.08. Use of Proceeds.......................................... 63
SECTION 5.09. Compliance with Environmental Laws....................... 63
SECTION 5.10. Compliance with Material Contracts....................... 63
SECTION 5.11. Arena/Complex Construction............................... 64
SECTION 5.12. NBA and NHL Obligations.................................. 64
SECTION 5.13. Operation of Franchises.................................. 64
SECTION 5.14. Services Contracts....................................... 64
SECTION 5.15. Key Man Life Insurance/NBA and NHL Financial
Information.............................................. 64
SECTION 5.16. Arena/Complex Notice..................................... 65
SECTION 5.17. Syndication.............................................. 65
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Indebtedness............................................. 65
SECTION 6.02. Liens.................................................... 67
SECTION 6.03. Sale and Lease Back Transactions......................... 68
SECTION 6.04. Investments, Acquisitions, Loans and Advances............ 68
SECTION 6.05. Mergers, Consolidations and Sales of Assets.............. 69
SECTION 6.06. Dividends and Distributions; Restrictions on
Ability of Subsidiaries to Pay Dividends................. 70
SECTION 6.07. Transactions with Affiliates............................. 71
SECTION 6.08. Limitation on Restrictive Agreements..................... 71
SECTION 6.09. Coverage Ratio........................................... 72
SECTION 6.10. Financial Covenants Regarding On Command Corp............ 72
SECTION 6.11. Film Inventory........................................... 73
SECTION 6.12. Amendments to Organizational Documents and Subordinated
Indebtedness Documentation. ............................ 73
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
THE ADMINISTRATIVE AGENT
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iv
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices.................................................. 82
SECTION 9.02. Survival of Agreement.................................... 84
SECTION 9.03. Binding Effect........................................... 84
SECTION 9.04. Successors and Assigns................................... 84
SECTION 9.05. Expenses; Indemnity...................................... 88
SECTION 9.06. Right of Setoff.......................................... 89
SECTION 9.07. Applicable Law........................................... 89
SECTION 9.08. Waivers; Amendment....................................... 89
SECTION 9.09. Interest Rate Limitation................................. 90
SECTION 9.10. NBA Consent Letter and NHL Consent Letter................ 91
SECTION 9.11. ENTIRE AGREEMENT......................................... 91
SECTION 9.12. WAIVER OF JURY TRIAL..................................... 91
SECTION 9.13. Severability............................................. 91
SECTION 9.14. Counterparts............................................. 92
SECTION 9.15. Headings................................................. 92
SECTION 9.16. Jurisdiction; Consent to Service of Process.............. 92
SECTION 9.17. Confidentiality.......................................... 93
SECTION 9.18. Proposed Merger of Ascent Network Services, Inc.......... 93
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ASCENT ENTERTAINMENT GROUP, INC.
$140,000,000
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT"), dated
as of March 23, 1997, among ASCENT ENTERTAINMENT GROUP, INC., a Delaware
corporation (the "BORROWER"), the Lenders (as defined in Article I hereof), and
NATIONSBANK OF TEXAS, N.A., a national banking association, as issuing bank (in
such capacity, the "ISSUING BANK"), and as administrative agent (in such
capacity, the "ADMINISTRATIVE AGENT") for the Lenders.
WHEREAS, the Borrower and Lenders entered in to that certain Credit
Agreement dated as of October 8, 1996 in the maximum principal amount of
$200,000,000 (said Credit Agreement, as amended, restated or modified, the
"Existing Credit Agreement");
WHEREAS, the Borrower has requested the Lenders to amend and restate the
Existing Credit Agreement to provide for a loan facility in the aggregate
maximum amount of $140,000,000, consisting of (a) Revolving Loans (such term and
each other capitalized term used but not defined herein having the meaning given
it in Article I hereof), at any time and from time to time prior to the Maturity
Date, in an aggregate principal amount at any time outstanding not in excess of
$90,000,000 (of which not more than $15,000,000 may be used for Letters of
Credit) and (b) a Term Loan, in an aggregate principal amount at any time
outstanding not in excess of $50,000,000, the proceeds of which will be used in
accordance with the terms and conditions of this Agreement.
WHEREAS, the Lenders are willing to extend such credit to the Borrower, and
the Issuing Bank is willing to issue letters of credit for the account of the
Borrower, in each case on the terms and subject to the conditions set forth
herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR BORROWING" shall mean a Borrowing comprised of ABR Loans.
<PAGE>
"ABR LOAN" shall mean any Loan bearing interest at the Alternate Base Rate
in accordance with the provisions of Article II hereof.
"ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate and (b) the sum of (i) the quotient of (x) the LIBO
Rate divided by (y) one minus the LIBOR Reserve Percentage, stated as a decimal,
plus (ii) the Applicable Percentage. The Adjusted LIBO Rate shall apply to
Interest Periods of one, two, three or six months, or, if determined available
by the Administrative Agent, twelve months. The Adjusted LIBO Rate shall be
subject to availability with respect to the Lenders and to Section 2.13 hereof.
Once determined, the Adjusted LIBO Rate shall remain unchanged during the
applicable Interest Period, except for changes to reflect adjustments in the
LIBOR Reserve Percentage.
"ADMINISTRATIVE AGENT FEES" shall have the meaning assigned to such term in
Section 2.05(b) hereof.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire
in the form of EXHIBIT A hereto.
"ADVERTISING AGREEMENTS" shall mean all material agreements between Ascent
Sports, Avalanche Sub or Nuggets Sub and any other Person in any manner relating
to signage or advertising in, around or relating to the Arena, or, after its
completion, the Arena/Complex.
"AFFILIATE" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the lesser of (a) the
Highest Lawful Rate and (b) sum of (i) the Applicable Percentage, plus (ii) the
greater of (A) the Prime Rate in effect on such day, and (B) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms of the definition thereof, the Alternate Base Rate shall be determined
without regard to clause (B) of the preceding sentence, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively. The term "PRIME RATE" shall mean
the rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its office in Dallas, Texas;
each change in the Prime Rate shall be effective on the date such change is
publicly announced as being effective. The term "FEDERAL FUNDS EFFECTIVE RATE"
shall mean, for any day, the weighted average of the rates on overnight
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Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of Dallas, Texas or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for the day
for such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"APPLICABLE LAW" shall mean (a) in respect of any Person, all provisions of
Laws of tribunals applicable to such Person, and all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in question
is a party and (b) in respect of contracts made or performed in the State of
Texas, "Applicable Law" also means the laws of the United States of America,
including, without limiting the foregoing, 12 USC Sections 85 and 86, as amended
to the date hereof and as the same may be amended at any time and from time to
time hereafter, and any other statute of the United States of America now or at
any time hereafter prescribing the maximum rates of interest on loans and
extensions of credit, and the laws of the State of Texas, including, without
limitations, Articles 5069-1.04 and 5069-1.07(a), Title 79, Revised Civil
Statutes of Texas, 1925, as amended ("ART. 1.04"), and any other statute of the
State of Texas now or at any time hereafter prescribing maximum rates of
interest on loans and extensions of credit; PROVIDED HOWEVER, that pursuant to
Article 5069-15.10(b), Title 79, Revised Civil Statutes of Texas, 1925, as
amended, the Borrower agrees that the provisions of Chapter 15, Title 79,
Revised Civil Statutes of Texas, 1925, as amended, shall not apply to the Loans
hereunder.
"APPLICABLE PERCENTAGE" shall mean, for any day, with respect to any
Eurodollar Loan or ABR Loan, the applicable percentage set forth below under the
caption "Eurodollar Margin" or "ABR Margin", as the case may be, based upon the
ratio of (a) the product of the Borrower's and its consolidated Subsidiaries'
EBITDA for the most recently completed four fiscal quarters to (b) Consolidated
Cash Interest Expense for the most recently completed four fiscal quarters (the
"DETERMINING RATIO"), then in effect for purposes hereof:
Eurodollar ABR
Determining Ratio Margin Margin
- ----------------- ---------- ------
CATEGORY 1 2.50% 1.50%
Less than 1.10 to 1.00
CATEGORY 2 2.00% 1.00%
Greater than or equal to
1.10 to 1.00 but less than
2.00 to 1.00
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CATEGORY 3
Greater than or equal to 1.75% 0.75%
2.00 to 1.00
Except as set forth below, the Determining Ratio utilized for purposes of
determining the Eurodollar Margin and ABR Margin shall be that in effect as of
the last day of the most recent fiscal quarter of the Borrower in respect of
which financial statements have been delivered pursuant to this Agreement. From
the date hereof until the earliest to occur of the initial delivery of financial
statements pursuant to Section 5.04(a) or (b) hereof, the Borrower's failure to
timely deliver such financial statements or the occurrence of an Event of
Default, the Determining Ratio shall be deemed to be within Category 1 above.
The Applicable Percentage from time to time in effect shall be based on the
Determining Ratio from time to time in effect, and each change in the Applicable
Percentage resulting from a change in (or the initial establishment of) the
Determining Ratio shall be effective with respect to all Loans, Commitments and
Letters of Credit outstanding on and after the date of delivery to the
Administrative Agent of the financial statements and certificates required by
Section 5.04(a) or (b) hereof indicating such change to and including the date
immediately preceding the next date of delivery of such financial statements and
certificates indicating another such change. Notwithstanding the foregoing, (a)
at any time during which the Borrower has failed to deliver the financial
statements and certificates required by Section 5.04(a) or (b) hereof, or (b) at
any time after the occurrence and during the continuance of an Event of Default,
the Determining Ratio shall be deemed to be in Category 1 above for purposes of
determining the Applicable Percentage.
"APPLICABLE SPECIFIED PERCENTAGE" means either the Revolving Loan Specified
Percentage or the Term Loan Specified Percentage, as applicable in the context
used.
"APPLICATION" shall mean any stand-by letter of credit application
delivered to the Administrative Agent for or in connection with any Letter of
Credit pursuant to Section 2.20 hereof, in the Administrative Agent's standard
form for stand-by letters of credit, the form of which, on the Closing Date, is
attached as EXHIBIT D hereto.
"ARENA" shall mean the arena owned by the City and County of Denver, in
Denver, Colorado, commonly known as "William H. McNichols, Jr. Sports Arena".
"ARENA/COMPLEX" shall mean the proposed multi-purpose sports arena and
entertainment complex which is expected to include, among other things,
facilities for basketball, hockey, live concerts and other shows, television and
audio production and post-production facilities and integrated office space,
retail stores and restaurants.
"ART. 1.04" has the meaning specified in the definition of "Applicable
Law".
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"ASCENT SPORTS" shall mean Ascent Sports, Inc., a Delaware corporation and
wholly owned Subsidiary of the Borrower.
"ASCENT SPORTS HOLDINGS" shall mean Ascent Sports Holdings, Inc., a
Delaware corporation and wholly owned Subsidiary of the Borrower.
"ASSET DISPOSITION" shall mean the sale or disposition of assets (not
including Capital Stock owned by the Borrower or any Subsidiary of the Borrower)
for fair market value in cash outside the ordinary course of business.
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent, in
the form of EXHIBIT B hereto or such other form as shall be approved by the
Administrative Agent.
"AVALANCHE SUB" shall mean Colorado Avalanche, LLC, a Colorado limited
liability corporation and wholly owned indirect Subsidiary of the Borrower,
which such Subsidiary owns and operates the Colorado Avalanche, a franchise of
the NHL.
"AVALANCHE LICENSE AGREEMENT" shall mean the User Agreement, between the
City and County of Denver and Avalanche Sub, related to Avalanche Sub's rights
to use and occupancy of the Arena.
"AVALANCHE LICENSE DOCUMENTS" shall mean the Avalanche License Agreement
and each other material agreement related to Avalanche Sub's rights to the use
and occupancy of the Arena, or, after its completion, the similar agreements
related to the Arena/Complex.
"BEACON" shall mean Beacon Communications Corp., a Delaware corporation and
wholly owned Subsidiary of the Borrower.
"BOARD" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"BORROWING" shall mean, with respect to the Revolving Loans and the Term
Loan, as applicable, Loans of a single Type made by the Lenders in accordance
with the terms hereof on a single date and as to which a single Interest Period
is in effect.
"BORROWING BASE" shall mean, on any date of determination, the sum of (a)
$100,000,000, plus (b) 50% of the product of (i) the number of shares of the
Borrower's and its Subsidiaries' Capital Stock of On Command Corp. times (i) the
most recently quoted public price of such Capital Stock. Notwithstanding
anything herein to the contrary, (A) effective on any date of execution of any
such Guarantee, the Borrowing Base shall be automatically reduced by the maximum
amount of any outstanding completion Guarantee of the Borrower executed in
accordance with the terms of Section 6.01(f) hereof, and (B) effective on the
date that is two
5
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Business Days after the Administrative Agent gives the Borrower written notice
thereof from time to time (which such notice must be within seven Business Days
after the Administrative Agent's receipt of written notice from the Borrower
regarding the receipt of such amounts), the Borrowing Base shall be
automatically reduced by amounts equal to (I) the Net Cash Proceeds of each
Asset Disposition consummated by the Borrower or any Subsidiary of the Borrower
during the term of this Agreement which requires a reduction in the Borrowing
Base in accordance with the terms of Section 6.05(b) hereof, and (II) the
difference between aggregate cash proceeds received by the Borrower or any
Subsidiary of the Borrower during the term of this Agreement from any and each
expansion of the NHL or NBA less the amount, if any, of the Borrower's good
faith best estimate of all taxes attributable to such cash expansion proceeds
which it in good faith expects to be paid in such taxable year or in the next
taxable year.
"BORROWING REQUEST" shall mean a request by the Borrower in accordance with
the terms of Section 2.03 hereof and substantially in the form of EXHIBIT C
hereto.
"BROADCAST RIGHTS" shall mean (a) any and all rights of Ascent Sports,
Avalanche Sub or Nuggets Sub to broadcast, disseminate or publish, or to permit
the broadcast, dissemination or publication of, by means of television, radio,
cable, satellite or other electronic transmissions or recordings, any activities
of either Franchise; (b) any and all rights to license, sell, lease, convey or
otherwise transfer any of the foregoing described in CLAUSE (a); (c) any and all
rights of Ascent Sports, Avalanche Sub or Nuggets Sub, pursuant to any
agreement, contract, transaction or understanding, as a result of which any
Person is or becomes entitled to broadcast, disseminate or publish such
activities; and (d) any and all renewals and extensions of any of the foregoing
and any and all amendments and supplements thereto.
"BROADCASTING AGREEMENTS" shall mean all material agreements now or
hereafter granting the Broadcast Rights by and between Ascent Sports, Avalanche
Sub or Nuggets Sub and any other Person.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on
which banks in Dallas, Texas or New York, New York are authorized or required by
Law to close; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CAPITAL STOCK" shall mean, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person that is a
6
<PAGE>
corporation and each class of partnership interests (including without
limitation, general, limited and preference units) in any Person that is a
partnership.
A "CHANGE IN CONTROL" shall be deemed to have occurred if any Person or
group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934
as in effect on the date hereof) shall (a) own directly or indirectly,
beneficially or of record, shares of Capital Stock of the Borrower representing
a majority of the aggregate ordinary voting power, or (b) control a majority of
the seats on the Board of Directors of the Borrower, or (c) have effective
voting control of the Borrower, unless (i) such Person or group is COMSAT or
(ii) such Person or group has a long term senior unsecured debt rating of A- or
A3 or better from Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc. or from Moody's Investors Service, Inc., respectively, and such Person or
group is otherwise acceptable to the Administrative Agent as evidenced by its
prior written consent to such change (which such consent may not be unreasonably
withheld or delayed).
"CLOSING DATE" shall mean the date of the first Credit Event.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall mean first priority and perfected Liens in (a) 100% of
the Capital Stock of all Subsidiaries of the Borrower, except Nuggets Sub and
the Avalanche Sub and (b) all of the Borrower's and each Subsidiary's interest
in the Capital Stock of On Command Corp.
"COMMITMENT" shall mean, with respect to each Lender under the Revolving
Loans, the lesser of (a) $90,000,000 and (b) the commitment of such Lender to
make Loans hereunder as set forth on SCHEDULE 2.01 hereto, or in the Assignment
and Acceptance pursuant to which such Lender assumed its Commitment, as
applicable, provided that, effective on any date of execution of any such
Guarantee, each Lender's Commitment shall be automatically reduced by the amount
of any such Lender's Revolving Loan Specified Percentage of the maximum amount
of any outstanding completion Guarantee of the Borrower executed in accordance
with the terms of Section 6.01(f) hereof, and further, as the same may be (x)
reduced from time to time pursuant to Section 2.09 hereof or pursuant to Section
2.19 hereof and (y) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04 hereof.
"COMMITMENT FEE" shall have the meaning assigned to such term in Section
2.05(d) hereof.
"COMPLIANCE CERTIFICATE" shall mean a compliance certificate, substantially
in the form of EXHIBIT E hereto, and certifying that there exists no Default or
Event of Default at the time of delivery thereof.
"COMSAT" shall mean COMSAT Corporation, a corporation organized under the
Laws of the District of Columbia.
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"COMSAT AGREEMENTS" shall mean the Services Agreement, the Corporate
Agreement and the Tax Sharing Agreement, in each case between the Borrower and
COMSAT, in the forms delivered to the Lenders, as such agreements may hereafter
be amended as permitted by, and in accordance with, the provisions of this
Agreement.
"CONCESSION AGREEMENTS" shall mean all material agreements now or hereafter
existing covering or affecting the sale of food, beverage, merchandise or other
goods at or near the Arena, or, after its completion, the Arena/Complex, and any
and all amendments thereto or substitutions therefor between Ascent Sports,
Avalanche Sub or Nuggets Sub and any other Person.
"CONSOLIDATED CASH INTEREST EXPENSE" shall mean, for any period of
determination, the gross interest expense of the Borrower and its Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP,
excluding any amounts not paid or not required (whether during or after such
period) to be paid in cash. For purposes of the foregoing, gross interest
expense shall be determined after giving effect to any net cash payments made or
received by the Borrower with respect to rate protection agreements entered into
as a hedge against interest rate exposure. Gross interest expense shall be
calculated in accordance with GAAP as in effect and applied by the Borrower on
the date of this Agreement and, accordingly, shall exclude the effects of any
changes in GAAP or its application by the Borrower after the date hereof.
"CONSOLIDATED TOTAL INDEBTEDNESS" shall mean, for any Person, all
Indebtedness of such Person and its consolidated subsidiaries (other than
Indebtedness referred to in clause (h) of the definition of such term),
determined on a consolidated basis in accordance with GAAP; PROVIDED, HOWEVER,
that Consolidated Total Indebtedness of the Borrower shall not include
Non-Recourse Arena Financing or Non-Recourse Film Indebtedness, in each case
incurred in compliance with the provisions of this Agreement.
"CONTROL" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have the meanings correlative thereto.
"CORPORATE RESTRUCTURING" shall mean that series of transactions described
in the S-4 Registration Statement.
"COVERAGE RATIO" shall mean, on any date for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) the sum of (i) EBITDA for
the four most recently completed consecutive fiscal quarters, plus (ii) the
Revolver Availability on the date of determination, to (b) the product of (i)
Consolidated Total Indebtedness of the Borrower and its Subsidiaries on such
date times (ii) the current weighted average rate of interest being charged to
the Borrower on such date; PROVIDED, HOWEVER, that solely for purposes of
calculating the Coverage Ratio prior to the earlier of (i) October 9, 1997 and
(ii) the date on which the Borrower receives proceeds from the Subordinated
Indebtedness contemplated by Section 2.09(e) hereof, the Total Commitment shall
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mean the sum of (i) the aggregate amount of Lenders' Commitments, as in effect
at such time, plus (ii) $50,000,000.
"CREDIT EVENT" shall have the meaning assigned to such term in Section 4.01
hereto.
"DEBTOR RELIEF LAWS" shall mean applicable bankruptcy, reorganization,
moratorium, or similar Laws, or principles of equity affecting the enforcement
of creditors' rights generally.
"DEFAULT" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"DOLLARS" or "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, with respect to any Person and its subsidiaries on a
consolidated basis for any period, the consolidated net income of such Person
and its subsidiaries for such period, computed in accordance with GAAP, plus, to
the extent deducted in computing such consolidated net income and without
duplication, the sum of (a) income tax expense, (b) interest expense, (c)
depreciation and amortization expense (but excluding the amortization of Film
Inventory), (d) allocation of income to minority interests in earnings of
consolidated subsidiaries and (e) extraordinary losses (including restructuring
provisions) during such period minus, to the extent added in computing such
consolidated net income and without duplication, (y) extraordinary gains during
such period and (z) allocation of losses to minority interests in earnings of
consolidated subsidiaries. EBITDA shall be calculated in accordance with GAAP
as in effect and applied by the Borrower on the date of this Agreement and,
accordingly, shall exclude the effects of any changes in GAAP or its application
by the Borrower after the date hereof.
"ELIGIBLE ASSIGNEE" means (a) with respect to any assignment of any
Lender's Revolving Loan Specified Percentage of the Commitment and the
outstanding Borrowings under the Revolving Loans (i) any Lender, (ii) a
commercial bank organized under the laws of the United States, or any state
thereof, and having total assets in excess of $1,000,000,000; (iii) a savings
and loan association or savings bank organized under the laws of the United
States, or any state thereof, having total assets in excess of $500,000,000, and
not in receivership or conservatorship; (iv) a commercial bank organized under
the laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000, provided that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is described in this clause; and (v) the
central bank of any country which is a member of the Organization for Economic
Cooperation and Development, and (b) with respect to any assignment of any
Lender's Term Loan Specified Percentage of the Term Loan and the outstanding
Borrowings under the Term Loan, (i) a Lender, (ii) a commercial bank organized
under the laws of any country that is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, (iii) the
central bank of any country that is a member of the
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Organization for Economic Cooperation and Development and (iv) a finance
company, insurance company or other financial institution or fund (whether a
corporation, partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary course of
its business and having a combined capital and surplus of at least $100,000,000,
provided that, neither the Borrower or any Affiliate of the Borrower shall
qualify as an Eligible Assignee.
"ENVIRONMENT" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, notice
of violation, claim, demand, order, directive, consent decree, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any Person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the Environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the
existence, or the continuation of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material; or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"ENVIRONMENTAL LAW" shall mean any and all applicable present and future
treaties, Laws, codes, judgments, injunctions, notices or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in
any way to the Environment, preservation or reclamation of natural resources,
the management, Release or threatened Release of any Hazardous Material or to
health and safety matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 ET SEQ. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. Sections 6901 ET SEQ., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 ET SEQ., the
Clean Air Act of 1970, 42 U.S.C. Sections 7401 ET SEQ., as amended, the Toxic
Substances Control Act of 1976, 15 U.S.C. Sections 2601 ET SEQ., the
Occupational Safety and Health Act of 1970, as amended by 29 U.S.C. Sections 651
ET SEQ., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Sections 11001 ET SEQ., the Safe Drinking Water Act of 1974, as amended
by 42 U.S.C. Sections 300(f) ET SEQ., the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 5101 ET SEQ., and any similar or implementing state or
local law, and all amendments or regulations promulgated thereunder.
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"ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
upon the termination of any Plan or the withdrawal or partial withdrawal of the
Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f)
the receipt by the Borrower or any ERISA Affiliate from the PBGC of any notice
relating to the intention to terminate any Plan or Plans or to appoint a trustee
to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate
of any notice concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; and (h) the
occurrence of a "prohibited transaction" with respect to which the Borrower or
any of its Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which the Borrower or any such
Subsidiary could otherwise be liable.
"EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar
Loans.
"EURODOLLAR LOANS" shall mean Loans bearing interest at a rate determined
by reference to the Adjusted LIBO Rate in accordance with the provisions of
Article II hereof.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in Article
VII hereof.
"EXISTING CREDIT AGREEMENT" shall have the meaning assigned to such term in
the preamble to this Agreement.
"FACILITY FEE" shall have the meaning assigned to such term in Section
2.05(a) hereof.
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"FEE LETTERS" shall mean that certain Fee Letter dated March 23, 1997,
between the Borrower and the Administrative Agent, and any other fee letters
executed from time to time among the Borrower, the Administrative Agent and the
Lenders, as each may be amended, extended, increased, revised or substituted
from time to time.
"FEES" shall mean the Facility Fees, the Commitment Fees, the
Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.
"FILM CASH FLOW" shall mean, for the period from the date hereof through
any date of determination, positive or negative earnings before interest and
taxes generated by Motion Picture projects included in Film Inventory on the
balance sheet of the Borrower and its Subsidiaries, provided that revenues and
losses attributable to those film projects listed on SCHEDULE 1.01 hereto shall
not be included in the calculation of Film Cash Flow.
"FILM INVENTORY" shall mean film inventory on the balance sheet of the
Borrower and its Subsidiaries from time to time.
"FINANCIAL OFFICER" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.
"FRANCHISE" shall mean either the NBA Franchise or the NHL Franchise, and
"Franchises" means both such franchises.
"GAAP" shall mean generally accepted accounting principles.
"GAME" shall mean any game participated in by either Franchise and
conducted pursuant to the governance of or consented to by the NBA or the NHL,
including any promotional, exhibition, regular season, playoff or championship
game.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"GUARANTEE" of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness, and (d) to guaranty the
obligations, payments by or performance of, a Person that is not a wholly owned
direct or indirect Subsidiary of the Borrower; PROVIDED,
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HOWEVER, that the term Guarantee shall not include (i) endorsements for
collection or deposit in the ordinary course of business, (ii) any obligation,
contingent or otherwise, incurred in the ordinary course of business, to pay any
amounts pursuant to valid and binding actor's agreements in respect of any
Motion Pictures, whether or not the Person to whom such obligation is owed uses
the obligation to secure Indebtedness or services, or (iii) any obligation,
contingent or otherwise, incurred in the ordinary course of business, to
purchase any Motion Picture after its completion pursuant to valid and binding
production or distribution agreements in respect of any Motion Pictures, whether
or not the Person to whom such obligation is owed uses the obligation to secure
Indebtedness or services.
"GUARANTORS" shall mean: Ascent Network Services, Inc., Ascent Sports
Holdings, Ascent Sports, Ascent Arena Corporation, Beacon, Beacon Music
Publishing, Inc., Club Pictures, Inc. and Daily Double Music Co., and all other
wholly owned direct or indirect Subsidiaries of the Borrower from time to time.
"HAZARDOUS MATERIALS" shall mean all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBS") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HIGHEST LAWFUL RATE" shall mean at the particular time in question the
maximum rate of interest which, under Applicable Law, any Lender is then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, any Lender is permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under Applicable
Law, the applicable rate ceiling shall be (a) the indicated rate ceiling
described in and computed in accordance with the provisions of Section (a)(1) of
Art. l.04; or (b) provided notice is given as required in Section (h)(1) of Art.
1.04, either the annualized ceiling or quarterly ceiling computed pursuant to
Section (d) of Art. 1.04; PROVIDED, HOWEVER, that at any time the indicated rate
ceiling, the annualized ceiling or the quarterly ceiling, as applicable, shall
be less than 18% per annum or more than 24% per annum, the provisions of
Sections (b)(1) and (2) of said Art. 1.04 shall control for purposes of such
determination, as applicable.
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits with
such Person or advances to such Person of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade
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accounts payable and accrued obligations incurred in the ordinary course of
business), (e) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (f) all Guarantees by such
Person, (g) all Capital Lease Obligations of such Person, (h) all net
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (i) all obligations of such Person as an account party in
respect to letters of credit and bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any partnership in which such Person is
a general partner.
"INTEREST PAYMENT DATE" shall mean the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day that would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable to such Borrowing,
and, in addition, the date of any prepayment of such Borrowing or conversion of
such Borrowing to a Borrowing of a different Type.
"INTEREST PERIOD" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, or if
determined available by the Administrative Agent, 12 months thereafter, as the
Borrower may elect and (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the earliest of (i) the next succeeding
March 31, June 30, September 30 or December 31, (ii) the Maturity Date and (iii)
the date such Borrowing is converted to a Borrowing of a different Type in
accordance with Section 2.10 hereof or repaid or prepaid in accordance with
Section 2.11 hereof; PROVIDED, HOWEVER, that if any Interest Period would end on
a day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, in the case of a Eurodollar Borrowing only,
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest Period.
"ISSUING BANK" shall mean NationsBank (or any Affiliate thereof) or any
other Lender that may become an Issuing Bank pursuant to Section 2.20(i) hereof,
in each case with respect to Letters of Credit issued by it.
"ISSUING BANK FEES" shall have the meaning assigned to such term in Section
2.05(c) hereof.
"LAW" shall mean any applicable constitution, statute, law, ordinance,
regulation, rule, order, writ, injunction, or decree of any tribunal.
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"L/C COMMITMENT" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.20 hereof.
"L/C DISBURSEMENT" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Lender at any time shall mean its Revolving
Loan Specified Percentage of the aggregate L/C Exposure at such time.
"L/C PARTICIPATION FEE" shall have the meaning assigned to such term in
Section 2.05(c) hereof.
"LENDERS" shall mean (a) the financial institutions listed on SCHEDULE 2.01
hereto (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any Eligible Assignee
that has become a party hereto pursuant to an Assignment and Acceptance.
"LETTER OF CREDIT" shall mean any letter of credit issued pursuant to
Section 2.20 hereof.
"LIBO RATE" shall mean, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Telerate
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in United States dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period. If for any reason
such rate is not available, the term "LIBO Rate" shall mean, for any Eurodollar
Borrowing for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%))
appearing on Reuters Screen LIBO page as the London interbank offered rate for
deposits in United States dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; PROVIDED, HOWEVER, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
"LIBOR RESERVE PERCENTAGE" shall mean, with respect to any Interest Period,
the percentage which is in effect on the first day of such period under
Regulation D of the Board of Governors of the Federal Reserve System, as such
regulation may be amended from time to time, as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency or marginal
reserves) applicable to any Lender with respect to eurocurrency liabilities (as
that term is defined in Regulation D). The Adjusted LIBO Rate for any
Eurodollar Borrowing shall be adjusted for any change in the LIBOR Reserve
Percentage.
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"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"LOAN" shall mean the Revolving Loans and the Term Loan made in accordance
with the terms of this agreement.
"LOAN PAPERS" shall mean this Agreement, the promissory notes evidencing
the Loans, all pledge agreements, guaranties of the Obligations executed by the
Guarantors, Fee Letters, financing statements, all Letters of Credit, all
Applications and all other agreements between the Borrower or any Subsidiary of
the Borrower and the Administrative Agent related to any Letter of Credit, all
Assignment and Acceptances, post-closing letters, and all other documents,
instruments, agreements, or certificates executed or delivered from time to time
by any Person in connection with this Agreement or as security for the
Obligations hereunder, granting Collateral or otherwise, as each such agreement
may be amended, modified, substituted, replaced or extended from time to time.
"MARGIN STOCK" shall have the meaning assigned to such term in Regulation
U.
"MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect on the
business, assets, operations, or financial condition of the Borrower, the
Subsidiaries of the Borrower and On Command Corp. and its Subsidiaries taken as
a whole, (b) material impairment of the ability of the Borrower to perform any
of its obligations under this Agreement or under any other Loan Paper or (c)
material impairment of the enforceability of this Agreement, any other Loan
Paper or the Loans.
"MATURITY DATE" shall mean, subject to Section 2.09(e) hereof, October 7,
1997, or such earlier date as the Obligations are due and payable in full
(whether by scheduled reduction, acceleration, termination or otherwise).
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, the Administrative Agent or any Lender is permitted to charge on
the Obligations.
"MOTION PICTURES" shall mean motion pictures produced for distribution
through theaters and broadcast or cable television.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
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"NATIONAL MEDIA CONTRACTS" shall mean radio or television or other media
agreements now existing or entered into in the future respecting the broadcast
of the Games to audiences beyond the local areas in which games are played or
the local areas of the visiting team, whether such games are regular season
games or otherwise, and whether transmission of such broadcast is over-the-air,
over cable, by pay per view or by any other means of transmission (except for
those contracts that are the subject of a Superstation Agreement), including
each agreement between (a) the NBA or any Affiliate of the NBA, on its own
behalf and as agent for each of the Teams, and any other Person and (b) the NHL
or any Affiliate of the NHL, on its own behalf and as agent for each of the
Teams, and any other Person, in each case, as each may be supplemented,
modified, amended or restated from time to time in the manner provided therein
and all successor contracts that may in the future be entered into.
"NATIONSBANK" shall mean NationsBank of Texas, N.A., a national banking
association.
"NBA" shall mean the National Basketball Association, a joint venture, and
each successor and assign thereof.
"NBA CONSENT LETTER" shall mean the letter agreement among the Borrower and
certain of its Subsidiaries, the Administrative Agent (on behalf of itself and
the Lenders), NBA, NBA Properties, Inc. and NBA Market Extension Partnership,
approving the transactions evidenced by the Loan Papers, giving the
Administrative Agent and the Lenders the right to assign any portion of the
Obligations in accordance with Section 9.04 hereof and setting forth certain
restrictions with respect to the Administrative Agent and the Lenders exercise
of their rights hereunder.
"NBA DOCUMENTS" shall mean, collectively, (a) the Amended and Restated
Joint Venture Agreement made as of January 1, 1989 among Nuggets Sub and the
other joint venturers in the NBA, and (b) the Constitution and Bylaws of the
NBA, as the same may be renewed, extended, modified or replaced from time to
time.
"NBA FRANCHISE" shall mean the NBA franchise known as the "Denver Nuggets"
and all rights of Nuggets Sub and Ascent Sports pursuant to the agreements with
the NBA related thereto.
"NBC CONTRACT" shall mean the Service Contract dated September 15, 1983,
between COMSAT General Corporation (now Ascent Network Services, Inc.) and
National Broadcasting Company, Inc., as amended from time to time.
"NET CASH PROCEEDS" shall mean with respect to any Asset Disposition (i)
the gross amount of any cash paid to or received by the Borrower or any of its
Subsidiaries in respect of such Asset Disposition (including (a) payments of
principal or interest, or cash proceeds from the sale or other disposition in
respect of noncash consideration permitted under Section 6.05 hereof, and (b)
insurance proceeds, condemnation awards and payments from time to time in
respect of installment obligations, if applicable), less (ii) the amount, if
any, of (x) the Borrower's good faith best estimate of all taxes attributable to
such Asset Disposition which it in good faith expects to
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be paid in the taxable year in which such Asset Disposition shall occur or in
the next taxable year, (y) reasonable and customary fees, discounts,
commissions, costs and other expenses (other than those payable to the Borrower
or any Affiliate of the Borrower), which are incurred in connection with such
Asset Disposition and are payable by the Borrower or any of its Subsidiaries and
(z) in the case of an Asset Disposition that is a sale, transfer or other
disposition of assets or properties, proceeds required to discharge Liens in
respect of such assets or properties permitted by Section 6.02 hereof.
"NHL" shall mean the National Hockey League, an unincorporated association,
and each successor and assign thereof.
"NHL CONSENT LETTER" shall mean the letter agreement among the Borrower and
certain of its Subsidiaries, the Administrative Agent, each Lender and the NHL,
approving the transactions evidenced by the Loan Papers, giving the
Administrative Agent and the Lenders the right to assign any portion of the
Obligations in accordance with Section 9.04 hereof and setting forth certain
restrictions with respect to the Administrative Agent and the Lenders exercise
of their rights hereunder.
"NHL DOCUMENTS" shall mean, collectively, (a) the Consent Agreement, made
as of July 1, 1995 among National Hockey League, le Club de Hockey Les
Nordiques, Les Nordiques de Quebec 1988, 2627-9455 Quebec Inc., Marcel Aubut,
COMSAT Hockey Enterprises, COMSAT Video Enterprises, Inc., COMSAT Denver, Inc.,
COMSAT Entertainment Group, Inc., and COMSAT Corporation and the other joint
venturers in the NHL, and (b) the Constitution and Bylaws of the NHL, as the
same may be renewed, extended, modified or replaced from time to time.
"NHL FRANCHISE" shall mean the NHL franchise known as the "Colorado
Avalanche" and all rights of Avalanche Sub and Ascent Sports pursuant to the
agreements with the NHL related thereto.
"NON-RECOURSE ARENA FINANCING" shall mean Indebtedness incurred by the
Denver Arena Company, LLC in connection with the financing of the Arena/Complex
(i) as to which neither the Borrower nor any other Subsidiary of the Borrower
(A) provides credit support (including any undertaking, agreement or instrument
which would constitute Indebtedness) or has given or made other written
assurances regarding repayment (except with respect to the limited construction
Guarantee permitted by Section 6.01(f) hereof), (B) is directly or indirectly
personally liable (except with respect to the limited construction Guarantee
permitted by Section 6.01(f) hereof) or (C) constitutes the lender and (ii) the
obligees of which will have recourse solely against the assets comprising such
project (including rights of Denver Arena Company, LLC as a lessor under leases
thereto) for repayment of the principal of and interest on such Indebtedness and
fees, indemnities, expense reimbursements or other amounts of whatever nature
accrued or payable in connection with such Indebtedness and that has terms and
provisions reasonably satisfactory in
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form and substance to, and approved in writing by, the Administrative Agent in
respect of the matters referred to in clause (i) or clause (ii) above.
"NON-RECOURSE FILM INDEBTEDNESS" shall mean Indebtedness of Beacon incurred
solely for the purpose of financing Motion Pictures (i) as to which neither the
Borrower nor any other Subsidiary of the Borrower (A) provides credit support
(including any undertaking, agreement or instrument which would constitute
Indebtedness) or has given or made other written assurances regarding repayment,
(B) is directly or indirectly personally liable or (C) constitutes the lender
and (ii) the obligees of which will have recourse for repayment of the principal
of and interest on such Indebtedness and any fees, indemnities, expense
reimbursements or other amounts of whatever nature accrued or payable in
connection with such Indebtedness solely against (x) the negatives for such
Motion Pictures, (y) ownership, distribution or exploitation rights with respect
to such Motion Pictures or (z) standby letters of credit constituting
Indebtedness which itself qualifies as Non-Recourse Film Indebtedness.
"NUGGETS LICENSE AGREEMENT" shall mean the User Agreement, dated as of July
15, 1992, as amended, between the City and County of Denver and Nuggets Sub
related to Nuggets Sub's right to use and occupancy of the Arena.
"NUGGETS LICENSE DOCUMENTS" shall mean the Nuggets License Agreement and
each other material agreement related to Nuggets Sub's rights to the use and
occupancy of the Arena, or, after its completion, the similar agreements related
to the Arena/Complex.
"NUGGETS SUB" shall mean Denver Nuggets, L.P., a Delaware limited
partnership and wholly owned indirect Subsidiary of the Borrower, which such
Subsidiary owns and operates the Denver Nuggets, a franchise of the NBA.
"OBLIGATIONS" shall mean all present and future obligations, indebtedness
and liabilities, and all renewals and extensions of all or any part thereof, of
the Borrower and each Obligor to the Lenders and the Administrative Agent
arising from, by virtue of, or pursuant to this Agreement, any of the other Loan
Papers and any and all renewals and extensions thereof or any part thereof, or
future amendments thereto, all interest accruing on all or any part thereof and
reasonable attorneys' fees incurred by the Administrative Agent for the
preparation of this Agreement and consummation of this credit facility,
execution of waivers, amendments and consents, and in connection with the
enforcement or the collection of all or any part thereof, and reasonable
attorneys' fees incurred by the Lenders in connection with the enforcement or
the collection of all or any part of the Obligations during the continuance of
an Event of Default, in each case whether such obligations, indebtedness and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several. Without limiting the generality of the foregoing, "Obligations"
includes all amounts which would be owed by the Borrower, each other Obligor and
any other Person (other than the Administrative Agent or the Lenders) to the
Administrative Agent or the Lenders under any Loan Paper, but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the
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Borrower, any other Obligor any other Person (including all such amounts which
would become due or would be secured but for the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding of the Borrower, any other Obligor or any other Person under any
Debtor Relief Law).
"OBLIGOR" shall mean (a) the Borrower, (b) each Guarantor, (c) each other
Person liable for performance of any of the Obligations and (d) each other
Person the Property of which now or hereafter secures the performance of any of
the Obligations.
"OCC AGREEMENTS" shall mean the Services Agreement and the Corporate
Agreement, in each case between the Borrower and On Command Corp., in the forms
delivered to the Lenders, as such agreements may hereafter be amended as
permitted by, and in accordance with, the provisions of this Agreement.
"ON COMMAND CORP." shall mean On Command Corporation, a Delaware
corporation, approximately 57.0% of whose outstanding Capital Stock is owned,
directly or indirectly, by the Borrower on the Closing Date.
"ON COMMAND CORP. LOAN FACILITY" shall mean a revolving credit facility
made available to On Command Corp. pursuant to documentation dated the Closing
Date, in an amount not to exceed $150,000,000, by a group of lenders with the
Administrative Agent as the administrative agent thereunder.
"PARKING AGREEMENTS" shall mean all material agreements now or hereafter
existing covering or affecting Game patron parking at or near the Arena, or,
after its completion, the similar agreements related to the Arena/Complex
(including shuttle and remote parking), and any and all amendments thereto or
substitutions therefor and any and all other agreements of a similar nature or
providing similar services between Ascent Sports, Avalanche sub or Nuggets Sub
and any other Person.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PERMITTED INVESTMENTS" shall mean:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from
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Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc. or from Moody's
Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within one year from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank which bank or office is
organized under the Laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits of not less than
$250,000,000; and
(d) fully collateralized repurchase agreements with a term of not more than
30 days for underlying securities of the type described in clause (a) above
entered into with any institution meeting the qualifications specified in clause
(c) above.
"PERSON" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"PLAN" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
112 of the Code or Section 307 of ERISA and in respect of which the Borrower or
any ERISA Affiliate is (or if such plan were terminated would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PLAYER CONTRACTS" shall mean any and all player contracts existing by and
between Nuggets Sub or Avalanche Sub and the professional basketball players or
professional hockey players whose aggregate annual compensation package is
contractually in excess of $1,000,000 from time to time employed by Nuggets Sub
or Avalanche Sub, respectively, and any and all material amendments,
modifications, restatements or replacements of or substitutions for any of the
foregoing.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation,
shall mean Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution or assets
upon any voluntary or involuntary liquidation or dissolution of any such
corporation, over shares of Capital Stock of any other class of such
corporation.
"REGISTER" shall have the meaning given such term in Section 9.04(d)
hereof.
"REGULATION G" shall mean Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
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"REGULATION X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"RELATED CONTRACTS" shall mean all material contracts and agreements, other
than the License Agreements, Services Contracts and the Player Contracts, by and
between Ascent Sports, Avalanche Sub or Nuggets Sub and other Persons,
including, without limitation, leases and related agreements related to training
facilities, non-Arena training facilities, non-Arena offices, non-Arena realty,
suites and boxes, suites and boxes marketing, option agreements, and all
material amendments, modifications, restatements or replacements of or
substitutions for any of the foregoing.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the Environment.
"REMEDIAL ACTION" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the Environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the Environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"REQUIRED LENDERS" shall mean, at any time, Lenders (a) having Total
Specified Percentages resulting in exposure to such Lenders equal to at least
51% of the sum of (i) all outstanding Revolving Loan Borrowings on such date,
plus, (ii) the Revolver Availability on such date, plus, (iii) all outstanding
Borrowings under the Term Loan on such date, (b) for purposes of acceleration
pursuant to clause (ii) of the last paragraph of Article VII, Lenders having
Loans, L/C Exposures and unused Commitments representing at least 51% of the sum
of all Loans outstanding, L/C Exposure and unused Commitments or (c) after the
Maturity Date or after the Commitments and Term Loan have terminated, Lenders
having Loans and L/C Exposure representing at least 51% of the sum of all Loans
outstanding and L/C Exposure; and, in each case, if there is more than one
Lender party hereto, at least two Lenders.
"RESPONSIBLE OFFICER" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement and the other Loan Papers.
"REVOLVER AVAILABILITY" shall mean, on any date of determination, the
lesser of (a) the difference between the Total Commitment minus the Total
Exposure, and (b) the difference between (i) the Borrowing Base minus (ii) the
sum of Total Exposure plus all Obligations under the Term Loan.
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"REVOLVING LOANS" shall mean the revolving loans made available by the
Lenders to the Borrower pursuant to the Total Commitments and Section 2.01
hereof. Each Revolving Loan shall be a Eurodollar Loan or an ABR Loan.
"REVOLVING LOAN SPECIFIED PERCENTAGE" means, as to any Lender, the
percentage indicated beside its name on the signature pages hereof as its
Revolving Loan Specified Percentage, or as adjusted or specified in any
amendment to this Agreement or in any Assignment and Acceptance.
"SERVICES CONTRACTS" shall mean the Broadcasting Agreements, the Concession
Agreements, the Advertising Agreements, the Parking Agreements, and any and all
material extensions, amendments, modifications, replacements and substitutions
for any of the above.
"S-4 REGISTRATION STATEMENT" shall mean that certain Form S-4 Registration
Statement, as filed by On Command Corp. with the Securities and Exchange
Commission on August 16, 1996, as amended on September 4, 1996, September 26,
1996 and as further amended on October 7, 1996.
"SPORTS SUBS" shall mean Ascent Sports and Ascent Sports Holdings.
"SUBORDINATED INDEBTEDNESS" shall mean that subordinated Indebtedness
issued by Borrower in accordance with Section 2.09(e) hereof, in the minimum
amount of $50,000,000, subject to terms and conditions acceptable to the
Administrative Agent and the Required Lenders including, but not limited to the
incorporation of the concepts set forth on EXHIBIT F hereto into the
Subordinated Indebtedness documentation.
"SUBSIDIARY" shall mean, with respect to any Person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than 50%
of the general partnership interests are, at the time any determination is being
made, owned, controlled or held, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent, provided
that, so long as the On Command Corp. Loan Facility is in existence and the
Administrative Agent is the administrative agent thereunder, when the term
"Subsidiary" is used with respect to the Borrower, it shall be deemed by the
parties hereto not to include On Command Corp. and its Subsidiaries.
"SUPERSTATION AGREEMENTS" shall mean all material agreements now existing
or entered into in the future between the NBA or NHL and/or individual Teams
regarding the sharing with the other Teams of revenues received by the
individual Teams with respect to agreements to broadcast basketball games
outside of the local areas of such Teams or the local areas of the visiting
teams entered into by such Teams with individual broadcasters, as each may be
supplemented, modified, amended or restated form time to time in the manner
provided therein and all material successor contracts that may in the further be
entered into.
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"TEAM" shall mean any joint venturer of the NBA, or of the NHL as
applicable in the context used.
"TERM LOAN" means that certain term loan, made by the Lenders to the
Borrower in accordance with the terms and provisions of Section 2.01(b) hereof.
"TERM LOAN SPECIFIED PERCENTAGE" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof as its Term Loan
Specified Percentage, or as adjusted or specified in any amendment of this
Agreement or in any Assignment and Acceptance.
"TOTAL COMMITMENT" shall mean, at any time, the aggregate amount of the
Lenders' Commitments, as in effect at such time.
"TOTAL EXPOSURE" shall mean, with respect to the Lenders at any time, the
aggregate principal amount at such time of all outstanding Revolving Loans of
the Lenders, plus the aggregate amount at such time of all Lenders' L/C
Exposure.
"TOTAL SPECIFIED PERCENTAGE" means, as to any Lender, the percentage
indicated beside its name on the signature pages hereof as its Total Specified
Percentage, or as adjusted or specified in any amendment to this Agreement or in
any Assignment and Acceptance.
"TRANSACTIONS" shall have the meaning assigned to such term in Section 3.02
hereof.
"TYPE", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"WHOLLY OWNED SUBSIDIARY" of any Person shall mean a subsidiary of such
Person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the outstanding Capital Stock or
partnership interests, as the case may be, are, at the time any determination is
being made, owned by such Person or one or more Wholly Owned Subsidiaries of
such Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
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limitation". All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require.
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Article VI hereof, all accounting terms herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP as in effect on the date of this Agreement and applied
on a basis consistent with the application used in the financial statements
referred to in Section 3.05 hereof.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Revolving Loans to the Borrower, at
any time and from time to time on or after the date hereof, and until the
earlier of (a) the Maturity Date, and (b) the termination of the Commitment of
such Lender in accordance with the terms hereof, in an aggregate principal
amount at any time up to the lesser of (i) such Lender's Commitment and (ii)
such Lender's Revolving Loan Specified Percentage of the difference between the
Borrowing Base minus the aggregate amounts outstanding under the Term Loan,
provided that, the Borrower agrees that, notwithstanding anything in this
Agreement or in any other Loan Paper to the contrary, (A) no Lender shall at any
time be obligated to make any Loan if such Loan would result in such Lender's
Total Exposure exceeding such Lender's Commitment, and (B) Total Exposure plus
all Obligations under the Term Loan shall never exceed the Borrowing Base.
Within the limits set forth in the preceding sentence and subject to the terms,
conditions and limitations set forth herein, the Borrower may borrow, pay or
prepay and reborrow Revolving Loans.
SECTION 2.02. LOANS.
(a) REVOLVING LOANS. Each Revolving Loan shall be made as part of a
Borrowing consisting of Revolving Loans made by the Lenders in an aggregate
outstanding amount not to exceed at any time outstanding the difference between
such Lender's Revolving Loan Specified Percentage of the Commitment, minus the
such Lender's Revolving Loan Specified Percentage of the L/C Exposure; PROVIDED,
HOWEVER, that the failure of any Lender to make any Revolving Loan shall not in
itself relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Revolving Loan required to be made by such other
Lender). Except for Revolving Loans deemed made pursuant to Section 2.02(f)
hereof, the Revolving Loans comprising any Borrowing shall be in an aggregate
principal amount that is (i) an integral multiple of $1,000,000 and not less
than $3,000,000 or (ii) equal to the Revolver Availability.
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(b) TERM LOANS. Each Lender severally agrees, subject to the terms and
conditions hereinafter set forth, on the Closing Date only, to make its Term
Loan Specified Percentage of the Term Loan available to the Borrower until the
Maturity Date in an aggregate outstanding amount not to exceed such Lender's
Term Loan Specified Percentage of $50,000,000 as repaid and reduced pursuant to
Section 2.04, Section 2.09 and Section 2.11 hereof. After the Closing Date, the
Borrower agrees to repay the Term Loan in accordance with the terms of Section
2.04, Section 2.09 and Section 2.11 hereof, and only conversion or continuation
Borrowings will be available under the Term Loan. The Term Loan shall initially
consist of a Borrowing which shall be an ABR Loan only, and each subsequent
Borrowing shall be either an ABR Borrowing or a Eurodollar Borrowing as
specified in the related notice of conversion, as applicable; provided that,
after the occurrence and during the continuance of any Event of Default,
Eurodollar Borrowings shall not be available to the Borrower. Subject to
Section 2.02 hereof and the other terms and conditions of this Agreement, the
Borrower may convert an ABR Loan made under the Term Loan to a Eurodollar
Borrowing at any time after the Closing Date; provided that the Borrower pay all
accrued and unpaid interest on such ABR Borrowing concurrently. All Borrowings
made under this Section 2.02(b) shall be made in accordance with Section 2.02
below. On any date of determination, the sum of all outstanding Borrowings
under the Term Loan shall never exceed the difference between $50,000,000 minus
the sum of (i) all scheduled payments to be made on the Term Loan through such
date of determination pursuant to Section 2.04 and Section 2.09 hereof plus (ii)
all prepayments made on the Term Loan.
(c) Subject to Sections 2.08 and 2.13 hereof, each other Borrowing shall
be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
request pursuant to Section 2.03 hereof, as applicable; PROVIDED, HOWEVER, that
Borrowings on the Closing Date shall be comprised entirely of ABR Loans. Each
Lender may at its option make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement. Borrowings of more
than one Type may be outstanding at the same time; PROVIDED, HOWEVER, that the
Borrower shall not be entitled to request any Borrowing that, if made, would
result in more than twelve Eurodollar Borrowings outstanding hereunder at any
time. For purposes of the foregoing, Borrowings having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Borrowings. After the initial Borrowing, no Borrowing under
the Term Loan shall increase the amount outstanding under the Term Loan.
(d) After the Closing Date, each Lender shall make each Revolving Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to such account in Dallas, Texas as the
Administrative Agent may designate not later than 12:00 noon, Dallas, Texas
time, and the Administrative Agent shall by 3:00 p.m., Dallas, Texas time,
credit the amounts so received to an account in the name of the Borrower,
maintained with the Administrative Agent and designated by the Borrower in the
applicable Borrowing Request or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met, return
the amounts so received to the respective Lenders.
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(e) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing under the Revolving Loans that such
Lender will not make available to the Administrative Agent such Lender's
Revolving Loan Specified Percentage of such Borrowing, the Administrative Agent
may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing under the Revolving Loan in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Revolving Loans comprising such
Borrowing and (ii) in the case of such Lender, a rate determined by the
Administrative Agent to represent its cost of overnight or short-term funds
(which determination shall be conclusive absent manifest error). If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing under the
Revolving Loans for purposes of this Agreement.
(f) The Borrower acknowledges that if the Borrower requests any Borrowing
with an Interest Period that would end after the Maturity Date, a Breakage Event
(as defined in Section 2.14 hereof) will occur on the Maturity Date and the
Borrower will be obligated to indemnify the Lenders in accordance with the terms
of Section 2.14 hereof.
(g) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.20(e) hereof within the time specified
in such Section, the Issuing Bank will promptly notify the Administrative Agent
of the L/C Disbursement and the Administrative Agent will promptly notify each
Lender of such L/C Disbursement and its Revolving Loan Specified Percentage
thereof. Each Lender shall pay by wire transfer of immediately available funds
to the Administrative Agent not later than 2:00 p.m., Dallas, Texas time, on
such date (or, if such Lender shall have received such notice later than 12:00
(noon), Dallas, Texas time, on any day, not later than 10:00 a.m., Dallas, Texas
time, on the immediately following Business Day), an amount equal to such
Lender's Revolving Loan Specified Percentage of such L/C Disbursement (it being
understood that such amount shall be deemed to constitute an ABR Loan of such
Lender and such payment shall be deemed to have reduced the L/C Exposure), and
the Administrative Agent will promptly pay to the Issuing Bank amounts so
received by it from the Lenders. The Administrative Agent will promptly pay to
the Issuing Bank any amounts received by it from the Borrower pursuant to
Section 2.20(e) hereof prior to the time that any Lender makes any payment
pursuant to this paragraph (f); any such amounts received by the Administrative
Agent thereafter will be promptly remitted by the Administrative Agent to the
Lenders that shall have made such payments and to the Issuing Bank, as their
interests may appear. If any Lender shall not have made its Revolving Loan
Specified Percentage of such L/C Disbursement available to the Administrative
Agent as provided above, such Lender and the Borrower severally agree to pay
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interest on such amount, for each day from and including the date such amount is
required to be paid in accordance with this paragraph to but excluding the date
such amount is paid, to the Administrative Agent at (i) in the case of the
Borrower, a rate per annum equal to the interest rate applicable to ABR Loans
pursuant to Section 2.06 hereof, and (ii) in the case of such Lender, for the
first such day, the Federal Funds Effective Rate, and for each day thereafter,
the Alternate Base Rate.
SECTION 2.03. BORROWING PROCEDURE. After the Closing Date, in order to
request a Borrowing under the Revolving Loans (other than a deemed Borrowing
pursuant to Section 2.02(g) hereof, as to which this Section 2.03 shall not
apply), the Borrower shall hand deliver or telecopy to the Administrative Agent
a duly completed Borrowing Request (a) in the case of a Eurodollar Borrowing,
not later than 11:00 a.m., Dallas, Texas time, three Business Days before a
proposed Borrowing under the Revolving Loans, and (b) in the case of an ABR
Borrowing, not later than 10:00 a.m., Dallas, Texas on the date (which shall be
a Business Day) of a proposed Borrowing under the Revolving Loans. Each
Borrowing Request shall be irrevocable, shall be signed by or on behalf of the
Borrower and shall specify the following information: (i) whether the Borrowing
under the Revolving Loans then being requested is to be a Eurodollar Borrowing
or an ABR Borrowing (it being understood that the Borrowing under the Revolving
Loans on the Closing Date shall be an ABR Borrowing); (ii) the date of such
Borrowing under the Revolving Loans (which shall be a Business Day); (iii) the
number and location of the account to which funds are to be disbursed (which
shall be an account that complies with the requirements of Section 2.02(c))
hereof; (iv) the amount of such Borrowing under the Revolving Loans; and (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto. If no election as to the Type of Borrowing under the Revolving Loans
is specified in any such notice, then the requested Borrowing under the
Revolving Loans shall be an ABR Borrowing. If no Interest Period with respect
to any Eurodollar Borrowing is specified in any such notice, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
The Administrative Agent shall promptly advise the Lenders of any notice given
pursuant to this Section 2.03 hereof (and the contents thereof), and of each
Lender's portion of the requested Borrowing under the Revolving Loans.
SECTION 2.04. EVIDENCE OF DEBT; REPAYMENT OF LOANS.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Revolving Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
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(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay the Loans in
accordance with their terms.
(e) As evidence of the Loans hereunder, on the Closing Date the Borrower
shall deliver to each Lender one promissory note evidencing its Applicable
Specified Percentage of each of the Loans made hereunder. Each such promissory
note will evidence each Lenders' Applicable Specified Percentage of (i) the
Revolving Loan and L/C Exposure, and (ii) the Term Loan.
(f) Notwithstanding anything in this Agreement or in any of the other Loan
Papers to the contrary, and in addition to the required payments set forth in
this Section 2.04 and Section 2.09 below, all Borrowings under the Term Loan and
all remaining outstanding portions of the Obligation shall be due and payable on
the Maturity Date.
(g) Notwithstanding anything in this Agreement or in any of the other Loan
Papers to the contrary, to the extent any such repayments are not otherwise
designated, any such repayment shall be first applied to ABR Borrowings and then
to repay Eurodollar Borrowings with respect to the repayment of any Loans.
SECTION 2.05. FEES.
(a) The Borrower agrees to pay to each Lender, through the Administrative
Agent, such Facility Fees as are set forth in any Fee Letters (the "FACILITY
FEES") in accordance with such terms set forth in the Fee Letters.
(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees set forth in its Fee Letter at the times and in
the amounts specified therein (the "ADMINISTRATIVE AGENT FEES").
(c) The Borrower agrees to pay (i) to each Lender, through the
Administrative Agent, on the last day of March, June, September and December of
each year and on the date on which the Commitment of such Lender shall be
terminated as provided herein, a fee (an "L/C PARTICIPATION FEE") calculated on
such Lender's Revolving Loan Specified Percentage of the average daily aggregate
L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements) during the preceding quarter (or shorter period commencing with
the date
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hereof or ending with the Maturity Date or the date on which all Letters of
Credit have been canceled or have expired and the Commitments of all Lenders
shall have been terminated) at a rate equal to the Applicable Percentage from
time to time used to determine the interest rate on Borrowings comprised of
Eurodollar Loans pursuant to Section 2.06 hereof, and (ii) to the Issuing Bank
with respect to each Letter of Credit the standard fronting, issuance and
drawing fees specified from time to time by the Issuing Bank (the "ISSUING BANK
FEES"). Subject to Section 9.09 hereof and Applicable Law, all L/C
Participation Fees and Issuing Bank Fees shall be computed on the basis of the
actual number of days elapsed in a year of 365 or 366 days, as applicable.
(d) Subject to Section 9.09 hereof, the Borrower agrees to pay to each
Lender, through the Administrative Agent, on the last day of March, June,
September and December of each year and on the date on which the Commitment of
such Lender shall be terminated as provided herein, the Borrower shall pay to
the Administrative Agent for the account of Lenders commitment fees (the
"COMMITMENT FEES") equal to the sum of (i) on the average daily amount of the
excess, if any, of (A) the lesser of (I) the Total Commitment or (II) the
difference between the Borrowing Base minus the aggregate outstanding amount of
the Term Loan, over (B) the Total Exposure, at the per annum rate of .50%, plus
(ii) to the extent the difference between the Borrowing Base minus the aggregate
outstanding amount under the Term Loan is less than the Total Commitment, the
average daily amount of the excess, of (A) the Total Commitment over (B) the
difference between the Borrowing Base minus the aggregate outstanding amount
under the Term Loan, at the per annum rate of .25%, commencing with the first
such date after the Closing Date, and continuing until the Commitment has been
reduced to zero or terminated. Notwithstanding anything in this Agreement to
the contrary, in each determination of the Borrowing Base and the Total
Commitment in connection with this Section 2.05(d), the amount of any completion
Guarantee deducted from the Borrowing Base and the Total Commitment in
accordance with the definition of each such term shall be added back to the
Borrowing Base and the Total Commitment, respectively. Subject to Section 9.09
hereof and Applicable Law, all Commitment Fees shall be computed on the basis of
the actual number of days elapsed in a year of 365 or 366 days, as applicable.
(e) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the Issuing Bank. Once paid, none of the Fees shall be refundable, except in
accordance with the provisions of Section 9.09 hereof.
SECTION 2.06. INTEREST ON LOANS.
(a) Subject to the provisions of Section 2.07 hereof, the Loans comprising
each ABR Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 365 or 366 days, as the case may be, when
the Alternate Base Rate is determined by reference to the Prime Rate and over a
year of 360 days at all other times) at a rate per annum equal to the Alternate
Base Rate. If the amount of interest payable in respect of any interest
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computation period is limited to the Highest Lawful Rate in accordance with the
definition of Alternate Base Rate, and the amount of interest payable in respect
of any subsequent interest computation period would be less than the Maximum
Amount, then the amount of interest payable in respect of such subsequent
interest computation period shall be automatically increased to the Maximum
Amount; PROVIDED that at no time shall the aggregate amount by which interest
paid has been increased pursuant to this sentence exceed the aggregate amount by
which interest has been reduced had the Alternate Base Rate not been limited to
the Highest Lawful Rate.
(b) Subject to the provisions of Section 2.07 hereof, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. DEFAULT INTEREST. Notwithstanding any other provision of
this Agreement and the other Loan Papers except Section 9.09 hereof to the
contrary, if there shall exist any Event of Default hereunder, the Borrower
shall pay interest on the Obligations to but excluding the date of actual
payment (after as well as before judgment) at a rate per annum equal to the
lesser of (a) the Highest Lawful Rate and (b) a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the sum of the Alternate Base Rate plus
1.00%.
SECTION 2.08. ALTERNATE RATE OF INTEREST. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to the Required Lenders of making or
maintaining Eurodollar Loans during such Interest Period, or that reasonable
means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative
Agent shall, as soon as practicable thereafter, give written or telecopy notice
of such determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 hereof shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
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SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS; TERMINATION OF THE
TERM LOAN; EXTENSION OF MATURITY DATE.
(a) The Commitments and the L/C Commitment shall automatically terminate
on the Maturity Date and the Term Loan shall mature on the Maturity Date (and
the same may be extended pursuant to paragraph (e) of this Section).
(b) (i) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent (specifying the Commitments to be
terminated or reduced and the amount of reduction), the Borrower may at any time
in whole permanently terminate, or from time to time in part permanently reduce,
the Commitments; PROVIDED, HOWEVER, that (A) each partial reduction of the
Commitments shall be in an integral multiple of $1,000,000 and in a minimum
amount of $5,000,000 and (B) the Total Commitment shall not be reduced to an
amount that is less than the Total Exposure. (ii) If (A) Borrower or any
Subsidiary receives net proceeds in excess of $50,000,000 from the Subordinated
Indebtedness contemplated by Section 2.09(e) hereof, (B) any Lender declines to
accept a partial prepayment under the Term Loan pursuant to Section 2.11(b)
hereof, or (C) any payments are received pursuant to Section 2.15(b) hereof,
then the Commitments shall be reduced by the amount of the excess Subordinated
Indebtedness, the amount of the declined partial payment under the Term Loan, or
the amount of such payment received under Section 2.15(b) hereof respectively.
(c) If, as a result of a reduction described in paragraph (b) above, the
Total Exposure exceeds the Total Commitments, then the Borrower shall, on the
date of such reduction, repay Loans in accordance with this Agreement in an
aggregate principal amount sufficient to eliminate such excess.
(d) Each reduction in the Commitments hereunder shall be made ratably
among the Lenders in accordance with their respective Commitments. The Borrower
shall pay, to the Administrative Agent for the account of the applicable
Lenders, on the date of each termination or reduction, the Commitment Fees on
the amount of the Commitments so terminated or reduced accrued to but excluding
the date of such termination or reduction.
(e) The Borrower may, by giving written notice to the Administrative Agent
(which shall promptly deliver a copy to each of the Lenders) not fewer than 15
days prior to the then current Maturity Date (the "EXISTING MATURITY DATE"),
extend the Maturity Date to the date that occurs 364 days after the Existing
Maturity Date (or if such 364th day is not a Business Day, the immediately
preceding Business Day); PROVIDED, HOWEVER, that the Borrower may effect only
two extensions pursuant to this Section 2.09(e) hereof; PROVIDED, FURTHER,
HOWEVER, that the Maturity Date may not be extended to any date after October 9,
1997 unless prior thereto the Borrower has received not less than $50,000,000 in
proceeds from Subordinated Indebtedness, subordinated to Lenders and
incorporating the subordination concepts specified on EXHIBIT F hereto and
Borrower has used such proceeds to prepay existing Borrowings under this
Agreement. Notwithstanding the foregoing, the extension of the Existing
Maturity Date shall not be effective with respect to
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any Lender unless (i) no Default or Event of Default shall have occurred and be
continuing on both the date of the notice requesting such extension and on the
Existing Maturity Date and (ii) each of the representations and warranties set
forth in Article III hereof (including, without limitation, those set forth in
Section 3.06 hereof and Section 3.09 hereof) shall be true and correct in all
material respects on and as of each of the date of the notice requesting such
extension and the Existing Maturity Date with the same force and effect as if
made on and as of each such date, except to the extent such representations and
warranties expressly relate to an earlier date.
SECTION 2.10. CONVERSION AND CONTINUATION OF BORROWINGS.
(a) The Borrower shall have the right at any time upon prior irrevocable
notice to the Administrative Agent (x) not later than 12:00 (noon), Dallas,
Texas time, one Business Day prior to conversion, to convert any Eurodollar
Borrowing into an ABR Borrowing, (y) not later than 10:00 a.m., Dallas, Texas
time, three Business Days prior to conversion or continuation, to convert any
ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar
Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (z)
not later than 10:00 a.m., Dallas, Texas time, three Business Days prior to
conversion, to convert the Interest Period with respect to any Eurodollar
Borrowing to another permissible Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the Applicable Specified Percentage of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02 and 2.08(b) hereof
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.14
hereof;
(v) any portion of a Borrowing maturing or required to be repaid
in less than one month may not be converted into or continued as a
Eurodollar Borrowing;
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(vi) any portion of a Eurodollar Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by reason of the
immediately preceding clause shall be automatically converted at the end of
the Interest Period in effect for such Borrowing into an ABR Borrowing; and
(vii) after the occurrence and during the continuance of a Default
or an Event of Default, no outstanding Loan may be converted into, or
continued for an additional interest period as, a Eurodollar Loan.
(b) Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) whether the notice related to the
Term Loan or the Revolving Loans and the identity and amount of the Borrowing
that the Borrower requests be converted or continued, (ii) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the
Interest Period applicable thereto (unless repaid pursuant to the terms hereof),
automatically be continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. PREPAYMENT.
(a) The Borrower shall have the right at any time and from time to time to
prepay any Borrowing, in whole or in part, upon at least two Business Days'
prior written or telecopy notice (or telephone notice promptly confirmed by
written or telecopy notice) to the Administrative Agent before 11:00 a.m.,
Dallas, Texas time; provided, however, that each partial prepayment shall be in
an amount that is an integral multiple of $1,000,000 and not less than
$3,000,000.
(b) Subject to the limitations contained in this Section 2.11(b), the
Borrower may from time to time prepay Borrowings outstanding under the Term
Loan, in whole or in part, but not in any amount less than $3,000,000 and in an
integral multiple of $1,000,000, without premium or penalty except as provided
in Section 2.14 below, upon notice to the Administrative Agent (if telephone
notice promptly confirmed by written or telecopy notice) not later than 11:00
a.m., Dallas, Texas time two Business Days' prior to such prepayment. Any
Lender having a Term Loan Specified Percentage in excess of zero may, at its
option in writing to the Administrative Agent, decline partial prepayments on
its portion of the Term Loan. In the event that any Lender having a Term Loan
Specified Percentage in excess of zero declines a partial prepayment on its
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portion of the Term Loan, the Commitment shall be automatically and permanently
reduced by an amount equal to any amount which the Borrower would have prepaid
the Term Loan in accordance with Section 2.11(b) hereof but was declined for
prepayment by such Term Loan Lender; provided that, to the extent any such
voluntary prepayment was made from the ordinary course of business operating
cash flow of the Borrower and its Subsidiaries, any prepayment declined by any
Term Loan Lender shall be applied to repay the Revolving Loans, but shall not
reduce the Commitment.
(c) In the event of any termination of the Commitments and/or the Term
Loan maturity, the Borrower shall repay or prepay all its outstanding Borrowings
(and irrevocably cash collateralize the L/C Exposure in the manner contemplated
by Section 2.20(j) hereof) on the date of such termination. In the event of any
partial reduction of the Commitments, then (i) at or prior to the effective date
of such reduction or termination, the Administrative Agent shall notify the
Borrower and the Lenders of the aggregate amount of outstanding Revolving Loans
or Total Exposure, as the case may be, after giving effect thereto and (ii) if
the sum of the aggregate amount of outstanding Revolving Loans or Total
Exposure, as the case may be, at the time would exceed the lesser of the Total
Commitments and the difference between the Borrowing Base minus the aggregate
outstanding balance of the Term Loan, after giving effect to such reduction or
termination, then the Borrower shall, on the date of such reduction or
termination, repay or prepay Borrowings in an amount sufficient to eliminate
such excess.
(d) Whenever and on each occasion that the Total Exposure exceeds the
lesser of (i) the Total Commitments and (ii) the Borrowing Base minus the
aggregate outstandings under the Term Loan, the Borrower will immediately prepay
the Revolving Loans by the amount necessary to reduce the Total Exposure to an
amount less than or equal to the lesser of (i) the Total Commitments and (ii)
the Borrowing Base minus the aggregate outstandings under the Term Loan.
(e) In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the applicable outstanding ABR
Loans (the amount of any such excess being called the "ESCROW AMOUNT"), the
Borrower shall have the right, in lieu of making such prepayment in full, to
prepay all the outstanding applicable ABR Loans and to deposit an amount equal
to the Escrow Amount with the Administrative Agent in a cash collateral account
maintained by and in the sole dominion and control of the Administrative Agent.
Any amounts so deposited shall be held by the Administrative Agent as collateral
for the Obligations and applied to the prepayment of outstanding Eurodollar
Loans at the end of the current Interest Periods applicable thereto. On any
Business Day on which (x) collected amounts remain on deposit in or to the
credit of such cash collateral account after giving effect to the payments made
on such day and (y) the Borrower shall have delivered to the Administrative
Agent a written request or telephonic request (which shall be promptly confirmed
in writing) that such remaining collected amounts be invested in the Permitted
Investments specified in such request, the Administrative Agent shall use its
reasonable efforts to invest such remaining collected amounts in such Permitted
Investments; PROVIDED, HOWEVER, that the Administrative Agent shall have
continuous dominion and full control over any such investments (and over any
interest that accrues thereon) to the same
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extent that it has dominion and control over such cash collateral account and no
Permitted Investment shall mature after the end of the Interest Period for which
it is to be applied. The Borrower shall NOT have the right to withdraw any
amount from such cash collateral account until such Eurodollar Loans and accrued
interest thereon are paid in full or if a Default or Event of Default then
exists or would result.
(f) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.11 shall be subject to Section 2.14 hereof but otherwise without premium or
penalty. All prepayments under this Section 2.11 shall be accompanied by
accrued interest on the principal amount being prepaid to the date of payment.
SECTION 2.12. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.
(a) Notwithstanding any other provision of this Agreement, if after the
date of this Agreement any change in any Law or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
Law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan made by such Lender
or any Fees or other amounts payable hereunder (other than changes in respect of
taxes imposed on the overall net income (including without limitation franchise
taxes on net income, branch profit taxes and alternate minimum income taxes) of
such Lender or the Issuing Bank by the jurisdiction in which such Lender or the
Issuing Bank is incorporated or has its principal office or by any political
subdivision or taxing authority therein), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by any Lender or the
Issuing Bank (except any such reserve requirement which is reflected in the
Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or the
London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein, and the result of any of the foregoing shall be to increase the cost to
such Lender or the Issuing Bank of making or maintaining any Eurodollar Loan or
increase the cost to any Lender of issuing or maintaining any Letter of Credit
or purchasing or maintaining a participation therein or to reduce the amount of
any sum received or receivable by such Lender or the Issuing Bank hereunder
whether of principal, interest or otherwise, by an amount deemed by such Lender
or the Issuing Bank to be material, then the Borrower will pay to such Lender or
the Issuing Bank, as the case may be, upon demand such additional amount or
amounts as will compensate such Lender or the Issuing Bank, as the case may be,
for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any Law, agreement or guideline regarding
capital adequacy, or any change after the date hereof in any such Law, agreement
or guideline (regardless of whether the change in such Law, agreement or
guideline has been adopted) or in the interpretation or administration thereof
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by any Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or any lending office of such Lender) or
the Issuing Bank or any Lender's or the Issuing Bank's holding company with any
request or directive regarding capital adequacy (whether or not having the force
of Law) of any Governmental Authority has or would have the effect of reducing
the rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made or participations in Letters of
Credit purchased by such Lender pursuant hereto or the Letters of Credit issued
by the Issuing Bank pursuant hereto to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy) by an amount deemed by such Lender or the Issuing Bank to be material,
then from time to time the Borrower shall pay to such Lender or the Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the basis for computation of the amount or amounts necessary
to compensate such Lender or the Issuing Bank or its holding company, as
applicable, as specified in paragraph (a) or (b) above shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided,
however, that in no event shall the Borrower be obligated to make any payment
under this Section 2.12 in respect of increased costs incurred prior to the
period commencing 90 days prior to the date on which demand for compensation in
respect of such increased costs is first made. In addition, the Borrower shall
not incur liability for additional amounts with respect to changes in the basis
of taxation described above for periods of time before such Lender or Issuing
Bank becomes aware of the change in such basis except in the case of any
retroactive application of such a change. The protection of this Section shall
be available to each Lender and the Issuing Bank regardless of any possible
contention of the invalidity or inapplicability or the Law, agreement, guideline
or other change or condition that shall have occurred or been imposed.
SECTION 2.13. CHANGE IN LEGALITY.
(a) Notwithstanding any other provision of this Agreement, if, after the
date hereof, any change in any Law or regulation or in the interpretation
thereof by any Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any
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Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such Lender
hereunder (or be continued for additional Interest Periods and ABR Loans
will not thereafter (for such duration) be converted into Eurodollar
Loans), whereupon any request for a Eurodollar Borrowing (or to convert an
ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar
Borrowing for an additional interest Period) shall, as to such Lender only,
be deemed a request for an ABR Loan (or a request to continue an ABR Loan
as such for an additional Interest Period or to convert a Eurodollar Loan
into an ABR Loan, as the case may be), unless such declaration shall be
subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar
Loans made by it be converted to ABR Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR Loans as of the
effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.13, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.14. INDEMNITY. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar Loan
prior to the end of the Interest Period in effect therefor, (ii) the conversion
of any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period
with respect to any Eurodollar Loan, in each case other than on the last day of
the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be made
by such Lender (including any Eurodollar Loan to be made pursuant to a
conversion or continuation under Section 2.10 hereof) not being made after
notice of such Loan shall have been given by the Borrower hereunder for any
reason other than default by a Lender (any of the events referred to in this
clause (a) being called a "BREAKAGE EVENT") or (b) any default in the making of
any payment or prepayment required to be made hereunder. In the case of any
Breakage Event, such loss shall include an amount equal to the
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excess, as reasonably determined by such Lender, of (i) its cost of obtaining
funds for the Eurodollar Loan that is the subject of such Breakage Event for the
period from the date of such Breakage Event to the last day of the Interest
Period in effect (or that would have been in effect) for such Loan over (ii) the
amount of interest likely to be realized by such Lender in redeploying the funds
released or not utilized by reason of such Breakage Event for such period. A
certificate of any such Lender shall be delivered to the Borrower and shall be
conclusive absent manifest error, so long as such certificate sets forth in
reasonable detail any amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.14 and the basis of computation of the amount or
amounts necessary to compensate such Lender.
SECTION 2.15. SHARING OF PAYMENTS. Except as required under Section 2.13
hereof and notwithstanding anything in this Agreement to the contrary, all
payments received by the Administrative Agent from the Borrower shall be applied
as follows:
(a) So long as there then exists no Event of Default or the Commitments or
Term Loan have not been terminated, the Administrative Agent shall apply all
such payments as between the Revolving Loans and the Term Loan as directed by
the Borrower (unless prepayment of the Term Loan has been declined by any Lender
in accordance with the terms of Section 2.11(b) hereof) and, in the absence of
any direction by the Borrower, first to any amounts due and payable under the
Revolving Loans and then amounts due under the Term Loan, in each case in each
Lender's Applicable Specified Percentage.
(b) If there then exists an Event of Default or the Commitments and Term
Loan have been terminated, notwithstanding any direction by the Borrower, the
Administrative Agent shall apply all such payments received by it from the
Borrower to reduce the Revolving Loans and the Term Loan ratably in accordance
with each Lender's Total Specified Percentage.
SECTION 2.16. SHARING OF SETOFFS. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any Debtor Relief Law or
other similar Law or otherwise, or by any other means, obtain payment (voluntary
or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result
of which the unpaid principal portion of its Revolving Loans and participations
in L/C Disbursements or Term Loan shall be proportionately less than the unpaid
principal portion of the Revolving Loans and participations in L/C Disbursements
or Term Loan of any other Lender, it shall be deemed simultaneously to have
purchased from such other Lender at face value, and shall promptly pay to such
other Lender the purchase price for, a participation in the Revolving Loans and
L/C Exposure or Term Loan of such other Lender, so that the aggregate unpaid
principal amount of the Revolving Loans and L/C Exposure or Term Loan and
participations in Revolving Loans and L/C Exposure or Term Loan held by each
Lender shall be in the same proportion to the aggregate unpaid principal amount
of all Revolving Loans and L/C Exposure or Term Loan then outstanding as the
principal amount of its Revolving Loans and L/C Exposure or Term Loan prior to
such
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exercise of banker's lien, setoff or counterclaim or other event was to the
principal amount of all Revolving Loans and L/C Exposure or Term Loan
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.16 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Lender holding a
participation in a Revolving Loan, L/C Disbursement or Term Loan deemed to have
been so purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.
SECTION 2.17. PAYMENTS.
(a) The Borrower shall make each payment (including principal of or
interest on any Borrowing or any L/C Disbursement or any Fees or other amounts)
hereunder not later than 12:00 (noon), Dallas, Texas time, on the date when due
in immediately available dollars, without setoff, defense or counterclaim. Each
such payment (other than Issuing Bank Fees, which shall be paid directly to the
Issuing Bank,) shall be made to the Administrative Agent at its offices at 901
Main, 64th Floor, Dallas, Texas 75202.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment may be made on
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of interest or Fees, if applicable.
SECTION 2.18. TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.17 hereof, free and clear of and without deduction for
any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto EXCLUDING (i) income
taxes imposed on the net income (including without limitation, branch profit
taxes and alternative minimum income taxes of the Administrative Agent, any
Lender or the Issuing Bank (or any transferee or assignee thereof, including a
participation holder (any such entity a "TRANSFEREE")), (ii) franchise taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or Transferee), in each case by the jurisdiction under the Laws of which
the Administrative Agent, such Lender or the Issuing Bank (or Transferee) is
organized or any political subdivision thereof or by the jurisdiction in which
the applicable lending or issuing office of the Administrative Agent, such
Lender, or the Issuing Bank (or Transferee) is located or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called
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"TAXES"). If the Borrower shall be required to deduct any Taxes from or in
respect of any sum payable hereunder to the Administrative Agent, any Lender or
the Issuing Bank (or and Transferee), (i) the sum payable shall be increased by
the amount (an "ADDITIONAL AMOUNT") necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.18) the Administrative Agent, such Lender or the Issuing Bank or
Transferee), as the case may be, shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant Governmental Authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental
Authority in accordance with Applicable Law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from and payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
("OTHER TAXES").
(c) The Borrower will indemnify the Administrative Agent, each Lender and
the Issuing Bank (or Transferee) for the full amount of Taxes and Other Taxes
paid by the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, and any liability, (including penalties,
interest and expenses (including reasonable attorney's fees and expenses))
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability prepared by the
Administrative Agent, a Lender or the Issuing Bank (or Transferee), or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Administrative Agent, any Lender or the
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.
(d) If the Administrative Agent, a Lender or the Issuing Bank (or
Transferee) receives a refund in respect of any Taxes or Other Taxes as to which
it has been indemnified by the Borrower or with respect to which the Borrower
has paid additional amounts pursuant to this Section 2.18, it shall within 30
days from the date of such receipt pay over to the Borrower (a) such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrower under this Section 2.18 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent, such Lender or the Issuing Bank (or Transferee) and (b)
interest paid by the relevant Governmental Authority with respect to such
refund; PROVIDED, HOWEVER, that the Borrower, upon the request of the
Administrative Agent, such Lender or the Issuing Bank (or Transferee), shall
repay the amount paid over to the Borrower (plus penalties, interest or other
charges) to the Administrative Agent, such Lender or the Issuing Bank (or
Transferee) in the event the Administrative Agent, such Lender or the Issuing
Bank (or Transferee) is required to repay such refunds to such Governmental
Authority. If the Borrower determines in good faith that a reasonable basis
exists for contesting any Tax or Other Tax, the Administrative Agent, the
Lender, Issuing Bank or Transferee, as applicable, shall
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cooperate with the Borrower in challenging such Tax or Other Tax at the
Borrower's expense if requested by the Borrower (it being understood and agreed
that the Administrative Agent, the Lender, Issuing Bank or Transferee, as
applicable, shall have no obligation to contest or responsibility for contesting
such Tax or Other Tax).
(e) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrower to the relevant Governmental Authority, the Borrower will
deliver to the Administrative Agent, at its address referred to in Section 9.01
hereof, the original or a certified copy of any receipt actually issued by such
Governmental Authority evidencing payment thereof.
(f) Each Lender (or Transferee) that is organized under the Laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "NON-U.S. LENDER") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate containing representations regarding the status of such
Non-U.S. Lender as not being a bank for purposes of Section 881(c) of the Code,
as not being a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and as not being a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or reduced rate of, U.S. Federal withholding
tax on payments by the Borrower under this Agreement. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of a Transferee that is a participation holder,
on or before the date such participation holder becomes a Transferee hereunder)
and on or before the date, if any, such Non-U.S. Lender changes its applicable
lending office by designating a different lending office (a "NEW LENDING
OFFICE"). In addition, each Non-U.S. Lender shall deliver such forms promptly
upon the obsolescence or invalidity of any form previously delivered by such
Non-U S. Lender. Notwithstanding any other provision of this Section 2.18(f), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.18(f) that such Non-U.S. Lender is not legally able to deliver.
(g) The Borrower shall not be required to indemnify any Non-U.S. Lender or
to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (g) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrower and
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(y) to the extent the indemnity payment or additional amounts any Transferee, or
any Lender (or Transferee), acting through a New Lending Office, would be
entitled to receive (without regard to this paragraph (g)) do not exceed the
indemnity payment or additional amounts that the Person making the assignment,
participation or transfer to such Transferee, or the Lender (or Transferee)
making the designation of such New Lending Office, would have been entitled to
receive in the absence of such assignment, participation, transfer or
designation or (ii) the obligation to pay such additional amounts would not have
arisen but for a failure by such Non-U.S. Lender to comply with the provisions
of paragraph (g) above.
(h) Nothing contained in this Section 2.18 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
(i) Each Bank represents that, to the best of its knowledge, it is not a
party to any "conduit financing arrangement" as defined under applicable
Treasury Regulations promulgated under the Code.
(j) Any Non-U.S. Lender that could become completely exempt from
withholding of any tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof ("U.S.
TAXES") in respect of payment of any obligations due to such Non-U.S. Lender
under this Agreement ("LENDER OBLIGATIONS") if the Lender Obligations were in
registered form for U.S. Federal income tax purposes may request the Borrower
(through the Administrative Agent), and the Borrower agrees thereupon, to
exchange any promissory note(s) evidencing such Lender Obligations for
promissory note(s) registered as provided in subsection (k) below (each, a
"REGISTERED NOTE"). Registered Notes may not be exchanged for promissory notes
that are not Registered Notes.
(k) From and after the time, if any, when any Lender requests a Registered
Note, the Borrower shall maintain, or cause to be maintained, a register (the
"REGISTER") on which it enters the name of the registered owner of the Lender
Obligation(s) evidenced by each Registered Note. A Registered Note and the
Lender Obligation(s) evidenced thereby may be assigned or otherwise transferred
in whole or in part only by registration of such assignment or transfer of such
Registered Note and the Lender Obligation(s) evidenced thereby on the Register
(and each Registered Note shall expressly so provide). Any assignment or
transfer of all or part of such Lender Obligation(s) and the Registered Note(s)
evidencing the same shall be registered on the Register only upon surrender for
registration of assignment or transfer of the Registered Note(s) evidencing such
Lender Obligation(s), duly endorsed by (or accompanied by a written instrument
of assignment or transfer duly executed by) the Registered Noteholder thereof,
and thereupon one or more new Registered Note(s) in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s) pursuant
to, in accordance with, and subject to the restrictions of, Section 9.04 hereof.
Prior to the due presentment for registration of assignment or transfer of any
Registered Note, the Borrower and the Administrative Agent shall treat the
Person in whose name such Lender Obligation(s) and the Registered Note(s)
evidencing the same
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is registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes, notwithstanding any notice to the contrary.
The Register shall be available for inspection by the Administrative Agent and
any Lender at any reasonable time upon reasonable prior notice.
SECTION 2.19. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES; DUTY
TO MITIGATE.
(a) In the event (i) any Lender or the Issuing Bank delivers a certificate
requesting compensation pursuant to Section 2.12 hereof, (ii) any Lender or the
Issuing Bank delivers a notice described in Section 2.13 hereof or (iii) the
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.18 hereof, the Borrower may, at its sole expense and
effort (including with respect to the processing and recordation fee referred to
in Section 9.04(b) hereof), upon notice to such Lender or the Issuing Bank and
the Administrative Agent, require such Lender or the Issuing Bank to transfer
and assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04 hereof), all of its interests, rights and obligations
under this Agreement to an assignee that shall assume such assigned obligations
which assignee may be another Lender, if a Lender accepts such assignment);
provided that (x) such assignment shall not conflict with any Law, rule or
regulation or order of any court or other Governmental Authority having
jurisdiction, (v) the Borrower shall have received the prior written consent of
the Administrative Agent (and, if a Commitment is being assigned, of the Issuing
Bank), which consent shall not unreasonably be withheld, and (z) the Borrower or
such assignee shall have paid to the affected Lender or the Issuing Bank in
immediately available funds an amount equal to the sum of the principal of and
interest accrued to the date of such payment on the outstanding Loans and
participations in L/C Disbursements of such Lender or the Issuing Bank plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.12 hereof and Section 2.14
hereof); provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.12 hereof or notice under Section 2.13
hereof or the amounts paid pursuant to Section 2.18 hereof, as the case may be,
cease to cause such Lender or the Issuing Bank to suffer increased costs or
reductions in amounts received or receivable or reduction in return on capital,
or cease to have the consequences specified in Section 2.13, or cease to result
in amounts being payable under Section 2.18 hereof, as the case may be,
including as a result of any action taken by such Lender or the Issuing Bank
pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall
waive its right to claim further compensation under Section 2.12 hereof in
respect of such circumstances or event or shall withdraw its notice under
Section 2.13 hereof or shall waive its right to further payments under Section
2.18 hereof in respect of such circumstances or event, as the case may be, then
such Lender or the Issuing Bank shall not thereafter be required to make any
such transfer and assignment hereunder.
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(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.12 hereof, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.13 hereof or (iii) the Borrower is required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.18, then such Lender or the Issuing Bank shall use reasonable efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with
its internal policies or legal or regulatory restrictions or suffer any
disadvantage or burden deemed by it to be significant) (x) to file any
certificate or document reasonably requested in writing by the Borrower or (y)
to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.12 hereof or enable it
to withdraw its notice pursuant to Section 2.13 hereof or would reduce accounts
payable pursuant to Section 2.18 hereof, as the case may be, in the future. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender or the Issuing Bank in connection with any such filing or assignment,
delegation and transfer.
SECTION 2.20. LETTERS OF CREDIT.
(a) GENERAL. The Borrower may request the issuance of a Letter of Credit,
in a form reasonably acceptable to the Administrative Agent and the Issuing
Bank, appropriately completed, for the account of the Borrower, at any time and
from time to time while the Commitments remain in effect. This Section shall
not be construed to impose an obligation upon the Issuing Bank to issue any
Letter of Credit that is inconsistent with the terms and conditions of this
Agreement.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall hand deliver or
telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance
of the requested date of issuance, amendment, renewal or extension) a completed
Application and a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such Letter of Credit. In
connection with a request for the issuance of a Letter of Credit, in the event
of any inconsistency between the terms of any Application and the provisions of
this Agreement, the provisions of this Agreement shall be controlling. A Letter
of Credit shall be issued, amended, renewed or extended only if, and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that, after giving effect to such
issuance, amendment, renewal or extension (A) the L/C Exposure shall not exceed
$15,000,000 and (B) the sum of the Total Exposure shall not exceed the lesser of
(i) the Total Commitment and (ii) the difference between the Borrowing Base
minus the aggregate outstandings under the Term Loan. The Issuing Bank shall
not enter into any amendment of an outstanding Letter of Credit which has not
been requested or approved in writing by the Borrower.
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(c) EXPIRATION DATE. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the
Maturity Date, unless such Letter of Credit (i) expires by its terms on an
earlier date or (ii) has a one-year tenor and provides for the renewal thereof
for additional one-year periods, so long as such periods referred to in this
clause (ii) shall not in any event expire at a date later than the date that is
five Business Days prior to the Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each such Lender hereby acquires from the
applicable Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Revolving Loan Specified Percentage of the aggregate amount available
to bc drawn under such Letter of Credit, effective upon the issuance of such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to the Administrative
Agent, for the account of the Issuing Bank, such Lender's Revolving Loan
Specified Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrower forthwith on the date due as provided in Section
2.02(f) hereof. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or an Event of Default, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from the Issuing Bank that payment of
such draft will be made, or, if the Borrower shall have received such notice
later than 10:00 a.m., Dallas, Texas time, on any Business Day, not later than
10:00 a.m., Dallas, Texas time, on the immediately following Business Day.
(f) OBLIGATIONS ABSOLUTE. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit or any other Loan Paper, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from
all or any of the provisions of any Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right
that the Borrower, any other party guaranteeing, or otherwise obligated
with, the Borrower, any Subsidiary of the Borrower, On Command Corp. or any
of its Subsidiaries, or other Affiliate of any
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thereof or any other Person may at any time have against the beneficiary
under any Letter of Credit, the Issuing Bank, the Administrative Agent or
any Lender or any other Person, whether in connection with this Agreement
or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other Person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrower's obligations
hereunder.
The foregoing shall not be construed to excuse the Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by Applicable Law) suffered by the Borrower
that are caused by the Issuing Bank's gross negligence or wilful misconduct in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) the Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
the Issuing Bank
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
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any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Lenders with
respect to any such L/C Disbursement. The Administrative Agent shall promptly
give each Lender notice thereof.
(h) INTERIM INTEREST. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided in Section 2.02(g) hereof, at the rate per annum that would
apply to such amount if such amount were an ABR Loan.
(i) RESIGNATION OR REMOVAL OF THE ISSUING BANK. The Issuing Bank may
resign at any time by giving 90 days' prior written notice to the Administrative
Agent, the Lenders and the Borrower, and may be removed at any time by the
Borrower by notice to the Issuing Bank, the Administrative Agent and the
Lenders. Subject to the next succeeding paragraph, upon the acceptance of any
appointment as the Issuing Bank hereunder by a Lender that shall agree to serve
as successor Issuing Bank, such successor shall succeed to and become vested
with all the interests, rights and obligations of the retiring Issuing Bank and
the retiring Issuing Bank shall be discharged from its obligations to issue
additional Letters of Credit hereunder. At the time such removal or resignation
shall become effective, the Borrower shall pay all accrued and unpaid fees
pursuant to Section 2.05(c) hereof. The acceptance of any appointment as the
Issuing Bank hereunder by a successor Lender shall be evidenced by an agreement
entered into by such successor, in a form satisfactory to the Borrower and the
Administrative Agent, and, from and after the effective date of such agreement,
(i) such successor Lender shall have all the rights and obligations of the
previous Issuing Bank under this Agreement and (ii) references herein to the
term Issuing Bank, shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters of
Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders holding participations in outstanding Letters of
Credit representing greater than 50% of the aggregate undrawn amount of all
outstanding Letters of Credit thereof and of the amount to be deposited, deposit
in an account with the Administrative Agent, for the benefit of the Lenders, an
amount in cash equal to the L/C Exposure as of such date. Such deposit shall be
held by the Administrative Agent as collateral for the payment and performance
of the obligations of the Borrower under this Agreement. The Administrative
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account and, if so requested by the
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Borrower, shall invest the deposits therein in Permitted Investments. Other
than any interest earned on the investment of such deposits in Permitted
Investments, which investments shall be made at the option and sole discretion
of the Administrative Agent, such deposits shall not bear interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall (i) automatically be applied by the Administrative Agent to
reimburse the Issuing Bank for L/C Disbursements for which it has not been
reimbursed, (ii) be held for the satisfaction of the reimbursement obligations
of the Borrower for the L/C Exposure at such time and (iii) if the maturity of
the Loans has been accelerated (but subject to the consent of the Lenders
holding participations in outstanding Letters of Credit representing greater
than 50% of the aggregate undrawn amount of all outstanding Letters of Credit),
be applied to satisfy other obligations of the Borrower under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Administrative Agent, the
Issuing Bank and each of the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. The Borrower and each of its
Subsidiaries (except as hereinafter provided) (a) is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization, (b) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (c) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify could not reasonably be expected to result in a
Material Adverse Effect, and (d) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the other
Loan Papers, as appropriate, and each other agreement or instrument contemplated
thereby to which it is or will be a party and to borrow hereunder. Denver Arena
Company, LLC and Avalanche Sub are each limited liability companies duly
organized pursuant to its Articles of Organization and the laws of the State of
Colorado, validly existing and in good standing under the Laws of such State.
Nuggets Sub is a limited partnership duly organized under the laws of the State
of Delaware.
SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by
the Borrower of this Agreement, the promissory notes, the borrowing by the
Borrower hereunder, the granting by the Borrower and the other Obligors of all
Liens securing the Obligations, and the execution of all Loan Papers
(collectively, the "TRANSACTIONS") (a) have been duly authorized by all
requisite partnership, membership, corporate and, if required, stockholder
action, as applicable, and (b) will not (i) violate (A) any provision of Law,
statute, rule or regulation, or of the certificate or articles of incorporation
or other constitutive documents, by-laws or organizational documents of the
Borrower or any of its Subsidiaries, (B) any order of any
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Governmental Authority or (C) any provision of any indenture, material agreement
or other material instrument to which the Borrower or any Subsidiary of the
Borrower or On Command Corp. or any of its Subsidiaries is a party or by which
any of them or any of their property is or may be bound, provided that, for the
first 90 days after the Closing Date, the Borrower may still be pursuing the
consent of the NBA and the NHL, (ii) be in conflict with, result in a breach of
or constitute (alone or with notice or lapse of time or both) a default under,
or give rise to any right to accelerate or to require the prepayment, repurchase
or redemption of any obligation under any such indenture, agreement or other
instrument or (iii) result in the creation or imposition of any Lien upon or
with respect to any property or assets now owned or hereafter acquired by the
Borrower or any Subsidiary of the Borrower or On Command Corp. or any of its
Subsidiaries.
SECTION 3.03. ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Borrower and constitutes a legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with its terms.
All other Loan Papers have been duly executed and delivered by the Borrower and
each of the Obligors, as appropriate, and each constitutes the legal, valid and
binding obligation of the Borrower and each Obligor, as appropriate, enforceable
against the Borrower and each Obligor, as appropriate, in accordance with its
terms.
SECTION 3.04. GOVERNMENTAL APPROVALS. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for such as have
been made or obtained and are in full force and effect.
SECTION 3.05. FINANCIAL STATEMENTS. The Borrower has heretofore furnished
to the Lenders its consolidated balance sheets and statements of income and
equity and cash flow (a) as of and for the fiscal year ended December 31, 1996,
audited, and the Borrower shall deliver the opinion of Deloitte & Touche, LLP,
independent public accountants, no later than April 3, 1997. Such financial
statements present fairly the financial condition and results of operations and
cash flows of the Borrower and its consolidated Subsidiaries as of such dates
and for such periods. Such balance sheets and the notes thereto disclose all
material liabilities, direct or contingent, of the Borrower and its consolidated
Subsidiaries as of the dates thereof. Such financial statements were prepared
in accordance with GAAP applied on a consistent basis.
SECTION 3.06. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the business, assets, operations, financial condition, or
material agreements of the Borrower, any of its Subsidiaries, On Command Corp.
and any of its Subsidiaries, taken as a whole, since December 31, 1996.
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each of the Borrower and its Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its material properties and
assets, except for minor defects in title that
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do not interfere with its ability to conduct its business as currently conducted
or to utilize such properties and assets for their intended purposes. All such
material properties and assets are free and clear of Liens, other than Liens
expressly permitted by Section 6.02 hereof.
(b) Each of the Borrower and its Subsidiaries has complied with all
material obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Each of the Borrower and its Subsidiaries owns or possesses, or could
obtain ownership or possession of, on terms not materially adverse to it, all
patents, trademarks, service marks, trade names, copyrights, licenses and rights
with respect thereto necessary for the present conduct of its business, without
any known conflict with the rights of others, and free from any burdensome
restrictions, except where such conflicts and restrictions could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.08. THE SUBSIDIARIES AND ON COMMAND CORP. SCHEDULE 3.08 hereto
sets forth as of the date hereof a list of all Subsidiaries of the Borrower and
On Command Corp. and its Subsidiaries, and the percentage ownership interest of
the Borrower or On Command Corp., as the case may be, therein. As of the date
hereof, the shares of Capital Stock or other ownership interests so indicated on
SCHEDULE 3.08 are fully paid and non-assessable and are owned by the Borrower,
directly or indirectly, free and clear of all Liens.
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 3.09 hereof, there are not any
actions, suits or proceedings at Law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary of the Borrower
or On Command Corp. or any of its Subsidiaries, or any business, property or
rights of any such Person, or the NBA or NHL or any of their related entities in
which the Borrower or any Subsidiary of the Borrower owns any Capital Stock (i)
that involve this Agreement or the Transactions or (ii) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
(b) None of the Borrower or any of the Subsidiaries of the Borrower or On
Command Corp. or any of its Subsidiaries, or any of their respective material
properties or assets is in violation of, nor will the continued operation of
their material properties and assets as currently conducted violate, any Law, or
is in default with respect to any judgment, writ, injunction, decree or order of
any Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
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SECTION 3.10. AGREEMENTS.
(a) Neither the Borrower nor any of the Subsidiaries of the Borrower nor
On Command Corp. nor any of its Subsidiaries is a party to any agreement or
subject to any corporate restriction that, since December 31, 1996, has resulted
or would reasonably be expected to result in a Material Adverse Effect, except
as disclosed on SCHEDULE 3.10 hereof.
(b) Neither the Borrower nor any of the Subsidiaries of the Borrower nor
On Command Corp. nor any of its Subsidiaries is in default in any manner under
any provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound,
where such default could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.11. FEDERAL RESERVE REGULATIONS.
(a) Neither the Borrower nor any of the Subsidiaries of the Borrower is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation
G, U or X.
(c) No part of proceeds of any Loan or any Letter of Credit will enable
Borrower to maintain, reduce, or retire indebtedness originally incurred to
purchase a security that is currently Margin Stock.
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither the Borrower nor any Subsidiary of the Borrower is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit (i) to refinance
existing indebtedness and (ii) for general corporate purposes of the Borrower
and its Subsidiaries.
SECTION 3.14. TAX RETURNS. Each of the Borrower, its Subsidiaries, On
Command Corp. and its Subsidiaries has filed or caused to be filed all Federal,
state, and material local and foreign tax returns or materials required to have
been filed by it and has paid or caused to be paid all taxes due and payable by
it and all assessments received by it, except taxes that are being
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contested in good faith by appropriate proceedings and for which the Borrower or
On Command Corp. or such Subsidiary of the Borrower or On Command Corp., as
applicable, shall have set aside on its books adequate reserves.
SECTION 3.15. NO MATERIAL MISSTATEMENTS. None of (a) the S-4 Registration
Statement (at the time it is declared effective under the Securities Act of
1933), or (b) any other written information, report, financial statement,
exhibit or schedule prepared by the Borrower and furnished to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement and the
other Loan Papers or in connection with any of the Corporate Restructuring
transactions, or included herein or delivered pursuant hereto contained (in the
case of subsection (a) above) and contained, contains or will contain (in the
case of subsection (b) above) when furnished any material misstatement of fact
or omitted, omits or will omit when furnished to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were, are or will be made, not misleading.
SECTION 3.16. EMPLOYEE BENEFIT PLANS. Each of the Borrower and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in liability of the Borrower or any of
its Subsidiaries or On Command Corp. or any of its Subsidiaries which would be
material to the Borrower and its Subsidiaries on a consolidated basis.
SECTION 3.17. SOLVENCY.
(a) Immediately after the consummation of the Transactions and the other
transactions to occur on the Closing Date and immediately following the making
of each Loan made and the issuance of each Letter of Credit issued and after
giving effect to the application of the proceeds thereof, (i) the fair value of
the assets of the Borrower and the Subsidiaries of the Borrower on a
consolidated basis, at a fair valuation, will exceed the debts and liabilities,
direct, subordinated, contingent or otherwise, of the Borrower and the
Subsidiaries of the Borrower on a consolidated basis; (ii) the present fair
saleable value of the property of the Borrower and the Subsidiaries of the
Borrower on a consolidated basis will be greater than the amount that will be
required to pay the probable liability of the Borrower and the Subsidiaries of
the Borrower on a consolidated basis on their debts and other liabilities,
direct, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) the Borrower and the Subsidiaries
of the Borrower on a consolidated basis will be able to pay their debts and
liabilities, direct, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) the Borrower and the
Subsidiaries of the Borrower on a consolidated basis will not have unreasonably
small capital with which to conduct the businesses in which they are engaged as
such businesses are now conducted and are proposed to be conducted following the
Closing Date.
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(b) The Borrower does not intend to, and does not believe that it or any
of its Subsidiaries will, incur debts beyond its ability to pay such debts as
they mature, taking into account the timing and amounts of cash to be received
by it or any such Subsidiary and the timing and amounts of cash to be payable on
or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.18. INSURANCE. SCHEDULE 3.18 hereto sets forth a true, complete
and correct description of all insurance maintained by or for the Borrower or
for or by its Subsidiaries as of the date hereof and the Closing Date. As of
each such date, such insurance is in full force and effect and all premiums have
been duly paid. The Borrower and its Subsidiaries have insurance in such
amounts and covering such risks and liabilities as are in accordance with normal
industry practice.
SECTION 3.19. LABOR MATTERS. As of the date hereof and the Closing Date,
there are no strikes, lockouts or slowdowns against the Borrower or any
Subsidiary of the Borrower pending or, to the knowledge of the Borrower,
threatened which could reasonably be expected to have a Material Adverse Effect.
The hours worked by and payments made to employees of the Borrower and the
Subsidiaries of the Borrower have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign Law
dealing with such matters. All payments due from the Borrower or any Subsidiary
of the Borrower, or for which any claim may be made against the Borrower or any
Subsidiary of the Borrower, on account of wages and employee health and welfare
insurance and other benefits, have been paid or accrued as a liability on the
books of the Borrower or such Subsidiary. The consummation of the Transactions
to be consummated on or prior to the Closing Date will not give rise to any
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which the Borrower or any Subsidiary of
the Borrower is bound.
SECTION 3.20. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
3.20:
(a) The properties owned, operated or leased by the Borrower and the
Subsidiaries of the Borrower (the "PROPERTIES") do not contain any Hazardous
Materials in amounts or concentrations which (i) constitute, or constituted a
violation of, or (ii) could reasonably be expected to give rise to liability
under, Environmental Laws, which violations and liabilities, in the aggregate,
could reasonably be expected to result in a Material Adverse Effect;
(b) All Environmental Permits have been obtained and are in effect with
respect to the Properties and operations of the Borrower and the Subsidiaries of
the Borrower, and the Properties and all operations of the Borrower and the
Subsidiaries of the Borrower are in compliance, and in the last two years have
been in compliance, with all Environmental Laws and all necessary Environmental
Permits, except to the extent that such non-compliance or failure to obtain any
necessary permits, in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect;
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(c) Neither the Borrower nor any of the Subsidiaries of the Borrower has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrower or the Subsidiaries of the Borrower or with
regard to any Person whose liabilities for environmental matters the Borrower or
the Subsidiaries of the Borrower has retained or assumed, in whole or in part,
contractually, which, in the aggregate, could reasonably be expected to result
in a Material Adverse Effect, nor do the Borrower or the Subsidiaries of the
Borrower have knowledge that any such notice will be received or is being
threatened;
(d) Hazardous Materials have not been transported from the Properties, nor
have Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of the Properties in a manner that could reasonably be expected to
give rise to liability under any Environmental Law, nor have the Borrower or the
Subsidiaries of the Borrower retained or assumed any liability contractually,
with respect to the generation, treatment, storage or disposal of Hazardous
Materials, which transportation, generation, treatment, storage or disposal, or
retained or assumed liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.21. OWNERSHIP OF THE FRANCHISES.
(a) NBA FRANCHISE. Nuggets Sub is, on the Closing Date, the owner of, and
have good and marketable title to, the NBA Franchise, and the NBA Franchise is
in compliance with all of the rules and regulations of, and is in good standing
with, the NBA, and all agreements related thereto. A true, correct and complete
copy of the NBA Documents in effect on the Closing Date, together with any all
amendments, supplements or other material agreements relating thereto have been
delivered to the Administrative Agent.
(b) NHL FRANCHISE. Avalanche Sub is, on the Closing Date, the owner of,
and have good and marketable title to, the NHL Franchise, and the NHL Franchise
is in compliance with all of the rules and regulations of, and is in good
standing with, the NHL, and all agreements related thereto. A true, correct and
complete copy of the NHL Documents in effect on the Closing Date, together with
any all amendments, supplements or other material agreements relating thereto
have been delivered to the Administrative Agent.
SECTION 3.22. STRIKES. There are (a) no labor disputes or grievances
pending against the NBA, the NHL, the Sports Subs, Nuggets Sub or Avalanche Sub,
the Borrower or any Subsidiary of the Borrower, (b) no unfair labor practice
charges or grievances pending or in process or, to the knowledge of the
Borrower, threatened by or on behalf of any employee or group of employees of
the NBA, the NHL, the Sports Subs, Nuggets Sub or Avalanche Sub, the Borrower or
any Subsidiary of the Borrower, or (c) no written complaints received by Sports
Subs, Nuggets Sub, Avalanche Sub, the Borrower or any other Subsidiary of the
Borrower, or, to the knowledge of the Borrower, threatened, or, with respect to
unresolved complaints, on file, with any tribunal alleging employment
discrimination by the NBA, the NHL, the Borrower or any
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Subsidiary of the Borrower, pursuant to the provisions of any collective
bargaining agreement, which, in each case, could reasonably be expected to cause
a Material Adverse Effect.
SECTION 3.23. FILM INVENTORY. Film Inventory of the Borrower and its
Subsidiaries on the Closing Date is set forth on SCHEDULE 3.23 hereto.
SECTION 3.24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Papers shall be deemed to be made at and as of the Closing Date and at and as of
the date of each Revolving Loan, and each shall be true and correct when made,
except to the extent (a) previously fulfilled in accordance with the terms
hereof, (b) subsequently inapplicable, or (c) previously waived in writing by
the Administrative Agent and the Lenders with respect to any particular factual
circumstance. The representations and warranties made under this Agreement and
the other Loan Papers shall be deemed applicable to each Subsidiary of the
Borrower and On Command Corp. and each of its Subsidiaries, as applicable, as of
the formation or acquisition of such Subsidiary and at and as of each date the
representations and warranties are remade pursuant to this provision. All
representations and warranties made under this Agreement and the other Loan
Papers shall survive, and not be waived by, the execution hereof by the
Administrative Agent and the Lenders, any investigation or inquiry by the
Administrative Agent or any Lender, or by the making of any Loan under this
Agreement and the other Loan Papers.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. ALL CREDIT EVENTS. On the date of each Borrowing, and on
the date of each issuance of a Letter of Credit (each such event being called a
"CREDIT EVENT"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 hereof, as applicable (or such notice
shall have been deemed given in accordance with Section 2.03 hereof), or, in the
case of the issuance of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a duly completed Application and a
notice requesting the issuance of such Letter of Credit, required by Section
2.20(b) hereof.
(b) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date, and there shall have occurred no event which caused a Material Adverse
Effect.
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(c) The Borrower shall be in compliance in all material respects with the
terms and provisions set forth herein on its part to be observed or performed,
and at the time of and immediately after such Credit Event, no Event of Default
or Default shall have occurred and be continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. FIRST CREDIT EVENT. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of itself, the
Lenders and the Issuing Bank, a favorable written opinion of (i) the General
Counsel of the Borrower, (ii) Latham & Watkins, counsel for the Borrower and
each of its Subsidiaries, and (iii) Latham & Watkins, in its capacity as counsel
to the Borrower and each of its Subsidiaries in connection with the Corporate
Restructuring, in each case (y) dated the Closing Date, and (z) covering such
other matters relating to this Agreement, the Transactions and the Corporate
Restructuring as the Administrative Agent shall reasonably request, and in form
and substance acceptable to the Administrative Agent and its counsel, and the
Borrower hereby requests and instructs such counsel to deliver such opinion.
The opinions shall be addressed to the Issuing Bank, the Administrative Agent
and the Lenders.
(b) All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder shall be reasonably satisfactory to the Lenders,
to the Issuing Bank and to the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto, of
the Borrower and each of its Subsidiaries, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as to the
good standing of the Borrower and each of its Subsidiaries as of a recent date,
from such Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of the Borrower dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of the Borrower and
each of its Subsidiaries as in effect on the Closing Date and at all times since
a date prior to the date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of resolutions duly adopted by
the Board of Directors of the Borrower and each of its Subsidiaries authorizing
the execution, delivery and performance of this Agreement, the Loan Papers and
the borrowings hereunder, as appropriate, and that such resolutions have not
been modified rescinded or amended and are in full force and effect, (C) that
the certificate or articles of incorporation of the Borrower and each of its
Subsidiaries have not been amended since the date of the last amendment thereto
shown on the certificate of good standing furnished pursuant to clause (i)
above, (D) as to the incumbency and specimen signature of each officer executing
this Agreement, each Loan Paper, or any other document delivered in connection
herewith on behalf of the Borrower and each of its Subsidiaries
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and (E) that attached thereto is a true and complete copy of each of the COMSAT
Agreements and OCC Agreements as in effect on the Closing Date; (iii) a
certificate of another officer as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as the Lenders, the Issuing Bank or
Donohoe, Jameson & Carroll, P.C., counsel for the Administrative Agent, may
reasonably request.
(d) The Administrative Agent shall have received a Compliance Certificate,
dated the Closing Date and signed by a Financial Officer of the Borrower,
confirming compliance with (i) the conditions precedent set forth in paragraphs
(b) and (c) of Section 4.01 hereof, with paragraphs (f), (g), (i), (j) and (k)
of this Section 4.02, (ii) with the Borrowing Base and (iii) the financial
covenants set forth in Sections 6.09, 6.10 and 6.11 hereof, and certifying to
the fact that there exists no Default or Event of Default under the terms of
this Agreement, and consummating the Agreement and making the initial Loans
hereunder would not cause a Default or Event of Default.
(e) Each Lender and the Administrative Agent shall have received payment
in full of all Fees and other amounts due and payable on or prior to the Closing
Date, including reimbursement or payment of all reasonable out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder.
(f) All indebtedness of the Borrower owed to the syndication of financial
institutions under its existing revolving credit facility shall be paid in full
by the end of the Closing Date.
(g) The Borrower shall have delivered duly executed and completed copies
by the Borrower and each of the Subsidiaries of the Borrower, as applicable, to
each of the Lenders of each of the following documents and agreements, in form
and substance satisfactory to each Lender: this Agreement, applicable Fee
Letters, pledge agreements pledging 100% of the Capital Stock of all
Subsidiaries of the Borrower except the Capital Stock of Avalanche Sub, Nuggets
Sub, Ascent Network Services, Inc. and Ascent Sports to secure the Obligations,
a pledge agreement pledging all the Capital Stock of On Command Corp. owned by
the Borrower or any of its Subsidiaries to secure the Obligations and guaranties
of the Obligations executed by all Subsidiaries of the Borrower except Avalanche
Sub and Nuggets Sub. Each such pledge agreement delivered on the Closing Date
shall be accompanied by stock certificates evidencing 100% of the Capital Stock
of each such pledged entity (except On Command Corp., which such stock shall
evidence not less than 57% of the Capital Stock of On Command Corp.), together
with stock powers executed in blank. The Borrower shall have delivered a
promissory note to each Lender, in form and substance satisfactory to each such
Lender and any other Loan Papers reasonably required by any Lender in connection
with this Agreement.
(h) All governmental and third party approvals necessary or advisable in
connection with the Corporate Restructuring, the Transactions and the continuing
operations of the Borrower and its Subsidiaries and On Command Corp. and its
Subsidiaries shall have been obtained and be
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in full force and effect, and all applicable waiting periods shall have expired
without any action being taken or threatened by any Governmental Authority which
would restrain, prevent or otherwise impose adverse conditions on the Corporate
Restructuring or the Transactions.
(i) Except as contemplated by the Corporate Restructuring and the
Transactions, or as specifically contemplated hereby, there shall not have
occurred any material change in the capitalization (whether in debt or in
equity), corporate structure or assets of the Borrower or any of its
Subsidiaries and On Command Corp. or any of its Subsidiaries, since December 31,
1996.
(j) No action, suit, litigation or similar proceeding by or before any
Governmental Authority shall exist or, in the case of litigation by a
Governmental Authority, be threatened, with respect to the Corporate
Restructuring or the Transactions contemplated thereby or otherwise, which would
be likely in the reasonable opinion of the Required Lenders to have a Material
Adverse Effect.
(k) The structure and documentation of the Corporate Restructuring and the
Transactions contemplated thereby, and all corporate and other proceedings taken
or to be taken and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Administrative Agent and Donohoe,
Jameson & Carroll, P.C., counsel for the Administrative Agent, and each Lender
shall have received copies of all such documents as such Lender, acting through
the Administrative Agent, may reasonably request. All transactions necessary to
consummate the Corporate Restructuring shall have been completed.
(l) The Lenders shall have received a certification from the chief
financial officer of the Borrower, in form and substance reasonably satisfactory
to the Lenders, as to the solvency of the Borrower and its Subsidiaries on a
consolidated basis after giving effect to the Corporate Restructuring and the
consummation of the other transactions contemplated hereby.
(m) The Administrative Agent shall have received evidence satisfactory to
the Administrative Agent that each Person necessary for the pledge of the stock
in the Sports Subs, except the NBA and the NHL, has consented to such
transactions.
(n) The Administrative Agent shall have received copies of all NBA
Documents, NHL Documents, Broadcasting Agreements (other than Superstation
Agreements and National Media Contracts copies of which are not provided to
Teams by the NBA or NHL), Concession Agreements, Avalanche License Documents,
Nuggets License Documents, Parking Agreements, Player Contracts, Related
Contracts and Advertising Agreements.
(o) The Administrative Agent shall have received copies of a description
in detail satisfactory to the Administrative Agent describing all material
pending litigation and, to the knowledge of the Borrower, threatened litigation
in which each Obligor, the NBA and the NHL and the related NBA and NHL entities
in which the Borrower or any Subsidiary of the Borrower owns any Capital Stock
is a defendant.
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(p) The On Command Corp. Loan Facility must have been consummated or must
be consummated simultaneously with the Transaction.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the Obligations shall have been paid in full and all Letters of Credit have
been canceled or have expired and all amounts drawn thereunder have been
reimbursed in full, the Borrower will, and will cause each of its Subsidiaries
to:
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES.
(a) Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence, except as otherwise expressly
permitted under Section 6.05 hereof.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
all applicable Laws, rules, regulations and decrees and orders of any
Governmental Authority, whether now in effect or hereafter enacted; and at all
times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times.
SECTION 5.02. INSURANCE. Keep its insurable properties insured in
accordance with industry standards at all times by financially sound and
reputable insurers; maintain such other insurance, to such extent and against
such risks, including (a) fire and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses
operating in the same or similar locations, (b) public liability insurance
against claims for personal injury or death or property damage occurring upon,
in, about or in connection with the use of any properties owned, occupied or
controlled by it, and (c) key-man and player disability and life insurance in
minimum amounts and in the form required by the NBA and NHL, but in no event in
amounts less than or having coverage less than standard practice for Teams; and
maintain such other insurance as may be required by Law.
SECTION 5.03. OBLIGATIONS AND TAXES. Pay and discharge promptly when due
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or
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profits or in respect of its property before the same shall become delinquent or
in default, as well as all lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien upon such properties or any
part thereof; PROVIDED, HOWEVER, that such payment and discharge shall not be
required with respect to any such tax, assessment, charge, levy or claim so long
as the validity or amount thereof shall be contested in good faith by
appropriate proceedings and the Borrower shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP and such contest
operates to suspend collection of the contested obligation, tax, assessment or
charge and enforcement of a Lien.
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 105 days after the end of each fiscal year, its consolidated
and consolidating balance sheet and related consolidated and consolidating
statements of income and cash flow, showing the financial condition of the
Borrower and its consolidated Subsidiaries as of the close of such fiscal year
and the results of their operations during such year, and a comparison of such
financial position and results of operations as of the corresponding date and
for the previous fiscal year, all audited (in the case of the consolidated
financial statements) by Deloitte & Touche, LLP or other independent public
accountants of recognized national standing acceptable to the Required Lenders
and accompanied by an opinion of such accountants (which shall not be qualified
in any material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations of
the Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated balance sheet and related
consolidated statements of earnings and cash flow showing the financial
condition of the Borrower and its consolidated Subsidiaries as of the close of
such fiscal quarter and the results of their operations during such fiscal
quarter and the then elapsed portion of the fiscal year, and a comparison of
such financial position and results of operations as of the corresponding date
and for the corresponding periods in the previous fiscal year, all certified by
one of its Financial Officers as fairly presenting the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustment;
(c) (i) concurrently with any delivery of financial statements under
sub-paragraph (a) above, a certificate of the accounting firm opining on or
certifying such statements (which certificate may be limited to accounting
matters and disclaim responsibility for legal interpretations) certifying that
no Event of Default has occurred in Sections 6.01, 6.02(j), 6.03, 6.04, 6.05,
6.06, 6.09, 6.10 and 6.11 hereof; and (ii) concurrently with any delivery of
financial statements under sub-paragraph (a) or (b) above, a Compliance
Certificate of a Financial Officer of the Borrower certifying that no Event of
Default or Default has occurred or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto and setting forth
computations in
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reasonable detail (which detail shall be reasonably satisfactory to the
Administrative Agent) demonstrating compliance with the covenants contained in
Sections 6.01, 6.03, 6.04, 6.06, 6.09, 6.10 and 6.11 hereof and showing the
Borrowing Base;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements, registration statements (other
than on Form S-8) and other similar materials filed by the Borrower or any
Subsidiary of the Borrower with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the function of said
Commission, or with any national securities exchange, or distributed generally
to its shareholders, as the case may be; and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary of the Borrower, On Command Corp., the Subsidiaries of On Command
Corp., the NBA, the NHL, any of the related entities of the NBA or NHL in which
the Borrower or any Subsidiary of the Borrower or On Command Corp. or any of its
Subsidiaries owns any Capital Stock, or compliance with the terms of this
Agreement and the other Loan Papers, as the Administrative Agent or any Lender
may reasonably request.
SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to the Administrative
Agent, the Issuing Bank and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) taken or proposed to be taken with
respect thereto;
(b) the (i) filing or commencement of, or any written threat or notice of
intention of any Person to file or commence, any action, suit or proceeding,
whether at Law or in equity or by or before any Governmental Authority, or (ii)
the making of any written claim, in either case against the Borrower, any
Affiliate of the Borrower, the NBA or the NHL, as to which there is a reasonable
possibility of an adverse determination and which if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) any development (including, without limitation, developments in
pending litigation, developments in pending or threatened labor disruption and
loss or, to the knowledge of the Borrower, threatened loss, of either Franchise
or any Broadcasting Agreement or other material NHL Document or NBA Document)
that has resulted in, or could reasonably be expected to result in, a Material
Adverse Effect; and
(d) receipt or anticipated receipt by the Borrower or any Subsidiary of
the Borrower of the proceeds of any and each expansion of the NHL or the NBA.
SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as
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soon as possible after, and in any event within 10 days after any Responsible
Officer of the Borrower or any ERISA Affiliate knows or has reason to know that,
any ERISA Event has occurred that, alone or together with any other ERISA Event
could reasonably be expected to result in liability of the Borrower in an
aggregate amount exceeding $5,000,000, a statement of a Financial Officer of the
Borrower setting forth details as to such ERISA Event and the action, if any,
that the Borrower proposes to take with respect thereto.
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of Law are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries and On Command Corp. and its Subsidiaries,
to, permit any representatives designated by the Administrative Agent or any
Lender, upon reasonable prior written notice, to visit and inspect the financial
records and the properties of the Borrower or any Subsidiary of the Borrower or
On Command Corp. or its Subsidiaries at reasonable times and as often as
reasonably requested and to make extracts from and copies of such financial
records, and permit any representatives designated by the Administrative Agent
or any Lender to discuss the affairs, finances and condition of the Borrower or
any Subsidiary of the Borrower or On Command Corp. or any of its Subsidiaries
with the officers thereof and (with the concurrence of the Administrative Agent)
independent accountants therefor (provided that the Borrower has the right to
have a representative present for any meeting with the Borrower's independent
accountants).
SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Comply, and exercise best efforts to cause all lessees and other
Persons occupying its Properties to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; and obtain and renew all material Environmental Permits necessary
for its operations and Properties; and conduct any Remedial Action to the extent
required by and in accordance with Environmental Laws; provided, however, that
none of the Borrower or any of its Subsidiaries shall be required to undertake
any Remedial Action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and appropriate reserves are
being maintained with respect to such circumstances.
(b) If a Default caused by reason of a breach of paragraph (a) above or
Section 3.20 hereof shall have occurred and be continuing, at the request of the
Required Lenders through the Administrative Agent, provide to the Lenders within
45 days after such request, at the expense of the Borrower, a "Phase 1"
environmental site assessment report for the Properties which are the subject of
such default prepared by an environmental consulting firm acceptable to the
Administrative Agent and indicating the presence or absence of Hazardous
Materials and the estimated cost of any compliance or Remedial Action in
connection with such Properties.
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SECTION 5.10. COMPLIANCE WITH MATERIAL CONTRACTS. Except as set forth in
Section 6.07 hereof, maintain in full force and effect (including exercising any
available renewal option), and without amendment or modification, each material
contract, unless the failure so to maintain any such material contract or
replacement contract or contracts thereof (or any amendment or modification
thereto) could not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect.
SECTION 5.11. ARENA/COMPLEX CONSTRUCTION. The Borrower shall provide the
Administrative Agent and each Lender with quarterly written reports regarding
the status of plans/budget/financing and other information regarding the
Arena/Complex Construction, which such information must be in detail reasonably
acceptable to the Administrative Agent.
SECTION 5.12. NBA AND NHL OBLIGATIONS. The Borrower shall timely perform
all of its obligations under the NBA Documents and the NHL Documents, and all
other obligations relating to the NBA and NHL which are binding on it, except
where the failure to so perform would not result in a Material Adverse Effect.
SECTION 5.13. OPERATION OF FRANCHISES. Each of Ascent Sports, Ascent
Sports Holdings, Nuggets Sub, Avalanche Sub and the Borrower shall take any and
all action which is necessary or appropriate to keep each of the Franchises in
full force and effect and in good standing, shall conform to and duly observe in
all material respects the requirements of the NBA Documents and NHL Documents,
respectively, and shall promptly notify the Administrative Agent of any
violation, or alleged violation thereof, and shall provide the Administrative
Agent with copies of all written documents or notices relating thereto. Each of
Ascent Sports, Ascent Sports Holdings, Nuggets Sub, Avalanche Sub and the
Borrower shall actively promote and conduct, and use its best efforts to promote
and conduct, ticket sales for its basketball operations and hockey operations
(both season and individual Game tickets).
SECTION 5.14. SERVICES CONTRACTS. Each of Ascent Sports, Ascent Sports
Holdings, Nuggets Sub, Avalanche Sub and the Borrower shall comply and use all
reasonable efforts to compel compliance by third parties through appropriate
means, with all material terms and conditions of all Services Contracts and to
maintain all of the foregoing in full force and effect, except where the failure
to so perform would not result in a Material Adverse Effect.
SECTION 5.15. KEY MAN LIFE INSURANCE/NBA AND NHL FINANCIAL INFORMATION.
(a) Within 30 days after the Closing Date, the Borrower shall have
provided the Administrative Agent with copies of all key-man life insurance
contracts which exist for any of the employees of the Borrower and its
Subsidiaries, and
(b) Within 10 days after receipt by the Borrower or any Subsidiary of the
Borrower of such information, the Borrower shall have provided the
Administrative Agent with copies of all financial statements for each of the NBA
and the NHL and the related NBA and NHL entities
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in which the Borrower or any Subsidiary of the Borrower owns any Capital Stock
to the extent such financial statements are provided to the Teams.
SECTION 5.16. ARENA/COMPLEX NOTICE. Not later than 30 Business Days
prior to the commencement of construction on the Arena/Complex, the Borrower
shall give each Lender written notice of the date of such intended commencement
of construction, together with a summary in reasonable detail of all final
financing plans regarding such construction. Upon request of the Administrative
Agent, the Borrower shall promptly provide the Administrative Agent with such
additional information regarding such construction as requested by the
Administrative Agent or any Lender.
SECTION 5.17. SYNDICATION. In connection with the syndication of the
Loans, the Borrower shall promptly upon request, but in no case later than five
business after such reasonable request, provide to Administrative Agent all
updated financial information including but not limited to financial statements,
income statements, balances sheets and pro forma calculations related to
Borrower and its Subsidiaries.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the Obligations have been paid in full and all Letters of Credit have been
canceled or have expired and all amounts drawn thereunder have been reimbursed
in full:
SECTION 6.01. INDEBTEDNESS. The Borrower will not, and will not cause or
permit any of its Subsidiaries of the Borrower or On Command Corp. or its
Subsidiaries to, issue any Preferred Stock, or to issue, incur, create, assume
or permit to exist any Indebtedness, except:
(a) Indebtedness of the Borrower and any Subsidiary of the Borrower for
borrowed money existing on the date hereof and set forth in SCHEDULE 6.01
hereto, but not any extensions, renewals or replacements of such Indebtedness;
(b) Indebtedness of any Subsidiary of the Borrower owed to the Borrower or
to a Wholly Owned Subsidiary of the Borrower (except Denver Arena Company, LLC)
that does not otherwise violate any provision of this Agreement or any other
Loan Paper;
(c) so long as there exists no Default or Event of Default both before and
after giving effect to the incurrence of such Indebtedness, Denver Arena
Company, LLC may incur Non-Recourse Arena Financing;
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(d) so long as there exists no Default or Event of Default both before and
after giving effect to the incurrence of such Indebtedness, Beacon may incur
Non-Recourse Film Indebtedness;
(e) On Command Corp. and its Subsidiaries may incur Indebtedness under the
On Command Corp. Loan Facility, and, additionally, On Command Corp. may, so long
as there exists no Default or Event of Default both before and after giving
effect to each such issuance or incurrence, (i) issue Preferred Stock in a
maximum amount equal to $50,000,000, provided that such Preferred Stock must not
have terms more onerous than the terms in this Agreement and the Loan Papers,
and may not mature, require redemption or otherwise be redeemed or retired until
three years after the Obligations hereunder are repaid in full and the
Commitments have been terminated, and (ii) incur Indebtedness up to a maximum
outstanding amount of $50,000,000, provided that such Indebtedness must not have
terms more onerous than the terms in this Agreement and the Loan Papers;
(f) so long as there exists no Default or Event of Default both before and
after giving effect to the execution of such Guarantee, the Borrower may
Guarantee the completion of the construction of the Arena/Complex, provided that
(i) such Guarantee may not be in an aggregate amount in excess of $25,000,000;
and (ii) the amount of any such Guarantee reduces the Borrowing Base in
accordance with the terms of the definition thereof;
(g) so long as there exists no Default or Event of Default both before and
after giving effect to the incurrence of such Indebtedness, the Borrower or any
Subsidiary of the Borrower may incur Capital Lease Obligations in a maximum
aggregate amount not to exceed $10,000,000 at any one time outstanding;
(h) so long as there exists no Default or Event of Default both before and
after giving effect to the issuance of such Preferred Stock, the Borrower may
issue Preferred Stock, provided that the terms of such Preferred Stock require
payment-in-kind only until such date that is two years after the Maturity Date;
(i) provided that no Default or Event of Default exists both before and
after giving effect to the issuance of Subordinated Indebtedness, and so long as
copies of all documentation related to the Subordinated Indebtedness (including
all disclosure documentation) are delivered to the Administrative Agent in form
and substance reasonably acceptable to the Administrative Agent, Borrower may
issue Subordinated Indebtedness; and
(j) in addition to Indebtedness permitted by subsections (a) through (i)
above, so long as there exists no Default or Event of Default both before and
after giving effect to the incurrence of such Indebtedness, the Borrower may
incur other unsecured Indebtedness up to a maximum amount outstanding at any one
time of $10,000,000, provided that the weighted average of the per annum
interest rates on such Indebtedness may not exceed 12%.
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Notwithstanding anything in this Agreement or in any other Loan Paper to
the contrary, Ascent Sports Holdings may not operate as any business other than
a holding company for Capital Stock.
SECTION 6.02. LIENS. The Borrower will not, and will not cause or permit
any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on
any of its property or assets (including on the stock or other securities of any
Person, including any Subsidiary of the Borrower and On Command Corp. and its
Subsidiaries) now owned or hereafter acquired by it or them or on any income or
revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in SCHEDULE 6.02 hereto; provided that
such Liens shall secure only those obligations which they secure on the date
hereof;
(b) any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary of the Borrower; provided that (i)
such Lien is not created in contemplation of or in connection with such
acquisition and (ii) such Lien does not apply to any other property or assets of
such Subsidiary;
(c) Liens for taxes not yet due or which are being contested in compliance
with Section 5.03 hereof;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or which are being contested in
compliance with Section 5.03 hereof, which, in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;
(e) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other social
security Laws or regulations;
(f) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course or business;
(g) zoning restrictions, easements, rights-of-way, restrictions on use of
real property and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries;
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(h) Liens granted by Denver Arena Company, LLC securing any permitted
Non-Recourse Arena Financing or the City and County of Denver's interest in the
Arena/Complex, but only to the extent such Liens are limited to the realty,
fixtures, equipment and other assets comprising the Arena/Complex (including
rights as a lessor under leases relating thereto);
(i) Liens granted by Beacon securing Non-Recourse Film Indebtedness
permitted hereby, but only to the extent such Liens are limited and apply only
to the film negatives for the Motion Pictures financed with such Indebtedness
and any rights of the Borrower or the Subsidiaries of the Borrower of ownership,
distribution or exploitation of such Motion Pictures;
(j) Liens securing Capital Lease Obligations permitted to be incurred in
accordance with the provisions of Section 6.01(g) hereof; and
(k) Liens arising under the Loan Papers.
SECTION 6.03. SALE AND LEASE BACK TRANSACTIONS. The Borrower will not,
and will not cause or permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, provided that, (a) nothing
herein shall be deemed to prevent the Borrower and its Subsidiaries from
entering into operating leases, (b) Denver Arena Company, LLC may enter into any
such transaction with the City of Denver regarding the real estate for the
Arena/Complex, and (c) so long as there exists no Default or Event of Default
both before and after giving effect thereto, the Borrower may consummate the
sale leaseback transaction described on SCHEDULE 6.03 hereto.
SECTION 6.04. INVESTMENTS, ACQUISITIONS, LOANS AND ADVANCES. The Borrower
will not, and will not cause or permit any of its Subsidiaries to, purchase,
hold or acquire any Capital Stock, evidences of indebtedness (other than
restructured receivables) or other securities of, make or permit to exist any
loans or advances to, or make or permit to exist any investment or any other
interest in, or make any acquisition of assets of any other Person as a going
concern, or create any Subsidiary (each, an "INVESTMENT"), except:
(a) Investments existing on the date hereof in the Capital Stock set forth
on SCHEDULE 6.04 hereto;
(b) Permitted Investments;
(c) so long as there exists no Default or Event of Default both before and
after giving effect thereto, Investments by the Borrower in the Arena/Complex in
an aggregate amount for the Borrower not in excess of $30,000,000 in form and
substance substantially the same as the
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Investments made in the Arena/Complex prior to the Closing Date, or in form and
substance otherwise acceptable to the Required Lenders;
(d) (i) Investments consisting of loans or advances to employees of the
Borrower or the Wholly Owned Subsidiaries, provided that such loans or advances
are made in the ordinary course of business and in accordance with company
policy, and provided further that the proceeds of such loan or advance are used
to finance employee related expenses (including relocation expenses and travel
and entertainment expenses), and (ii) so long as there exists no Default or
Event of Default both before and after giving effect thereto, Investments
pursuant to promissory notes to a Wholly Owned Subsidiary (except Denver Arena
Company, LLC), provided that such loans or advances are not subordinated to any
other Indebtedness or other obligations of such Subsidiary and rank pari passu
with all senior, unsecured Indebtedness of such Subsidiary;
(e) so long as there exists no Default or Event of Default both before and
after giving effect thereto, non cash Investments by the Borrower in
acquisitions, provided that (i) the Borrower must use its common Capital Stock
as consideration for each such acquisition and (ii) in no event shall more than
20% of the outstanding Capital Stock of the Borrower in the aggregate be used by
the Borrower for such acquisitions over the life of this Agreement;
(f) so long as there exists no Default or Event of Default both before and
after giving effect to any such Investment, the Borrower or any of its
Subsidiaries (except Denver Arena Company, LLC) may purchase shares of Capital
Stock of On Command Corp., so long as such shares are immediately delivered to
the Administrative Agent together with stock powers executed in blank and a duly
completed and executed pledge agreement in the form executed on the Closing
Date, pledging such shares to the Administrative Agent and the Lenders to secure
the Obligations;
(g) promissory notes delivered on or prior to the Closing Date in
connection with the Corporate Restructuring, which such promissory notes may not
have maturities in excess of one year;
(h) if permitted by Section 6.01(i) hereof, the Borrower may issue
Subordinated Indebtedness; and
(i) in addition to those permitted Investments in (a) through (h) above,
so long as there exists no Default or Event of Default both before and after
giving effect to any such Investment, other Investments made by the Borrower up
to a maximum amount outstanding at any one time of $10,000,000.
SECTION 6.05. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Borrower
will not, and will not cause or permit any of its Subsidiaries to:
(a) merge into or consolidate with any Person, or permit any other Person
to merge into or consolidate with it, provided that, if there exists no Default
or Event of Default at the time
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thereof or immediately after giving effect thereto (i) any Wholly Owned
Subsidiary may merge into the Borrower in a transaction in which the Borrower is
the surviving corporation, (ii) any Wholly Owned Subsidiary may merge into or
consolidate with any other Wholly Owned Subsidiary in a transaction in which the
surviving entity is a Wholly Owned Subsidiary and no Person other than the
Borrower or a Wholly Owned Subsidiary receives any consideration, provided
further that any such merger or consolidation may not include any Subsidiary
that incurred the Non-Recourse Arena Financing; or
(b) sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all or any substantial part of its assets (whether
now owned or hereafter acquired) or any amount of Capital Stock of any
Subsidiary of the Borrower or On Command Corp., except that (i) the Borrower and
any Subsidiary of the Borrower may sell or dispose of inventory and obsolete
equipment in the ordinary course of business, (ii) so long as there exists no
Default or Event of Default both before and after giving effect thereto the
Borrower or any of its Subsidiaries may (A) make an Asset Disposition, so long
as (I) the cumulative aggregate consideration for all such Asset Dispositions
after the date hereof shall not exceed $10,000,000, and (II) such assets are not
used in the operation of the Nuggets Sub or the Avalanche Sub or the related
Teams, and (B) in addition to Asset Dispositions permitted by subsection (A)
above, make an Asset Disposition, so long as (I) the cumulative aggregate
consideration for all such Asset Dispositions after the date hereof (but
excluding the proceeds from sales of those assets described on SCHEDULE 6.05
hereto) shall not exceed $10,000,000, (II) such assets are not used in the
operation of the Nuggets Sub or the Avalanche Sub or the related Teams, and
(III) the Borrowing Base is reduced by the Net Cash Proceeds of each such Asset
Disposition, (iii) so long as there exists no Default or Event of Default both
before and after giving effect thereto the Borrower or any of its Subsidiaries
may sell the Capital Stock described on SCHEDULE 6.05 hereto, (iv) so long as
there exists no Default or Event of Default both before and after giving effect
thereto, the Borrower or the Denver Arena Company, LLC may sell the real estate
used for the Arena/Complex to the City and County of Denver, (v) so long as
there exists no Event of Default both before and after giving effect thereto,
any Wholly Owned Subsidiary of the Borrower may transfer all or any part of its
assets to the Borrower, and (vi) so long as there exists no Default or Event of
Default both before and after giving effect thereto, the Borrower may consummate
the sale leaseback transaction described on SCHEDULE 6.03 hereto.
Notwithstanding anything to the contrary herein or in any other Loan Paper,
under no circumstance may the Borrower or any Subsidiary of the Borrower sell,
dispose of or transfer any of the Capital Stock of On Command Corp. or any other
Capital Stock owned by the Borrower, any Subsidiary of the Borrower or On
Command Corp. and its Subsidiaries, except the Capital Stock described on
Schedule 6.05 hereto.
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its Capital Stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary of the Borrower
to purchase or acquire) any
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shares of any class of its Capital Stock or set aside any amount for any such
purpose; PROVIDED, HOWEVER, that (i) any Subsidiary of the Borrower may declare
and pay dividends or make other distributions to another Wholly Owned Subsidiary
or to the Borrower, (ii) the Borrower may declare and pay dividends or make
other distributions that consist solely of common stock of the Borrower, (iii)
the Borrower may make redemptions or repurchases of its Capital Stock in
connection with employee stock options upon termination of such employment, for
an aggregate amount of consideration paid from and after the date hereof of up
to $10,000,000, in connection with any employee stock option or incentive plans,
and (iv) the Borrower may make dividends of Preferred Stock in accordance with
the terms and provisions of Section 6.01(h) hereof.
SECTION 6.07. TRANSACTIONS WITH AFFILIATES. Except as permitted in
Section 6.06 hereof, the Borrower will not, and will not cause or permit any of
its Subsidiaries to, sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise engage in any other
transactions with, or permit any Subsidiary of the Borrower to sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise engage in any other transactions with any of its Affiliates
(including, without limitation, On Command Corp. and its Subsidiaries), except
that the Borrower or any Subsidiary of the Borrower may engage in any of the
foregoing transactions in the ordinary course of business as currently conducted
or to be conducted at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm's length basis
from unrelated third parties; PROVIDED, HOWEVER, that the foregoing shall not
preclude the Borrower nor any Subsidiary of the Borrower from performing and
complying with its obligations under (a) the COMSAT Agreements and the OCC
Agreements in accordance with the terms thereof on the date hereof or, so long
as any such amendment (or extension to additional services, in the case of the
Services Agreement) does not materially adversely affect the interests of the
Administrative Agent, the Issuing Bank or the Lenders, as the same may be
hereafter amended (or extended to additional services) or (b) the transactions
necessary to consummate the Corporate Restructuring. Notwithstanding anything
in this Agreement or the other Loan Papers to the contrary, it is understood by
all parties hereto that all or any of the COMSAT Agreements or OCC Agreements
may be terminated by the parties thereto at any time during the term of this
Agreement.
SECTION 6.08. LIMITATION ON RESTRICTIVE AGREEMENTS. The Borrower will
not, and will not cause or permit any of its Subsidiaries to, enter into any
indenture, agreement, instrument, financing document or other arrangement which,
directly or indirectly, contains any financial covenants or prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon: (a) the incurrence of Indebtedness, (b) the
granting of Liens, (c) the making or granting of Guarantees, (d) the payment of
dividends or distributions, (e) the purchase, redemption or retirement of any
Capital Stock, (f) the making of loans or advances, or (g) transfers or sales of
property or assets (including Capital Stock) by the Borrower or any of its
Subsidiaries, other than restrictions on the granting of Liens on, or the
transfer of, assets that are encumbered by Liens permitted under clauses (b),
(h) and (i) of Section 6.02 hereof with respect to the property or assets
covered by such Lien only, provided that, notwithstanding the foregoing, (i)
Denver Arena Company, LLC may enter into restrictive agreements relating
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solely to the Denver Arena Company, LLC and the Arena/Complex, each exclusively
in connection with the Non-Recourse Arena Financing, the Arena/Complex or the
interest of the City and County of Denver in the Arena/Complex, (ii) Beacon may
enter into restrictive agreements relating solely to Beacon, its Subsidiaries
and the related Motion Pictures invested in by Beacon and its Subsidiaries, each
exclusively in connection with Non-Recourse Film Indebtedness, (iii) the
Borrower may enter into any such restrictive agreements relating to any
Preferred Stock permitted under Section 6.01(h) hereof so long as no such
restrictive agreement shall be effective or binding on the Borrower or any of
its Subsidiaries until the earlier of (A) the Maturity Date and (B) the payment
in full of the Obligations and the termination of the Commitments, and (iv) in
connection with the issuance of Subordinated Indebtedness, the Borrower may
enter into restrictive agreements and provisions permitted by the terms set
forth in EXHIBIT F attached hereto and otherwise acceptable to Administrative
Agent and Required Lenders, but in no event shall any such restrictive
provisions be more restrictive than the provisions contained in this Agreement
and the other Loan Papers.
SECTION 6.09. COVERAGE RATIO. The Borrower will not permit the Coverage
Ratio as of the last day of any fiscal quarter ending during any period set
forth below to be less than the ratio set forth below for such period:
Quarter Ending Ratio Ratio
-------------------- -----
From the Closing Date to
through December 31, 1997 1.50 to 1.00
January 1, 1998 and thereafter 1.10 to 1.00
SECTION 6.10. FINANCIAL COVENANTS REGARDING ON COMMAND CORP. On Command
Corp. will meet each of the following covenants:
(a) Beginning with the fourth fiscal quarter of 1997, On Command
Corp.'s EBITDA, as of the last day of any fiscal quarter ending during the
term of this Agreement for the most recently completed four fiscal
quarters, may not be less than $50,000,000; and
(b) as of the last day of any fiscal quarter ending during any period
set forth below, the ratio of On Command Corp.'s (a) Consolidated Total
Indebtedness plus any Preferred Stock issued by On Command Corp. to (b)
EBITDA for the most recently completed four fiscal quarters may not exceed
the ratio set forth below for such period:
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Quarter Ending Ratio Ratio
-------------------- -----
Closing Date through 3.00 to 1.00
December 31, 1997
January 1, 1998 and 2.50 to 1.00
thereafter
In the event that On Command Corp. shall complete, directly or through
a Subsidiary of On Command Corp., a permitted acquisition, the ratio of
Consolidated Total Indebtedness of On Command Corp. to EBITDA of On Command
Corp. shall be determined thereafter, to the extent necessary, by computing
such ratio on a pro forma basis as if such acquisition had been completed
on the first day of the period of four consecutive fiscal quarters ending
on the dates indicated above occurring after the date of such acquisition.
SECTION 6.11. FILM INVENTORY. The Borrower will not, and will not cause
or permit any of its Subsidiaries to cause or permit, gross Film Inventory on
the balance sheet of the Borrower and its consolidated Subsidiaries less the sum
of (a) deferred revenues associated with such Film Inventory, plus (b)
contractually guaranteed pre-sales that have been secured to be more than
$60,000,000 at any time, provided that, the $60,000,000 limitation shall be
adjusted quarterly by increasing or decreasing such number by Film Cash Flow,
which such number shall remain as adjusted until the following quarter at which
point the $60,000,000 limitation shall be readjusted by Film Cash Flow.
SECTION 6.12. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS AND SUBORDINATED
INDEBTEDNESS DOCUMENTATION. The Borrower will not, and will not cause or permit
any of its Subsidiaries to, enter into any amendment of any term or provision,
or accept any consent or waiver with respect to any such provision, of (a) its
articles of incorporation, by-laws, or its organizational documents, as
applicable, in any manner that is material and adverse to the Lenders, and (b)
any agreement or other documentation related to the Subordinated Indebtedness.
ARTICLE VII
EVENTS OF DEFAULT
In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):
(a) any representation or warranty made or deemed made by the Borrower or
any of its Subsidiaries in or in connection with this Agreement or in any other
Loan Paper, or in connection with any agreement related to the Corporate
Restructuring or the borrowings or issuances of Letters of Credit hereunder; or
any representation, warranty, statement or written
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information contained in any report, certificate, financial statement or other
instrument prepared by the Borrower or any Subsidiary of the Borrower and
furnished by the Borrower or any Subsidiary of the Borrower in connection with
or pursuant to this Agreement or any other Loan Paper, shall prove to have been
false or misleading in any material respect when so made, deemed made or
furnished;
(b) default shall be made in the payment of any principal of any Loan or
the reimbursement of principal with respect to any L/C Disbursement when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or
any Fee or L/C Disbursement or any other amount (other than an amount referred
to in (b) above) due under this Agreement or any other Loan Paper, when and as
the same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of the Borrower or On Command Corp. or any of its
Subsidiaries, as applicable, of any covenant, condition or agreement contained
in Sections 5.01(a), 5.05 or 5.08 hereof or in Article VI hereof;
(e) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of the Borrower or On Command Corp. or any of its
Subsidiaries, as applicable, of any covenant, condition or agreement contained
in this Agreement (other than those specified in (b), (c) or (d) above) or in
any Loan Paper and such default shall continue unremedied for a period of 15
days after notice thereof from the Administrative Agent or any Lender to the
Borrower;
(f) the Borrower or any Subsidiary of the Borrower, or On Command Corp. or
any Subsidiary of On Command Corp. shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of $10,000,000, when and as the same shall become due
and payable, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or instrument evidencing or
governing any such Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such indebtedness
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Indebtedness to become due prior to its
stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower, any Subsidiary of the Borrower or On Command Corp.
or any Subsidiary of On Command Corp., or of a substantial part of the property
or assets of the Borrower, a Subsidiary of the Borrower or On Command Corp. or a
Subsidiary of On Command Corp., under Title 11 of the United States
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Code, as now constituted or hereafter amended, or any other Federal, state or
foreign bankruptcy, insolvency, receivership or similar Law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower, any Subsidiary of the Borrower or On Command
Corp. or any Subsidiary of On Command Corp. or for a substantial part of the
property or assets of the Borrower, a Subsidiary of the Borrower or On Command
Corp. or a Subsidiary of On Command Corp. or (iii) the winding-up or liquidation
of the Borrower, any Subsidiary of the Borrower or On Command Corp. or any
Subsidiary of On Command Corp.; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(h) the Borrower, any Subsidiary of the Borrower or On Command Corp. or
any Subsidiary of On Command Corp. shall (i) voluntarily commence any proceeding
or file any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar Law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower, any Subsidiary of the Borrower
or On Command Corp. or any Subsidiary of On Command Corp. or for a substantial
part of the property or assets of the Borrower, any Subsidiary of the Borrower
or On Command Corp. or any Subsidiary of On Command Corp., (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any action for the purpose of effecting any of
the foregoing;
(i) one or more judgments for the payment of money in an aggregate amount
in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary
of the Borrower or On Command Corp. or any Subsidiary of On Command Corp., or
any combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively stayed, or
any action shall be legally taken by a judgment creditor to levy upon assets or
properties of the Borrower, or any Subsidiary of the Borrower or On Command
Corp. or any Subsidiary of On Command Corp. to enforce any such judgment;
(j) an ERISA Event shall have occurred that, when taken together with all
other such ERISA Events, could reasonably be expected to result in liability of
the Borrower, any Subsidiary of the Borrower or On Command Corp. or any
Subsidiary of On Command Corp., or any combination thereof, in an aggregate
amount exceeding $10,000,000;
(k) there shall have occurred a Change in Control of the Borrower; or the
Borrower shall fail to own directly or indirectly, beneficially or of record,
shares of Capital Stock of On Command Corp. representing 50.1% or more of the
aggregate ordinary voting power of On Command Corp.; or the Borrower shall fail
to control, directly or indirectly, a majority of the Board of Directors of On
Command Corp., provided that, if the Borrower fails to own directly
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or indirectly beneficially or of record shares of Capital Stock of On Command
Corp. representing less than 50.1% but more than 45%, and such failure is not a
result of the sale by the Borrower or any of its Subsidiaries of any such shares
of Capital Stock, no Default or Event of Default shall occur under this
subsection (k) until such date that is 30 days after the date of occurrence;
(l) On Command Corp. or any of its Subsidiaries shall: (i) fail to pay any
principal or interest, regardless of amount, due in respect of the On Command
Corp. Loan Facility, when and as the same shall become due and payable taking
into account any applicable period of grace thereunder, or (ii) fail to observe
or perform any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing the On Command Corp. Loan
Facility if the effect of any failure referred to in this clause (ii) is to
cause, or to permit the holder or holders of such indebtedness or a trustee on
its or their behalf (with or without the giving of notice, the lapse of time or
both) to cause, such Indebtedness to become due prior to its stated maturity;
(m) any of the following shall occur: (i) This Agreement, any pledge
agreement, guarantee or promissory note executed in connection with this
Agreement (collectively, the "Material Agreements"), or any material provision
of any thereof shall, for any reason, not be valid and binding on the Obligor
signatory thereto, or not be in full force and effect, or shall be declared to
be null and void; or (ii) the validity or enforceability of any Material
Agreement shall be contested by any Obligor, any Subsidiary of the Borrower, or
On Command Corp. or any of its Subsidiaries, or any of their Affiliates; or
(iii) any Obligor shall deny in writing that it has any or further liability or
obligation under its respective Material Agreements; or (iv) any default or
breach under any provision of any Material Agreement shall continue after the
applicable grace period, if any, specified in such Material Agreement;
(n) any of the following shall have occurred: (i) Any Loan Paper shall
for any reason (other than pursuant to the terms thereof) cease to create a
valid and perfected first priority Lien in the Collateral purported to be
covered thereby (except as permitted by the terms of this Agreement or consented
to by the Lenders); or (ii) at any time after the date that is 90 days after the
Closing Date, less than 100% of the Capital Stock of all of the Subsidiaries of
the Borrower shall be pledged to secure the Obligations, or (iii) less than all
of the issued and outstanding Capital Stock of On Command Corp. that is owned by
the Borrower or any Subsidiary of the Borrower shall be pledged to secure the
Obligations;
(o) there shall be a breach, violation or default under any material
provision of any of the NBA Documents or the NHL Documents, or any other
material agreement relating to the operation of either Franchise; or either the
NBA Franchise or the NHL Franchise is transferred, sold, or the governing bodies
of either the NBA or the NHL shall dissolve, or no longer function as a
governing body, or either league shall fail to continue substantially in
accordance with past practices; or any material contract with any international,
regional or local company which has a television, radio or cable-related
contractual relationship with the NBA, the NHL, Nuggets Sub, Avalanche Sub or
the Sports Subs, or with any other Person for the benefit of Nuggets Sub,
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Avalanche Sub, the NBA Franchise or the NHL Franchise shall be violated,
breached or in default, or any such Person party thereto shall fail to honor any
such contract, if the effect of such failure results or could reasonably be
expected to have a Material Adverse Effect; or the NBA or NHL shall enter into a
collective bargaining agreement or change its governing agreements and documents
binding the NBA Franchise or the NHL Franchise in a manner which could
reasonably be expected to have a material adverse effect on Nuggets Sub,
Avalanche Sub, the Sports Subs or the Borrower, or materially and adversely
affect the Borrower's ability to perform and meet the terms of this Agreement
and the other Loan Papers, provided that, in any case, if the sum of (A) fair
market value of the Capital Stock of On Command Corp. owned directly or
indirectly by the Borrower on such date, plus (B) 50% the fair market value of
the unaffected Franchise on the Closing Date is in excess of $250,000,000, there
shall exist no Default or Event of Default under the terms of this
subsection (o);
(p) there shall occur either of the following events: (i) failure of
construction to begin on the Arena/Complex prior to August 31, 1997; or (ii) the
commencement of construction on the Arena/Complex at any time pursuant to terms,
conditions, plans, budget or financing that are not substantially similar in the
aggregate to those set forth in that certain letter from Mr. W.D. Minami of the
Borrower to Mr. G. Meador of the Administrative Agent, dated as of October 2,
1996, provided that, to the extent the Borrower has fully complied with the
provisions of Section 5.16 hereof and the Required Lenders did not object in
writing prior to the date ten Business Days before the proposed date of
construction that such plans are not substantially similar to those set forth
above, then any such plans disclosed in accordance with the terms of Section
5.16 hereof shall be deemed to be acceptable to the Required Lenders;
(q) either (i) there shall occur any sale of a majority or greater
interest in any franchise under the NHL for an aggregate purchase price that is
less than $35,000,000 (which shall be grossed up to reflect a 100% interest in
such franchise and shall include in the amount of consideration paid any
franchise transfer or relocation fees assessed or imposed by the NHL as a
condition to such sale); or (ii) the average price of all such sales (and in any
event at least two such sales) made subsequent to the Closing Date (which shall
be grossed up to reflect a 100% interest in such franchise and shall include in
the amount of consideration paid any franchise transfer or relocation fees
assessed or imposed by the NHL as a condition to such sale), shall be less than
$55,000,000, provided that, in either case, if the sum of (A) fair market value
of the Capital Stock of On Command Corp. owned directly or indirectly by the
Borrower on such date, plus (B) 50% of the fair market value of the NBA
Franchise on the Closing Date is in excess of $250,000,000, there shall exist no
Default or Event of Default under the terms of this subsection (q);
(r) either (i) there shall occur any sale of a majority or greater
interest in any franchise under the NBA for an aggregate purchase price that is
less than $45,000,000 (which shall be grossed up to reflect a 100% interest in
such franchise and shall include in the amount of consideration paid any
franchise transfer or relocation fees assessed or imposed by the NBA as a
condition to such sale); or (ii) the average price of all such sales (and in any
event at least two
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such sales) made subsequent to the Closing Date (which shall be grossed up to
reflect a 100% interest in such franchise and shall include in the amount of
consideration paid any franchise transfer or relocation fees assessed or imposed
by the NBA as a condition to such sale), shall be less than $70,000,000,
provided that, in either case, if the sum of (A) fair market value of the
Capital Stock of On Command Corp. owned directly or indirectly by the Borrower
on such date, plus (B) 50% of the fair market value of the NHL Franchise on the
Closing Date is in excess of $250,000,000, there shall exist no Default or Event
of Default under the terms of this subsection (r);
(s) there shall occur any amendment to any NBA Document or NHL Document
which could reasonably be expected to result in a Material Adverse Effect;
(t) either of the following events shall have occurred: (i) the Borrower
shall not have received the written consent of the NBA regarding the
Transactions by April 30, 1997 (including, without limitation, a written consent
giving the Administrative Agent and Lenders the right to assign any portion of
the Obligations and their rights hereunder and under the Loan Papers pursuant to
Section 9.04 hereof); or (ii) the Borrower shall not have received the written
consent of the NHL regarding the Transactions by April 30, 1997 (including,
without limitation, a written consent giving the Administrative Agent and
Lenders the right to assign any portion of the Obligations and their rights
hereunder and under the Loan Papers pursuant to Section 9.04 hereof);
(u) the Borrower and its Subsidiaries shall have failed by April 30, 1997,
to either (i) pledge 100% of the Capital Stock of Ascent Sports, Avalanche Sub,
Nuggets Sub and Ascent Network Services, Inc. to the Administrative Agent to
secure the Obligations by amending the schedules to the existing pledge
agreement, or (ii) deliver such pledge agreement(s) together with all stock
certificates evidencing such pledged stock and stock powers executed in blank to
the Administrative Agent; or
(v) at any time that the debt limitation on the Borrower in the Corporate
Agreement with COMSAT operates to limit the ability of the Borrower to make a
borrowing hereunder at a time when the Borrower needs such ability to meet
operating expenses or capital requirements in each case approved by the
Borrower's Board of Directors (as such approval may be amended), provided that,
no amendment to any such approval may be made once operating expenses or capital
requirements have been incurred or made, or to avoid a Default or an Event of
Default under this subsection (v);
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and
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payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder, shall become forthwith
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding or (iii) require cash
collateral as contemplated by Section 2.20(j) hereof; and in any event with
respect to the Borrower described in paragraph (g) or (h) above, the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest hereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding.
(w) the Borrower or any Subsidiary fails to provide to Administrative
Agent for the benefit of Lenders any documentation necessary for Administrative
Agent to perfect a security interest in the Collateral, including but not
limited to, (i) an affirmation of Guarantee, (ii) an affirmation of each pledge
agreement, (iii) re-issuance of any necessary stock certificates, (iv) execution
of stock powers, (v) execution of stop transfer letters and (vi) execution of
Article 8 letters, by March 31, 1997.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement and
the other Loan Papers, NationsBank is hereby appointed to act as Administrative
Agent on behalf of the Lenders and the Issuing Bank. Each of the Lenders and
each assignee of any such Lender, hereby irrevocably authorizes the
Administrative Agent to take such actions on behalf of such Lender or assignee
or the Issuing Bank and to exercise such powers as are specifically delegated to
the Administrative Agent by the terms and provisions hereof, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Bank,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Issuing Bank all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders hereunder, and promptly to distribute to each Lender or the Issuing
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower pursuant to this Agreement and the other Loan Papers as received by the
Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or
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representation herein or the contents of any document delivered in connection
herewith, or be required to ascertain or to make any inquiry concerning the
performance or observance by the Borrower of any of the terms, conditions,
covenants or agreements contained herein. The Administrative Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement, the other Loan Papers or any
other instruments or agreements. The Administrative Agent shall in all cases be
fully protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. The Administrative Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper Person or Persons. Neither the
Administrative Agent nor any of its directors, officers, employees or agents
shall have any responsibility to the Borrower on account of the failure of or
delay in performance or breach by any Lender or the Issuing Bank of any of its
obligations hereunder or to any Lender or the Issuing Bank on account of the
failure of or delay in performance or breach by any other Lender or the issuing
Bank or the Borrower of any of their respective obligations hereunder or in
connection herewith. The Administrative Agent may execute any and all duties
hereunder by or through agents or employees and shall be entitled to rely upon
the advice of legal counsel selected by it with respect to all matters arising
hereunder and shall not be liable for any action taken or suffered in good faith
by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement or any other Loan Paper unless it shall be
requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor. If no successor shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a bank having a
combined capital and surplus of at least $500,000,000 or an Affiliate of any
such bank. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After the Administrative Agent's
resignation hereunder, the provisions of this Article and Section 9.05 hereof
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Administrative Agent.
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With respect to the Loans made by it hereunder, the Administrative Agent in
its individual capacity and not as Administrative Agent shall have the same
rights and powers as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or any Subsidiary of the Borrower or On
Command Corp. or any of its Subsidiaries, or other Affiliate thereof as if it
were not the Administrative Agent.
Each Lender agrees (a) to reimburse the Administrative Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Administrative Agent,
including reasonable counsel fees and compensation of agents and employees paid
for services rendered on behalf of the Lenders, that shall not have been
reimbursed by the Borrower and (b) to indemnify and hold harmless the
Administrative Agent and any of its directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be Imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Paper or any action taken or omitted by it or
any of them under this Agreement or any other Loan Paper, to the extent the same
shall not have been reimbursed by the Borrower; provided that no Lender shall be
liable to the Administrative Agent or any such other indemnified Person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of the Administrative Agent or any of
its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent, or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Papers. Each Lender
also acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement
and the other Loan Papers, or any related agreement or any document furnished
hereunder or thereunder.
THE LENDERS, IN ACCORDANCE WITH THEIR TOTAL SPECIFIED PERCENTAGES, HEREBY
AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND THE ISSUING BANK, IN THEIR
CAPACITY AS ADMINISTRATIVE AGENT AND ISSUING BANK, FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE
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ADMINISTRATIVE AGENT OR THE ISSUING BANK IN THEIR CAPACITY AS ADMINISTRATIVE
AGENT OR ISSUING BANK, IN ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN PAPERS
OR ANY OTHER DOCUMENTS OR INSTRUMENTS EXECUTED OR DELIVERED IN CONNECTION WITH
THIS AGREEMENT, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT
THEREUNDER OR THE ISSUING BANK THEREUNDER, INCLUDING ANY NEGLIGENCE OF THE
ADMINISTRATIVE AGENT OR THE ISSUING BANK; PROVIDED, HOWEVER, THAT NO LENDER
SHALL BE LIABLE TO THE ADMINISTRATIVE AGENT OR ISSUING BANK, RESPECTIVELY, FOR
ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE
ADMINISTRATIVE AGENT'S OR ISSUING BANK'S, RESPECTIVELY, GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, THE LENDERS AGREE TO
REIMBURSE THE ADMINISTRATIVE AGENT OR THE ISSUING BANK, AS APPROPRIATE, IN
ACCORDANCE WITH EACH SUCH LENDER'S TOTAL SPECIFIED PERCENTAGE, PROMPTLY UPON
DEMAND FOR ANY REASONABLE OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES)
INCURRED BY THE ADMINISTRATIVE AGENT OR ISSUING, IN ITS CAPACITY AS A
ADMINISTRATIVE AGENT OR ISSUING BANK RESPECTIVELY, IN CONNECTION WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR
ENFORCEMENT (WHETHER THROUGH NEGOTIATION, LEGAL PROCEEDINGS OR OTHERWISE) OF, OR
LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN PAPERS,
PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE TO THE ADMINISTRATIVE AGENT OR
ISSUING BANK, RESPECTIVELY, FOR ANY PORTION OF SUCH OUT-OF-POCKET EXPENSES
RESULTING FROM THE ADMINISTRATIVE AGENT'S OR ISSUING BANK'S, RESPECTIVELY, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. TO THE EXTENT THE ADMINISTRATIVE AGENT OR
ISSUING BANK RECOVERS ANY AMOUNT FROM THE BORROWER WHICH HAS BEEN PAID BY THE
LENDERS PURSUANT TO THE TERMS OF THIS ARTICLE VIII, ADMINISTRATIVE AGENT OR
ISSUING BANK AGREES TO REIMBURSE THE LENDERS IN THEIR TOTAL SPECIFIED
PERCENTAGES TO THE EXTENT OF SUCH RECOVERY. THE INDEMNITY PROVIDED IN THIS
SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
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(a) if to the Borrower, to it at:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Chief Operating Officer & Executive Vice President
of Finance
Telephone: (303) 626-7010
Telecopy No.: (303) 595-0823
With a copy to:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: Arthur Aaron, Esq.
Vice President-Business & Legal Affairs/Corporate
Secretary
Telephone: (303) 626-7040
Telecopy No.: (303) 595-0127
(b) if to the Administrative Agent, to it at:
NationsBank of Texas, National Association
NationsBank Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Telephone No.: (214) 508-0860
Telecopier No.: (214) 508-9390
Attention: Mr. Gregory I. Meador
Vice President
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With a copy to:
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Telephone No.: (214) 698-3814
Telecopier No.: (214) 744-0231
Attention: Melissa Ruman Stewart
(c) if to a Lender, to it at its address (or telecopy number) set forth on
the signature pages hereto or in the Assignment and Acceptance pursuant to which
such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement and the other Loan Papers shall be deemed
to have been given on the date of receipt if delivered by hand or overnight
courier service or sent by telecopy or on the date five Business Days after
dispatch by certified or registered mail if mailed, in each case delivered, sent
or mailed (properly addressed) to such party as provided in this Section 9.01 or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement and the other Loan Papers shall be considered to have
been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Paper is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.12. 2.14, 2.18 and 9.05
hereof shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Paper, or any investigation made by or on behalf of the Administrative Agent,
any Lender or the Issuing Bank.
SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
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SECTION 9.04. SUCCESSORS AND ASSIGNS.
(a) Whenever in this Agreement or any other Loan Paper any of the parties
hereto is referred to, such reference shall be deemed to include the permitted
successors and assigns of such party, and all covenants, promises and agreements
by or on behalf of the Borrower, the Administrative Agent, the Issuing Bank or
the Lenders that are contained in this Agreement and the other Loan Papers shall
bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement and the
other Loan Papers (including all or a portion of its Commitment and the
Revolving Loans or the Term Loan at the time owing to it); PROVIDED, HOWEVER,
that (i) except in the case of an assignment to a Lender or an Affiliate of such
Lender, (x) the Borrower and the Administrative Agent (and, in the case of any
assignment of a Commitment, the Issuing Bank) must give their prior written
consent to such assignment (which consent shall not be unreasonably withheld)
and (y) the amount of the Commitment or Term Loan of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 (or, if less, the entire remaining
amount of such Lender's Commitment or Term Loan) and will not result in the
unassigned portion, if any, of the assigning Lender's Commitment or Term Loan
being less than $5,000,000 (provided, however, that the $5,000,000 amounts
referred to in this clause (i) shall be reduced ratably in accordance with any
reductions in the Total Commitment) (ii) the parties to each such assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, together with a processing and recordation fee of $3,500 and (iii)
the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire. Upon acceptance and recording pursuant
to paragraph (e) of this Section 9.04, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and the other Loan Papers and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement and the other
Loan Papers (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement and the other Loan Papers, such Lender shall cease to be a party
hereto and to the Loan Papers, but shall continue to be entitled to the benefits
of Sections 2.12, 2.14, 2.18 and 9.05 hereof, as well as to any Fees accrued for
its account and not yet paid). The Borrower shall, at its expense, issue to the
assignor and assignee new promissory notes, as applicable, in the respective
amounts of each such Lender's Applicable Specified Percentage in the Loans, each
in the form of the promissory notes delivered by the Borrower on the Closing
Date.
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(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitment, the outstanding balances of its Revolving Loans, and the
outstanding balance of its Term Loan in each case without giving effect to
assignments thereof which have nor become effective, are as set forth in such
Assignment and Acceptance; (ii) except as set forth in (i) above, such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or any other Loan Paper, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Loan Paper, or any other instrument or document furnished
pursuant hereto, or the financial condition of the Borrower or any Subsidiary of
the Borrower or On Command Corp. or any Subsidiary of On Command Corp., or the
performance or observance by the Borrower, any Subsidiary of the Borrower or On
Command Corp. or any Subsidiary of On Command Corp. of any of its obligations
under this Agreement or any other Loan Paper, or any other instrument or
document furnished pursuant hereto; (iii) such assignee represents and warrants
that it is legally authorized to enter into such Assignment and Acceptance; (iv)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements referred to in Section 3.05
or delivered pursuant to Section 5.04 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (v) such assignee will independently
and without reliance upon the Administrative Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Papers; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Loan Papers as are delegated to the Administrative Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Agreement and the
other Loan Papers are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at its offices in Dallas, Texas a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "REGISTER"). The entries in the Register shall be conclusive and
the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement and the other
Loan Papers, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
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(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Issuing
Bank and the Administrative Agent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Lenders and the Issuing Bank. No assignment shall be effective unless it has
been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Issuing Bank
or the Administrative Agent sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
and the other Loan Papers (including all or a portion of its Commitment and the
Loans owing to it); PROVIDED, HOWEVER, that (i) such Lender's obligations under
this Agreement and the other Loan Papers shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other entities
shall be entitled to the benefit of the cost protection provisions contained in
Sections 2.12, 2.14 and 2.18 hereof to the same extent as if they were Lenders
and (iv) the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Papers, and such Lender shall retain the sole right to enforce
the obligations of the Borrower relating to the Loans or L/C Disbursements and
to approve any amendment, modification or waiver of any provision of this
Agreement and the other Loan Papers (other than amendments, modifications or
waivers decreasing any fees payable hereunder or the amount of principal of or
the rate at which interest is payable on the Loans, extending any scheduled
principal payment date or date fixed for the payment of interest on the Loans or
increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04. disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; PROVIDED that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16 hereof.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement and the other Loan Papers to a Federal Reserve Bank to
secure extensions of credit by such Federal Reserve Bank to such Lender;
PROVIDED that no such assignment shall release a Lender from any of its
obligations hereunder or substitute any such Bank for such Lender as a party
hereto. In order to facilitate such an assignment to a Federal Reserve Bank,
the Borrower shall, at the request of the assigning Lender, duly execute and
deliver to the assigning Lender a
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promissory note or notes evidencing the Loans made to the Borrower by the
assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc., Moody's Investors Service, Inc., and Thompson's BankWatch (or
Insurance Watch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall, after the date that any Lender
becomes a Lender, downgrade the longterm certificate deposit ratings of such
Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of a Lender that is an insurance company (or B, in the case of an insurance
company not rated by Insurance Watch Ratings Service)), then the Issuing Bank
shall have the right, but not the obligation, at its own expense, upon notice to
such Lender and the Administrative Agent, to replace (or to request the Borrower
to use its reasonable efforts to replace) such Lender with an assignee (in
accordance with and subject to the restrictions contained in paragraph (b)
above), and such Lender hereby agrees to transfer and assign without recourse
(in accordance with and subject to the restrictions contained in paragraph (b)
above) all its interests, rights and obligations in respect of its Commitment or
the Term Loan to such assignee; PROVIDED, HOWEVER, that (i) no such assignment
shall conflict with any Law, rule and regulation or order of any Governmental
Authority and (ii) the Issuing Bank or such assignee, as the case may be, shall
pay to such Lender in immediately available funds on the date of such assignment
the principal of and interest accrued to the date of payment on the Loans made
by such Lender hereunder and all other amounts accrued for such Lender's account
or owed to it hereunder.
SECTION 9.05. EXPENSES; INDEMNITY.
(a) The Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Administrative Agent and the Issuing Bank in connection with the
syndication of the credit facilities provided for herein and the preparation and
administration of this Agreement and the other Loan Papers or in connection with
any amendments, modifications or waivers of the provisions hereof (whether or
not the transactions hereby or thereby contemplated shall be consummated) or
incurred by the Administrative Agent or any Lender in connection with the
enforcement or protection of its rights in connection with this Agreement and
the Loan Papers, or in connection with the Loans made or Letters of Credit
issued hereunder, including the reasonable fees, charges and disbursements of
Donohoe, Jameson & Carroll, P.C., counsel for the Administrative Agent, and, in
connection with any such enforcement or protection, the reasonable fees, charges
and disbursements of any other counsel for the Administrative Agent or any
Lender.
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(b) The Borrower agrees to indemnify the Administrative Agent, each Lender
and the Issuing Bank, each Affiliate of any of the foregoing Persons and each of
their respective directors, officers, employees and agents (each such Person
being called an "INDEMNITEE") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement and the other Loan
Papers or any agreement or instrument contemplated thereby, the performance by
the parties thereto of their respective obligations thereunder or the
consummation of the Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or issuance of Lenders of
Credit, (iii) the Corporate Restructuring or any transactions connected
therewith or (iv) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of, or
breach of contract by, such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
other Loan Papers, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement, any other Loan Paper, or any investigation made by
or on behalf of the Administrative Agent, any Lender or the Issuing Bank. All
amounts due under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement and the other Loan
Papers held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Lender
may have.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN PAPERS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS (EXCEPT, IN THE CASE OF CERTAIN OF THE OTHER LOAN PAPERS, TO THE EXTENT
THE LAWS OF ANOTHER JURISDICTION GOVERN THE PERFECTION AND EFFECT OF PERFECTION
OR NON-PERFECTION OF, CERTAIN LIENS). EACH LETTER OF CREDIT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN
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SUCH LETTER OF CREDIT OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM
CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL
CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO
MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF TEXAS.
SECTION 9.08. WAIVERS; AMENDMENT.
(a) No failure or delay of the Administrative Agent, any Lender or the
Issuing Bank in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or any other Loan Paper, or consent to any departure
by the Borrower therefrom shall in any event be effective unless the same shall
be permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof or in any other Loan
Paper may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required Lenders;
PROVIDED, HOWEVER, that no such agreement shall (i) decrease the principal
amount of, or extend the maturity of or any scheduled principal payment date or
date for the payment of any interest on any Loan or any date for reimbursement
of an L/C Disbursement, or waive or excuse any such payment or any part thereof,
or decrease the rate of interest on any Loan or L/C Disbursement, without the
prior written consent of each Lender affected thereby (ii) change or extend the
Commitment or decrease the Commitment Fees or the Facility Fees of any Lender
without the prior written consent of such Lender, or (iii) amend or modify the
provisions of Sections 2.15 or 9.04(i) hereof, the provisions of this Section or
the definition of the term "Required Lenders", without the prior written consent
of each Lender; PROVIDED FURTHER that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or the Issuing
Bank hereunder without the prior written consent of the Administrative Agent or
the Issuing Bank, and PROVIDED FURTHER that to the extent any Wholly Owned
Subsidiary is merged into the Borrower, the Administrative Agent is authorized
by each Lender to release (i) all Capital Stock of such merged Wholly Owned
Subsidiary pledged to secure the Obligations and (ii) any guarantee of the
Obligations hereunder executed by any such merged Wholly Owned Subsidiary.
SECTION 9.09. INTEREST RATE LIMITATION. It is not the intention of any
party to any Loan Papers to make an agreement violative of the Laws of any
applicable jurisdiction relating to usury. In no event shall the Borrower or
any other Person be obligated to pay any amount in
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excess of the Maximum Amount. If the Administrative Agent or any Lender ever
receives, collects or applies, as interest, any such excess, such amount which
would be excessive interest shall be deemed a partial repayment of principal and
treated hereunder as such; and if principal is paid in full, any remaining
excess shall be paid to the Borrower or the other Person entitled thereto. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, each Obligor, the Administrative Agent
and each Lender shall, to the maximum extent permitted under Applicable Law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effect thereof, and (c)
amortize, prorate, allocate and spread in equal parts, the total amount of
interest throughout the entire contemplated term of the Obligation so that the
interest rate is uniform throughout the entire term of the Obligation; PROVIDED
that if the Obligation is paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, the Administrative Agent
or Lenders, as appropriate, shall refund to the Borrower the amount of such
excess or credit the amount of such excess against the total principal amount
owing, and, in such event, neither the Administrative Agent nor any Lender shall
be subject to any penalties provided by any Laws for contracting for, charging
or receiving interest in excess of the Maximum Amount. This SECTION 9.09 shall
control every other provision of all agreements among the parties to the Loan
Papers pertaining to the transactions contemplated by or contained in the Loan
Papers.
SECTION 9.10. NBA CONSENT LETTER AND NHL CONSENT LETTER. Each of the Loan
Papers will be subject to the provisions of the NBA Consent Letter and the NHL
Consent Letter from and after the date on which each is obtained. Without
limiting the generality of the preceding sentence, neither the Administrative
Agent nor any Lender (whether acting through the Administrative Agent or
otherwise) shall exercise, enforce or attempt to exercise or enforce any of its
rights or remedies under any of the Loan Papers except in accordance with and
subject to the NBA Consent Letter and the NHL Consent Letter. Each Lender
hereby irrevocably authorizes, and each holder of any promissory note by the
acceptance of such note shall be deemed irrevocably to authorize, the
Administrative Agent to execute, deliver and perform on its behalf the NBA
Consent Letter, the NHL Consent Letter and all amendments, modifications,
extensions, waivers and other acts in connection with the NBA Consent Letter and
the NHL Consent Letter as the Administrative Agent shall deem appropriate, and
all third parties shall be entitled to rely on the Administrative Agent's taking
of any such action or execution of any such document as conclusive evidence of
its authority to do so on behalf of the Lenders.
SECTION 9.11. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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SECTION 9.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN PAPER. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN PAPERS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.
SECTION 9.13. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Paper should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.14. COUNTERPARTS. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
9.03 hereof. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
SECTION 9.15. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.16. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any Texas State
court or Federal court of the United States of America sitting in Dallas, Texas
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or any other Loan Paper, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard
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and determined in such Texas State or, to the extent permitted by Law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
Nothing in this Agreement or in any other Loan Paper shall affect any right that
the Administrative Agent, the Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Paper against the Borrower or its properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Paper in any
Dallas, Texas State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement and any other Loan Paper irrevocably
consents to service of process in the manner provided for notices in Section
9.01 hereof. Nothing in this Agreement or any other Loan Paper will affect the
right of any party to this Agreement or any other Loan Paper to serve process in
any other manner permitted by Law.
SECTION 9.17. CONFIDENTIALITY. The Administrative Agent, the Issuing Bank
and each of the Lenders agrees to keep confidential (and to use its best efforts
to cause its respective agents and representatives to keep confidential) the
Information (as defined below) and all copies thereof, extracts therefrom and
analyses or other materials based thereon, except that the Administrative Agent,
the Issuing Bank or any Lender shall be permitted to disclose Information (a) to
such of its respective officers, directors, employees, agents, affiliates and
representatives as need to know such Information, (b) to the extent requested by
any regulatory authority, (c) to the extent otherwise required by Applicable
Laws and regulations or by any subpoena or similar legal process, (d) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or (e) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 9.17 or (ii)
becomes available to the Administrative Agent the Issuing Bank or any Lender on
a nonconfidential basis from a source other than the Borrower. For the purposes
of this Section, "INFORMATION" shall mean all financial statements,
certificates, reports, agreements and information (including all analyses,
compilations and studies prepared by the Administrative Agent, the Issuing Bank
or any Lender based on any of the foregoing) that are received from the Borrower
and related to the Borrower, any shareholder of the Borrower or any employee,
customer or supplier of the Borrower, other than any of the foregoing that were
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to its disclosure thereto by the Borrower, and which
are in the case of Information provided after the date hereof, clearly
identified at the time of delivery as confidential. The provisions of this
Section 9.17 shall remain operative and in full force and effect regardless of
the expiration and term of this Agreement.
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SECTION 9.18. PROPOSED MERGER OF ASCENT NETWORK SERVICES, INC.. The
parties hereto acknowledge that the Borrower currently anticipates that it may
desire to merge or consolidate Ascent Network Services, Inc. into the Borrower
(the "Proposed Merger"), or to dividend or distribute all or substantially all
of the assets of Ascent Network Services, Inc. to the Borrower (the "Proposed
Distribution") on some future date (maintaining the Borrower as the surviving
corporation). Notwithstanding any term or provision in this Agreement or in any
Loan Paper to the contrary, each Lender agrees that, so long as there exists no
Event of Default both before and immediately after giving effect to such
Proposed Merger or Proposed Distribution, as the case may be, the Borrower shall
be permitted to consummate such Proposed Merger or Proposed Distribution. Each
Lender further agrees that the Administrative Agent is hereby authorized, upon
the consummation of any such Proposed Merger, to release and/or cancel the
Guarantee of Ascent Network Services, Inc. of the Obligations hereunder, and to
release the Capital Stock of Ascent Network Services, Inc. that was pledged by
the Borrower to secure the Obligations hereunder. As a further condition to
each Lender's consent to any Proposed Merger or Proposed Distribution, at such
time as the Proposed Merger or Proposed Distribution becomes effective, Borrower
agrees to provide the Administrative Agent with a collateral assignment of the
NBC Contract, or a Lien on the NBC Contract (or on the proceeds thereof and
rights of Ascent Network Services, Inc. therein), in form and substance
satisfactory to the Administrative Agent, to the extent permitted by Applicable
Law and the terms and provisions of the NBC Contract.
SECTION 9.19 AMENDMENT, RESTATEMENT, EXTENSION AND RENEWAL. This
Agreement is a renewal, extension, amendment and restatement of that certain
Existing Credit Agreement, and as such, except for the "Obligations" as defined
in the Existing Credit Agreement (which shall survive, be renewed, extended and
restated by the terms of this Agreement), all other terms and provisions
supersede in their entirety the Existing Credit Agreement. All Loan Papers
executed and delivered in connection with this Agreement shall, to the extent
stated therein, supersede the Loan Papers executed and delivered in connection
with the Existing Credit Agreement (the "Original Loan Papers"), except for the
Liens created under the Original Loan Papers which shall remain valid, binding
and enforceable Liens against the Borrower and each of the Guarantors, as
applicable, and each of the other Persons which granted such Liens.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
94
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE BORROWER: ASCENT ENTERTAINMENT GROUP, INC.,
/s/ JAMES A. CRONIN, III
---------------------------------------------
By: James A. Cronin, III
Its: Chief Operating Officer & Executive Vice
President of Finance
THE ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent
/s/ GREGORY I. MEADOR
---------------------------------------------
By: Gregory I. Meador
Its: Vice President
THE LENDERS:
REVOLVING LOAN SPECIFIED NATIONSBANK OF TEXAS, NATIONAL
PERCENTAGE ON THE CLOSING: ASSOCIATION, individually as a Lender
DATE: 100%
Address:
901 Main Street
64th Floor
Dallas, Texas 75202
/s/ GREGORY I. MEADOR
---------------------------------------------
By: Gregory I. Meador
Attn: Gregory I. Meador Its: Vice President
Telephone: (214) 508-0860
Telecopy: (214) 508-9390
95
<PAGE>
TERM LOAN SPECIFIED NATIONSBANK OF TEXAS, NATIONAL
PERCENTAGE ON THE CLOSING: ASSOCIATION, individually as a Lender
DATE: 100%
Address:
901 Main Street
64th Floor
Dallas, Texas 75202
/s/ GREGORY I. MEADOR
---------------------------------------------
By: Gregory I. Meador
Attn: Gregory I. Meador Its: Vice President
Telephone: (214) 508-0860
Telecopy: (214) 508-9390
96
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$125,000,000
CREDIT AGREEMENT
DATED AS OF OCTOBER 8, 1996
AMONG
ON COMMAND CORPORATION
AS THE BORROWER
AND
THE LENDERS NAMED HEREIN
AND
NATIONSBANK OF TEXAS, N.A.
AS THE ADMINISTRATIVE AGENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Form of Administrative Questionnaire
Exhibit B - Form of Assignment and Acceptance
Exhibit C - Form of Borrowing Request
Exhibit D-1 - Form of Competitive Bid Request
Exhibit D-2 - Form of Notice of Competitive Bid Request
Exhibit D-3 - Form of Competitive Bid
Exhibit D-4 - Form of Competitive Accept/Reject Letter
Exhibit E - Form of Application for a Letter of Credit
Exhibit F - Form of Compliance Certificate
SCHEDULES
Schedule 2.01(a) - Short Term Commitments
Schedule 2.01(b) - Long Term Commitments
Schedule 3.08 - Subsidiaries
Schedule 3.09 - Litigation
Schedule 3.10 - Restrictive Material Agreements
Schedule 3.14 - Taxes Owed by Spectradyne and SpectraVision
Schedule 3.16 - ERISA Disclosure
Schedule 3.18 - Insurance
Schedule 3.20 - Environmental Matters
Schedule 4.02(h) - Certain Spectradyne FCC Licenses not Transferred
Schedule 6.01 - Subsidiary Indebtedness
Schedule 6.02 - Liens
Schedule 6.04 - Investments
Schedule 7.0 - Modification of the Reorganization Plan
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.03. Competitive Bid Procedure . . . . . . . . . . . . . . . 23
SECTION 2.04. Borrowing Procedure . . . . . . . . . . . . . . . . . . 25
SECTION 2.05. Evidence of Debt; Repayment of Loans. . . . . . . . . . 26
SECTION 2.06. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.07. Interest on Loans . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Default Interest. . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Alternate Rate of Interest. . . . . . . . . . . . . . . 29
SECTION 2.10. Termination and Reduction of Commitments; Extension of
the Short Term Revolving Loan Maturity Date . . . . . . 30
SECTION 2.11. Conversion and Continuation of Borrowings . . . . . . . 31
SECTION 2.12. Prepayment. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13. Reserve Requirements; Change in Circumstances . . . . . 35
SECTION 2.14. Change in Legality. . . . . . . . . . . . . . . . . . . 36
SECTION 2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.16. Pro Rata Treatment. . . . . . . . . . . . . . . . . . . 38
SECTION 2.17. Sharing of Setoffs. . . . . . . . . . . . . . . . . . . 38
SECTION 2.18. Payments. . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.19. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.20. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate. . . . . . . . . . . . . . . . . . . . 43
SECTION 2.21. Letters of Credit . . . . . . . . . . . . . . . . . . . 44
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers. . . . . . . . . . . . . . . . . . 48
SECTION 3.02. Authorization . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.03. Enforceability. . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.04. Governmental Approvals. . . . . . . . . . . . . . . . . 49
<PAGE>
SECTION 3.05. Financial Statements. . . . . . . . . . . . . . . . . . 49
SECTION 3.06. No Material Adverse Change. . . . . . . . . . . . . . . 49
SECTION 3.07. Title to Properties; Possession Under Leases. . . . . . 49
SECTION 3.08. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.09. Litigation; Compliance with Laws. . . . . . . . . . . . 50
SECTION 3.10. Agreements. . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.11. Federal Reserve Regulations . . . . . . . . . . . . . . 51
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.13. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.14. Tax Returns . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.15. No Material Misstatements . . . . . . . . . . . . . . . 51
SECTION 3.16. Employee Benefit Plans. . . . . . . . . . . . . . . . . 52
SECTION 3.17. Solvency. . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.18. Insurance . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.19. Labor Matters . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.20. Environmental Matters . . . . . . . . . . . . . . . . . 53
SECTION 3.21. Acquisition of Spectradyne. . . . . . . . . . . . . . . 54
SECTION 3.22. Survival of Representations and Warranties, etc.. . . . 54
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. All Credit Events . . . . . . . . . . . . . . . . . . . 55
SECTION 4.02. First Credit Event. . . . . . . . . . . . . . . . . . . 55
SECTION 4.03. Increase of Long Term . . . . . . . . . . . . . . . . . 58
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties. . . . . . . . . . 59
SECTION 5.02. Insurance . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.03. Obligations and Taxes . . . . . . . . . . . . . . . . . 59
SECTION 5.04. Financial Statements, Reports, etc. . . . . . . . . . . 60
SECTION 5.05. Litigation and Other Notices. . . . . . . . . . . . . . 61
SECTION 5.06. Employee Benefits . . . . . . . . . . . . . . . . . . . 61
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.09. Compliance with Environmental Laws. . . . . . . . . . . 62
SECTION 5.10. Compliance with Material Contracts. . . . . . . . . . . 62
ii
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. Indebtedness of the Subsidiaries of the Borrower. . . . 63
SECTION 6.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.03. Sale and Lease Back Transactions; Off-Balance Sheet
Financings. . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.04. Investments, Acquisitions, Loans and Advances . . . . . 65
SECTION 6.05. Mergers, Consolidations and Sales of Assets . . . . . . 65
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends . . . . . . . . . . . . . 66
SECTION 6.07. Transactions with Affiliates. . . . . . . . . . . . . . 67
SECTION 6.08. Limitation on Restrictive Agreements. . . . . . . . . . 67
SECTION 6.09. Leverage Ratio. . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.10. Coverage Ratio. . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.11. Amendments to Organizational Documents. . . . . . . . 68
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
THE ADMINISTRATIVE AGENT
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . . . . . 76
SECTION 9.03. Binding Effect. . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . 76
SECTION 9.05. Expenses; Indemnity . . . . . . . . . . . . . . . . . . 80
SECTION 9.06. Right of Setoff . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.07. Applicable Law. . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.08. Waivers; Amendment. . . . . . . . . . . . . . . . . . . 81
SECTION 9.09. Interest Rate Limitation. . . . . . . . . . . . . . . . 82
SECTION 9.10. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . 82
SECTION 9.11. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . 83
iii
<PAGE>
SECTION 9.12. Severability. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.14. Headings. . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.15. Jurisdiction; Consent to Service of Process . . . . . . 83
SECTION 9.16. Confidentiality . . . . . . . . . . . . . . . . . . . . 84
iv
<PAGE>
ON COMMAND CORPORATION
$125,000,000
CREDIT AGREEMENT
This CREDIT AGREEMENT (this "AGREEMENT"), dated as of October 8, 1996,
among ON COMMAND CORPORATION, a Delaware corporation (the "BORROWER"), the
Lenders (as defined in Article I hereof), and NATIONSBANK OF TEXAS, N.A., a
national banking association, as issuing bank (in such capacity, the "ISSUING
BANK"), and as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT") for the Lenders.
The Borrower has requested the Lenders to extend credit in the form of
revolving loans, competitive bid rate loans, and letters of credit (such letters
of credit in an aggregate face amount not to exceed $10,000,000), in a maximum
aggregate principal amount for all such facilities at any time outstanding not
in excess of $125,000,000. The proceeds of the Loans are to be used to
refinance existing indebtedness and for general corporate purposes of the
Borrower and its Subsidiaries, including, without limitation, working capital
and strategic acquisitions permitted under the terms hereof.
The Lenders are willing to extend a $125,000,000 aggregate credit facility
to the Borrower in the form of either revolving loans, competitive bid rate
loans or letters of credit, as elected by the Borrower, in each case on the
terms and subject to the conditions set forth herein. Accordingly, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR BORROWING" shall mean a Borrowing comprised of ABR Loans.
"ABR LOAN" shall mean any Loan bearing interest at the Alternate Base Rate
in accordance with the provisions of Article II hereof.
<PAGE>
"ACQUISITION" shall mean the acquisition made by the Borrower in accordance
with the terms of the Acquisition Agreement.
"ACQUISITION AGREEMENT" shall mean that certain Acquisition Agreement by
and among the Borrower, Ascent, the Official Creditors' Committee for
SpectraVision, Inc. and Certain of its Subsidiaries, SpectraVision, Spectradyne
and other Debtors named therein, dated as of August 13, 1996, as amended through
the Closing Date.
"ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, a simple per annum interest rate equal to the lesser of
(a) the Highest Lawful Rate and (b) the sum of (i) the quotient of (x) the LIBO
Rate divided by (y) one minus the LIBOR Reserve Percentage, stated as a decimal,
plus (ii) the Applicable Percentage. The Adjusted LIBO Rate shall apply to
Interest Periods of one, two, three or six months, or, if determined available
by the Administrative Agent, twelve months. The Adjusted LIBO Rate shall be
subject to availability with respect to the Lenders and to Section 2.14 hereof.
Once determined, the Adjusted LIBO Rate shall remain unchanged during the
applicable Interest Period, except for changes to reflect adjustments in the
LIBOR Reserve Percentage.
"ADMINISTRATIVE AGENT FEES" shall have the meaning assigned to such term in
Section 2.06(b) hereof.
"ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire
in the form of EXHIBIT A hereto.
"AFFILIATE" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the lesser of (a)
the Highest Lawful Rate and (b) sum of (i) the Applicable Percentage, plus
(ii) the greater of (A) the Prime Rate in effect on such day, and (B) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for
any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms of the definition thereof, the
Alternate Base Rate shall be determined without regard to clause (B) of the
preceding sentence, until the circumstances giving rise to such inability no
longer exist. Any change in the Alternate Base Rate due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively. The term "PRIME RATE" shall mean the rate of
interest per annum publicly announced from time to time by the Administrative
Agent as its prime rate in effect at its
2
<PAGE>
office in Dallas, Texas; each change in the Prime Rate shall be effective on
the date such change is publicly announced as being effective. The term
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of Dallas, Texas or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for the day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"APPLICABLE LAW" shall mean (a) in respect of any Person, all provisions
of Laws of tribunals applicable to such Person, and all orders and decrees of
all courts and arbitrators in proceedings or actions to which the Person in
question is a party and (b) in respect of contracts made or performed in the
State of Texas, "Applicable Law" also means the laws of the United States of
America, including, without limiting the foregoing, 12 USC Sections 85 and
86, as amended to the date hereof and as the same may be amended at any time
and from time to time hereafter, and any other statute of the United States
of America now or at any time hereafter prescribing the maximum rates of
interest on loans and extensions of credit, and the laws of the State of
Texas, including, without limitations, Articles 5069-1.04 and 5069-1.07(a),
Title 79, Revised Civil Statutes of Texas, 1925, as amended ("ART. 1.04"),
and any other statute of the State of Texas now or at any time hereafter
prescribing maximum rates of interest on loans and extensions of credit;
PROVIDED HOWEVER, that pursuant to Article 5069-15.10(b), Title 79, Revised
Civil Statutes of Texas, 1925, as amended, the Borrower agrees that the
provisions of Chapter 15, Title 79, Revised Civil Statutes of Texas, 1925, as
amended, shall not apply to the Loans hereunder.
"APPLICABLE PERCENTAGE" shall mean, for any day, with respect to any
Eurodollar Loan or ABR Loan (other than any Eurodollar Competitive Loan), the
applicable percentage set forth below under the caption "Eurodollar Margin" or
"ABR Margin", as the case may be, based upon the Leverage Ratio, then in effect
for purposes hereof:
Eurodollar ABR
Leverage Ratio Margin Margin
- -------------- ---------- ------
CATEGORY 1 0.625% 0%
Greater than or equal
to 2.00 to 1.00
3
<PAGE>
Category 2 0.500% 0%
- ----------
Greater than or equal to
1.00 to 1.00 but less than
2.00 to 1.00
Category 3 0.375% 0%
- ----------
Less than 1.00 to 1.00
Except as set forth below, the Leverage Ratio utilized for purposes of
determining the Eurodollar Margin and ABR Margin shall be that in effect as
of the last day of the most recent fiscal quarter of the Borrower in respect
of which financial statements have been delivered pursuant to this Agreement.
From the date hereof until the earliest to occur of the initial delivery of
financial statements pursuant to Section 5.04(a) or (b) hereof, the
Borrower's failure to timely deliver such financial statements or the
occurrence of an Event of Default, the Leverage Ratio shall be deemed to be
within Category 1 above. The Applicable Percentage from time to time in
effect shall be based on the Leverage Ratio from time to time in effect, and
each change in the Applicable Percentage resulting from a change in (or the
initial establishment of) the Leverage Ratio shall be effective with respect
to all Loans, Commitments and Letters of Credit outstanding on and after the
date of delivery to the Administrative Agent of the financial statements and
certificates required by Section 5.04(a) or (b) hereof indicating such change
to and including the date immediately preceding the next date of delivery of
such financial statements and certificates indicating another such change.
Notwithstanding the foregoing, (a) at any time during which the Borrower has
failed to deliver the financial statements and certificates required by
Section 5.04(a) or (b) hereof, or (b) at any time after the occurrence and
during the continuance of an Event of Default, the Leverage Ratio shall be
deemed to be in Category 1 above for purposes of determining the Applicable
Percentage.
"APPLICATION" shall mean any stand-by letter of credit application
delivered to the Administrative Agent for or in connection with any Letter of
Credit pursuant to Section 2.21 hereof, in the Administrative Agent's
standard form for stand-by letters of credit, the form of which, on the
Closing Date, is attached as EXHIBIT E hereto.
"ART. 1.04" has the meaning specified in the definition of "Applicable
Law".
"ASCENT" shall mean Ascent Entertainment Group, Inc., a Delaware
corporation and majority owner of the Borrower.
"ASCENT AGREEMENTS" shall mean the Services Agreement, the Corporate
Agreement and the Tax Sharing Agreement, in each case between the Borrower
and Ascent, in the forms
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delivered to the Administrative Agent, as such agreements may hereafter be
amended as permitted by, and in accordance with, the provisions of this
Agreement.
"ASCENT LOAN FACILITY" shall mean that certain loan facility to Ascent
pursuant to that certain Amended and Restated Credit Agreement, dated the
Closing Date from a group of financial institutions with the Administrative
Agent as the administrative agent thereunder.
"ASSET DISPOSITION" shall have the meaning assigned to it in Section
6.05(b) hereof.
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent, in
the form of EXHIBIT B hereto or such other form as shall be approved by the
Administrative Agent.
"ATTRIBUTABLE DEBT" shall mean as of any date of determination, the
present value (discounted semiannually at the interest rate set forth or
implicit in the terms of such transaction, as determined by the principal
accounting or financial officer of the Borrower) of the obligation of a
lessee for rental payments pursuant to any Equipment Lease Transaction during
the remaining term of such Equipment Lease Transaction (including any period
for which the lease relating thereto has been extended), such rental payments
not to include amounts payable by the lessee for maintenance and repairs,
insurance, taxes, assessments and similar charges.
"BOARD" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
"BORROWING" shall mean Loans of a single Type made by the Lenders in
accordance with the terms hereof (or, in the case of a Competitive Borrowing,
by the Lender or Lenders whose Competitive Bids have been accepted pursuant
to Section 2.03 hereof) on a single date and as to which a single Interest
Period is in effect.
"BORROWING REQUEST" shall mean a request by the Borrower in accordance
with the terms of Section 2.04 hereof and substantially in the form of
EXHIBIT C hereto.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on
which banks in Dallas, Texas or New York, New York are authorized or required
by Law to close; provided, however, that when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be
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classified and accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"CAPITAL STOCK" shall mean, as to any Person, the equity interests in
such Person, including, without limitation, the shares of each class of
capital stock of any Person that is a corporation and each class of
partnership interests (including without limitation, general, limited and
preference units) in any Person that is a partnership.
A "CHANGE IN CONTROL" shall be deemed to have occurred if (a) Ascent
fails to own directly or indirectly, beneficially or of record, shares of
Capital Stock of the Borrower representing 50.1% or more of the aggregate
ordinary voting power of the Borrower, or (b) Ascent shall fail to control a
majority of the seats on the Board of Directors of the Borrower.
"CLOSING DATE" shall mean the date of the first Credit Event.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" shall mean, with respect to each Lender, such Lender's Short
Term Commitment and Long Term Commitment.
"COMMITMENT FEE" shall have the meaning assigned to such term in Section
2.06(d) hereof.
"COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive
Loan pursuant to Section 2.03(b) hereof in the form of EXHIBIT D-3 hereto.
"COMPETITIVE BID ACCEPT/REJECT LETTER" shall mean a notification made by
the Borrower pursuant to Section 2.03(d) hereof in the form of EXHIBIT D-4
hereto.
"COMPETITIVE BID RATE" shall mean, as to any Competitive Bid, (i) in the
case of a Eurodollar Loan, the Margin, and (ii) in the case of a Fixed Rate
Loan, the fixed rate of interest offered by the Lender making such
Competitive Bid.
"COMPETITIVE BID REQUEST" shall mean a request made by the Borrower
pursuant to Section 2.03(a) hereof in the form of EXHIBIT D-1 hereto.
"COMPETITIVE BORROWING" shall mean a Borrowing consisting of a
Competitive Loan or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.03 hereof.
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"COMPETITIVE LOAN" shall mean a Loan from a Lender to the Borrower pursuant
to the bidding procedure described in Section 2.03 hereof. Each Competitive
Loan shall be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"COMPLIANCE CERTIFICATE" shall mean a compliance certificate, substantially
in the form of EXHIBIT F hereto, and certifying that there exists no Default or
Event of Default at the time of delivery thereof.
"CONSOLIDATED ASSETS" shall mean, with respect to the Borrower and its
Subsidiaries, at any date, the consolidated total assets of the Borrower and its
Subsidiaries at such date, as determined in accordance with GAAP.
"CONSOLIDATED CASH INTEREST EXPENSE" shall mean, for any period of
determination, the gross interest expense of the Borrower and its Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP,
excluding any amounts not paid or not required (whether during or after such
period) to be paid in cash. For purposes of the foregoing, gross interest
expense shall be determined after giving effect to any net cash payments made or
received by the Borrower with respect to rate protection agreements entered into
as a hedge against interest rate exposure. Gross interest expense shall be
calculated in accordance with GAAP as in effect and applied by the Borrower on
the date of this Agreement and, accordingly, shall exclude the effects of any
changes in GAAP or its application by the Borrower after the date hereof.
"CONSOLIDATED LIABILITIES" shall mean, with respect to the Borrower and its
Subsidiaries, at any date, the consolidated total liabilities of the Borrower
and its Subsidiaries at such date, as determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any date, with respect to
the Borrower and its Subsidiaries on a consolidated basis, the excess of the
Consolidated Assets over Consolidated Liabilities excluding, however, from the
determination of Consolidated Assets (a) except as otherwise provided in the
provision hereto, all assets which would be classified as intangibles under
GAAP, including goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), organizational expenses, trademarks,
trade names, copyrights, patents, patent applications, licenses and rights in
any thereof and (b) treasury stock held as an asset.
"CONSOLIDATED TOTAL INDEBTEDNESS" shall mean, for any Person, all
Indebtedness of such Person and its consolidated subsidiaries (other than
Indebtedness referred to in clause (h) of the definition of such term),
determined on a consolidated basis in accordance with GAAP.
"CONTROL" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ownership
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of voting securities, by contract or otherwise, and "Controlling and
"Controlled" shall have meanings correlative thereto.
"CORPORATE RESTRUCTURING" shall mean that series of transactions consisting
of the Merger, the Acquisition and the Reorganization Plan, and the related
issuance of the Borrower's Capital Stock and Warrants for the Capital Stock of
the Borrower, as each is described in the S-4 Registration Statement.
"COVERAGE RATIO" shall mean, on any date for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) EBITDA for the four most
recently completed consecutive fiscal quarters, to (b) Consolidated Cash
Interest Expense of the Borrower and its Subsidiaries for the four most recently
completed consecutive fiscal quarters.
"CREDIT EVENT" shall have the meaning assigned to such term in Section 4.01
hereto.
"DEBTOR RELIEF LAWS" shall mean applicable bankruptcy, reorganization,
moratorium, or similar Laws, or principles of equity affecting the enforcement
of creditors' rights generally.
"DEFAULT" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"DOLLARS" or "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, with respect to any Person and its subsidiaries on a
consolidated basis for any period, the consolidated net income of such Person
and its subsidiaries for such period, computed in accordance with GAAP, plus, to
the extent deducted in computing such consolidated net income and without
duplication, the sum of (a) income tax expense, (b) interest expense, (c)
depreciation and amortization expense, (d) allocation of income to minority
interests in earnings of consolidated subsidiaries and (e) extraordinary losses
(including restructuring provisions) during such period minus, to the extent
added in computing such consolidated net income and without duplication, (y)
extraordinary gains during such period and (z) allocation of losses to minority
interests in earnings of consolidated subsidiaries. EBITDA shall be calculated
in accordance with GAAP as in effect and applied by the Borrower on the date of
this Agreement and, accordingly, shall exclude the effects of any changes in
GAAP or its application by the Borrower after the date hereof.
"EDS AGREEMENT" shall mean the Agreement among SpectraVision, Electronic
Data Systems Corporation and EDS Technical Products Corporation, dated as of
August 5, 1996.
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"ENVIRONMENT" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"EQUIPMENT LEASE TRANSACTION" shall mean any transaction or arrangement
(other than (a) a Capital Lease Obligation reflected as such on the consolidated
financial statements of the Borrower or (b) an operating lease) (i) pursuant to
which the Borrower or any of its Subsidiaries sells or transfers any equipment
or fixtures used or useful in its business, whether now owned or hereafter
acquired, to any other Person, and thereafter rents or leases such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred or (ii) pursuant to which the
Borrower or any of its Subsidiaries rents or leases from any other Person any
equipment or fixtures used or useful in its business and which, although not
required to be accounted for as a Capital Lease Obligation, in substance
represents the financing of the acquisition of such property by the Borrower or
such Subsidiary.
"ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, notice
of violation, claim, demand, order, directive, consent decree, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any Person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the Environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the
existence, or the continuation of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases); (b) exposure to any
Hazardous Material; (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material; or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"ENVIRONMENTAL LAW" shall mean any and all applicable present and future
treaties, Laws, codes, judgments, injunctions, notices or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in
any way to the Environment, preservation or reclamation of natural resources,
the management, Release or threatened Release of any Hazardous Material or to
health and safety matters, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. Sections 9601 ET SEQ. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. Sections 6901 ET SEQ., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 ET SEQ., the
Clean Air Act of 1970, 42 U.S.C. Sections 7401 ET SEQ., as amended, the Toxic
Substances Control Act of 1976, 15 U.S.C. Sections 2601 ET SEQ., the
Occupational Safety and Health Act of 1970, as amended by 29 U.S.C. Sections 651
ET SEQ., the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Sections
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11001 ET SEQ., the Safe Drinking Water Act of 1974, as amended by 42 U.S.C.
Sections 300(f) ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C.
Sections 5101 ET SEQ., and any similar or implementing state or local law, and
all amendments or regulations promulgated thereunder.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
upon the termination of any Plan or the withdrawal or partial withdrawal of the
Borrower or any of its ERISA Affiliates from any Plan or Multiemployer Plan; (f)
the receipt by the Borrower or any ERISA Affiliate from the PBGC of any notice
relating to the intention to terminate any Plan or Plans or to appoint a trustee
to administer any Plan; (g) the receipt by the Borrower or any ERISA Affiliate
of any notice concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA; and (h) the
occurrence of a "prohibited transaction" with respect to which the Borrower or
any of its Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which the Borrower or any such
Subsidiary could otherwise be liable.
"EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar
Loans.
"EURODOLLAR COMPETITIVE BORROWING" shall mean a Borrowing comprised of
Eurodollar Competitive Loans.
"EURODOLLAR COMPETITIVE LOAN" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
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"EURODOLLAR LOAN" shall mean any Eurodollar Revolving Loan or Eurodollar
Competitive Loan.
"EURODOLLAR REVOLVING LOANS" shall mean Revolving Loans bearing interest at
a rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II hereof.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in Article
VII hereof.
"FACILITY FEE" shall have the meaning assigned to such term in Section
2.06(a) hereof.
"FEE LETTERS" shall mean that certain Fee Letter dated October 8, 1996,
between the Borrower and the Administrative Agent, and any other fee letters
executed from time to time among the Borrower, the Administrative Agent and the
Lenders, as each may be amended, extended, increased, revised or substituted
from time to time.
"FEES" shall mean the Facility Fees, the Commitment Fees, the
Administrative Agent Fees, the L/C Participation Fees and the Issuing Bank Fees.
"FINANCIAL OFFICER" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.
"FIXED RATE BORROWING" shall mean a Borrowing, comprised of Fixed Rate
Loans.
"FIXED RATE LOAN" shall mean any Competitive Loan bearing interest at a
fixed percentage rate per annum (expressed in the form of a decimal to no more
than four decimal places) specified by the Lender making such Loan in its
Competitive Bid.
"GAAP" shall mean generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"GUARANTEE" of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the
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primary obligor so as to enable the primary obligor to pay such Indebtedness
or (d) to guaranty the obligations, payments by or performance of, a Person
that is not a wholly owned direct or indirect subsidiary of the Borrower;
PROVIDED, HOWEVER, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"GUARANTORS" shall mean all Wholly Owned Subsidiaries of the Borrower,
except those Subsidiaries of the Borrower which are foreign organized
Subsidiaries.
"HAZARDOUS MATERIALS" shall mean all explosive or radioactive substances or
wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBS") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HIGHEST LAWFUL RATE" shall mean at the particular time in question the
maximum rate of interest which, under Applicable Law, any Lender is then
permitted to charge on the Obligations. If the maximum rate of interest which,
under Applicable Law, any Lender is permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrower. For purposes of determining the Highest Lawful Rate under Applicable
Law, the applicable rate ceiling shall be (a) the indicated rate ceiling
described in and computed in accordance with the provisions of Section (a)(1) of
Art. l.04; or (b) provided notice is given as required in Section (h)(1) of Art.
1.04, either the annualized ceiling or quarterly ceiling computed pursuant to
Section (d) of Art. 1.04; PROVIDED, HOWEVER, that at any time the indicated rate
ceiling, the annualized ceiling or the quarterly ceiling, as applicable, shall
be less than 18% per annum or more than 24% per annum, the provisions of
Sections (b)(1) and (2) of said Art. 1.04 shall control for purposes of such
determination, as applicable.
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits with
such Person or advances to such Person of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued obligations
incurred in the ordinary course of business, and excluding any obligations
relating to operating leases), (e) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (f)
all Guarantees by such Person, (g) all Capital Lease Obligations of such Person,
(h) all net
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obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate
hedging arrangements and (i) all obligations of such Person as an account
party in respect to letters of credit and bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any partnership
in which such Person is a general partner.
"INTEREST PAYMENT DATE" shall mean the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day that would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable to such Borrowing,
and, in addition, the date of any prepayment of such Borrowing or conversion of
such Borrowing to a Borrowing of a different Type.
"INTEREST PERIOD" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, or if
determined available by the Administrative Agent, 12 months thereafter, as the
Borrower may elect, (b) as to any ABR Borrowing, the period commencing on the
date of such Borrowing and ending on the earliest of (i) the next succeeding
March 31, June 30, September 30 or December 31, (ii) the Short Term Revolving
Loan Maturity Date or the Long Term Revolving Loan Maturity Date, as applicable,
and (iii) the date such Borrowing is converted to a Borrowing of a different
Type in accordance with Section 2.11 hereof or repaid or prepaid in accordance
with Section 2.12 hereof and (c) as to any Fixed Rate Borrowing, the period
commencing on the date of such Borrowing and ending on the date specified in the
Competitive Bids in which the offers to make the Fixed Rate Loans comprising
such Borrowing were extended, which shall not be earlier than seven days after
the date of such Borrowing or later than 360 days after the date of such
Borrowing; PROVIDED, HOWEVER, that if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest Period.
"ISSUING BANK" shall mean NationsBank (or any Affiliate thereof) or any
other Lender that may become an Issuing Bank pursuant to Section 2.21(i) hereof,
in each case with respect to Letters of Credit issued by it.
"ISSUING BANK FEES" shall have the meaning assigned to such term in Section
2.06(c) hereof.
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"LAW" shall mean any constitution, statute, law, ordinance, regulation,
rule, order, writ, injunction, or decree of any tribunal.
"L/C COMMITMENT" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.21 hereof.
"L/C DISBURSEMENT" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time PLUS (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Lender at any time shall mean its Pro Rata
Percentage of the aggregate L/C Exposure at such time.
"L/C PARTICIPATION FEE" shall have the meaning assigned to such term in
Section 2.06(c) hereof.
"LENDERS" shall mean (a) the financial institutions listed on SCHEDULE 2.01
hereto (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance.
"LETTER OF CREDIT" shall mean any letter of credit issued pursuant to
Section 2.21 hereof.
"LEVERAGE RATIO" shall mean, on any date for the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) the Borrower's and its
Subsidiaries' Consolidated Total Indebtedness to (b) EBITDA of the Borrower and
its consolidated Subsidiaries for the most recently completed four fiscal
quarters.
"LIBO RATE" shall mean, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest one-one hundredth (1/100th) of one percent (1%)) appearing on Telerate
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in United States dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period. If for any reason
such rate is not available, the term "LIBO Rate" shall mean, for any Eurodollar
Borrowing for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest one-one hundredth (1/100th) of one percent (1%))
appearing on Reuters Screen LIBO page as the London interbank offered rate for
deposits in United States dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; PROVIDED, HOWEVER, if more
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than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates.
"LIBOR RESERVE PERCENTAGE" shall mean, with respect to any Interest Period,
the percentage which is in effect on the first day of such period under
Regulation D of the Board of Governors of the Federal Reserve System, as such
regulation may be amended from time to time, as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency or marginal
reserves) with respect to eurocurrency liabilities (as that term is defined in
Regulation D), applicable to any Lender. The Adjusted LIBO Rate for any
Eurodollar Borrowing shall be adjusted for any change in the LIBOR Reserve
Percentage.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"LOANS" shall mean the Short Term Revolving Loans, Competitive Loans and
the Long Term Revolving Loans made in accordance with the terms of this
Agreement, and "Loan" shall mean any of the above, as applicable in the context
used.
"LOAN PAPERS" shall mean this Agreement, the promissory notes evidencing
the Loans, all guaranties executed by the Guarantors, Fee Letters, all Letters
of Credit, all Applications and all other agreements between the Borrower or any
Subsidiary of the Borrower and the Administrative Agent related to any Letter of
Credit, Assignment and Acceptances, post-closing letters, and all other
documents, instruments, agreements, or certificates executed or delivered from
time to time by any Person in connection with this Agreement or as security for
the Obligations hereunder, as each such agreement may be amended, modified,
substituted, replaced or extended from time to time.
"LONG TERM COMMITMENT" shall mean, with respect to each Lender, the
commitment of such Lender to make Long Term Revolving Loans hereunder as set
forth on SCHEDULE 2.01(b) hereto, or in the Assignment and Acceptance pursuant
to which such Lender assumed its Long Term Commitment, as applicable, as the
same may be (a) increased from time to time pursuant to the terms of Section
4.03 hereof, (b) reduced from time to time pursuant to (i) Section 2.10 hereof,
(ii) Section 2.20 hereof, (iii) the amount of Letters of Credit issued under the
Long Term Commitment in accordance with Section 2.21 hereof, and (iv) the amount
of Competitive Loans issued under the Long Term Commitment in accordance with
Sections 2.02 and 2.03 hereof and (c) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04 hereof.
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"LONG TERM REVOLVING LOAN MATURITY DATE" shall mean, the date that is five
years after the date hereof, or such earlier date as the Obligations are due and
payable in full (whether by scheduled reduction, acceleration, termination or
otherwise).
"LONG TERM REVOLVING LOANS" shall mean the long term revolving Loans made
available by the Lenders to the Borrower pursuant to the Long Term Commitments
and Section 2.01(b) hereof. Each Long Term Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.
"MARGIN" shall mean, as to any Eurodollar Competitive Loan, the margin
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) to be added to or subtracted from the LIBO Rate in
order to determine the interest rate applicable to such Loan, as specified in
the Competitive Bid relating to such Loan.
"MARGIN STOCK" shall have the meaning assigned to such term in
Regulation U.
"MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect on the
business, assets, operations, or financial condition of the Borrower and its
Subsidiaries taken as a whole, (b) material impairment of the ability of the
Borrower to perform any of its obligations under this Agreement or under any
other Loan Paper or (c) material impairment of the enforceability of this
Agreement, any other Loan Paper or the Loans.
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, Administrative Agent or any Lender is permitted to charge on the
Obligations.
"MERGER AGREEMENT" shall mean that certain Agreement and Plan of Merger, by
and among the Borrower, On Command Merger Corporation and OCV, dated as of
August 13, 1996.
"MERGER" shall mean the merger of On Command Merger Corporation with and
into OCV, in accordance with the terms of the Merger Agreement.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NATIONSBANK" shall mean NationsBank of Texas, N.A., a national banking
association.
"NET CASH PROCEEDS" shall mean with respect to any Asset Disposition (i)
the gross amount of any cash paid to or received by the Borrower or any of its
Subsidiaries in respect of such Asset Disposition (including (a) payments of
principal or interest, or cash proceeds from the sale or other disposition in
respect of noncash consideration permitted under Section 6.05
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hereof, and (b) insurance proceeds, condemnation awards and payments from
time to time in respect of installment obligations, if applicable), less (ii)
the amount, if any, of (x) the Borrower's good faith best estimate of all
taxes attributable to such Asset Disposition which it in good faith expects
to be paid in the taxable year in which such Asset Disposition shall occur or
in the next taxable year, (y) reasonable and customary fees, discounts,
commissions, costs and other expenses (other than those payable to the
Borrower or any Affiliate of the Borrower), which are incurred in connection
with such Asset Disposition and are payable by the Borrower or any of its
Subsidiaries and (z) in the case of an Asset Disposition that is a sale,
transfer or other disposition of assets or properties, proceeds required to
discharge Liens in respect of such assets or properties permitted by Section
6.02 hereof.
"OBLIGATIONS" shall mean all present and future obligations, indebtedness
and liabilities, and all renewals and extensions of all or any part thereof, of
the Borrower and each Obligor to the Lenders and the Administrative Agent
arising from, by virtue of, or pursuant to this Agreement, any of the other Loan
Papers and any and all renewals and extensions thereof or any part thereof, or
future amendments thereto, all interest accruing on all or any part thereof and
reasonable attorneys' fees incurred by the Administrative Agent for the
preparation of this Agreement and consummation of this credit facility,
execution of waivers, amendments and consents, and in connection with the
enforcement or the collection of all or any part thereof, and reasonable
attorneys' fees incurred by the Lenders in connection with the enforcement or
the collection of all or any part of the Obligations during the continuance of
an Event of Default, in each case whether such obligations, indebtedness and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several. Without limiting the generality of the foregoing, "Obligations"
includes all amounts which would be owed by the Borrower, each other Obligor and
any other Person (other than the Administrative Agent or the Lenders) to the
Administrative Agent or the Lenders under any Loan Paper, but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower, any other Obligor
or any other Person (including all such amounts which would become due or would
be secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of the Borrower, any other
Obligor or any other Person under any Debtor Relief Law).
"OBLIGOR" shall mean (a) the Borrower, (b) each Guarantor, (c) each other
Person liable for performance of any of the Obligations and (d) each other
Person the Property of which hereafter secures the performance of any of the
Obligations.
"OCV" shall mean On Command Video Corporation, a Delaware corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
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"PERMITTED INVESTMENTS" shall mean:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc. or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within one year from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank which bank or office is
organized under the Laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits of not less than
$250,000,000; and
(d) fully collateralized repurchase agreements with a term of not more than
30 days for underlying securities of the type described in clause (a) above
entered into with any institution meeting the qualifications specified in clause
(c) above.
"PERSON" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"PLAN" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
112 of the Code or Section 307 of ERISA and in respect of which the Borrower or
any ERISA Affiliate is (or if such plan were terminated would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PREFERRED STOCK", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution or assets
upon any voluntary or involuntary liquidation or dissolution of any such
corporation, over shares of Capital Stock of any other class of such
corporation.
"PRO FORMA FINANCIALS" shall mean those pro forma financial statements of
the Borrower and its Subsidiaries set forth in the S-4 Registration Statement.
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"PRO RATA PERCENTAGE" of any Lender at any time shall mean the percentage
of such Lender set forth opposite its signature line on the signature pages
hereof and designated as such, as such percentage may be hereafter be adjusted
pursuant to any Assignment and Acceptance or amendment to this Agreement.
"REGISTER" shall have the meaning given such term in Section 9.04(d)
hereof.
"REGULATION G" shall mean Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the Environment.
"REMEDIAL ACTION" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the Environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the Environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"REORGANIZATION PLAN" shall mean the Debtors' First Amended Joint Plan of
Reorganization, dated August 2, 1996, as supplemented on August 27, 1996 and
modified on September 11, 1996.
"REQUIRED LENDERS" shall mean, at any time, (i) Lenders having Commitments
representing at least 51% of the sum of all Commitments at such time, (ii) for
purposes of acceleration pursuant to clause (ii) of the last paragraph of
Article VII, Lenders having Loans, L/C Exposures and unused Commitments
representing at least 51% of the sum of all Loans outstanding, L/C Exposure and
unused Commitments or (iii) if the Commitments have terminated, Lenders having
Loans and L/C Exposure representing at least 51% of the sum of all Loans
outstanding and L/C Exposure; and, in each case, if there is more than one
Lender party hereto, at least two Lenders.
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"RESPONSIBLE OFFICER" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement and the other Loan Papers.
"REVOLVING LOANS" shall mean the Short Term Revolving Loans and the Long
Term Revolving Loans made available by the Lenders to the Borrower pursuant to
the Short Term Commitments, the Long Term Commitments and Section 2.01 hereof.
Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving
Loan.
"S-4 REGISTRATION STATEMENT" shall mean that certain Form S-4 Registration
Statement, as filed by the Borrower with the Securities and Exchange Commission
on August 16, 1996, as amended on September 4, 1996, September 26, 1996 and as
further amended on October 7, 1996.
"SHORT TERM COMMITMENT" shall mean, with respect to each Lender, the
commitment of such Lender to make Short Term Revolving Loans hereunder as set
forth on SCHEDULE 2.01(a) hereto, or in the Assignment and Acceptance pursuant
to which such Lender assumed its Commitment, as applicable, as the same may be
(a) reduced from time to time pursuant to (i) Section 2.10 hereof, (ii) Section
2.20 hereof, (iii) the amount of Letters of Credit issued under the Short Term
Commitment in accordance with Section 2.21 hereof, (iv) Section 4.03 hereof, and
(iv) the amount of Competitive Loans issued under the Short Term Commitment in
accordance with Sections 2.02 and 2.03 hereof, and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04 hereof.
"SHORT TERM REVOLVING LOAN MATURITY DATE" shall mean, subject to Section
2.10(g) hereof, the date that is 364 days after the date hereof, or such earlier
date as the Obligations are due and payable in full (whether by scheduled
reduction, acceleration, termination or otherwise).
"SHORT TERM REVOLVING LOANS" shall mean the short term revolving Loans made
available by the Lenders to the Borrower pursuant to the Short Term Commitments
and Section 2.01(a) hereof. Each Revolving Loan shall be a Eurodollar Revolving
Loan or an ABR Revolving Loan.
"SPECTRADYNE" shall mean Spectradyne, Inc., a Texas corporation and wholly
owned Subsidiary of SpectraVision.
"SPECTRAVISION" shall mean SpectraVision, Inc., a Delaware corporation.
"SUBSIDIARY" shall mean, with respect to any Person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity of which securities
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or other ownership interests representing more than 50% of the equity or more
than 50% of the ordinary voting power or more than 50% of the general
partnership interests are, at the time any determination is being made,
owned, controlled or held, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.
"TOTAL COMMITMENT" shall mean, at any time, the aggregate amount of the
Lenders' Commitments, as in effect at such time.
"TOTAL EXPOSURE" shall mean, with respect to the Lenders at any time, the
aggregate principal amount at such time of the sum of (a) all outstanding
Revolving Loans, plus (b) the aggregate amount at such time of all Lenders'
L/C Exposure, plus (c) the amount by which the outstanding Competitive
Borrowings shall be deemed to have utilized all Lenders' Commitments in
accordance with Section 2.16 hereof.
"TRANSACTIONS" shall have the meaning assigned to such term in Section
3.02 hereof.
"TYPE", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall
include the Adjusted LIBO Rate and the Alternate Base Rate.
"WHOLLY OWNED SUBSIDIARY" of any Person shall mean a subsidiary of such
Person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the outstanding Capital Stock or
partnership interests, as the case may be, are, at the time any determination
is being made, owned by such Person or one or more Wholly Owned Subsidiaries
of such Person or by such Person and one or more Wholly Owned Subsidiaries of
such Person.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as
in effect from time to time; provided, however, that for purposes of
determining compliance with the covenants contained in Article VI hereof, all
accounting terms herein shall
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be interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied
on a basis consistent with the application used in the financial statements
referred to in Section 3.05 hereof.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS.
(a) SHORT TERM REVOLVING LOANS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Short Term Revolving Loans to the
Borrower, at any time and from time to time on or after the date hereof, and
until the earlier of (a) the Short Term Revolving Loan Maturity Date, and (b)
the termination of the Short Term Commitment of such Lender in accordance
with the terms hereof, in an aggregate principal amount at any time up to
such Lender's Short Term Commitment, provided that, the Borrower agrees that,
notwithstanding anything in this Agreement or in any other Loan Paper to the
contrary, no Lender shall at any time be obligated to make any Loan if such
Loan would result in such Lender's Total Exposure exceeding such Lender's
Commitment. Within the limits set forth in the preceding sentence and subject
to the terms, conditions and limitations set forth herein, the Borrower may
borrow, pay or prepay and reborrow Short Term Revolving Loans.
(b) LONG TERM REVOLVING LOANS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Long Term Revolving Loans to the
Borrower, at any time and from time to time on or after the date hereof, and
until the earlier of (a) the Long Term Revolving Loan Maturity Date, and (b)
the termination of the Long Term Commitment of such Lender in accordance with
the terms hereof, in an aggregate principal amount at any time up to such
Lender's Long Term Commitment, provided that, the Borrower agrees that,
notwithstanding anything in this Agreement or in any other Loan Paper to the
contrary, no Lender shall at any time be obligated to make any Loan if such
Loan would result in such Lender's Total Exposure exceeding such Lender's
Commitment. Within the limits set forth in the preceding sentence and
subject to the terms, conditions and limitations set forth herein, the
Borrower may borrow, pay or prepay and reborrow Long Term Revolving Loans.
SECTION 2.02. LOANS.
(a) Each Loan (other than Competitive Loans) shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Pro Rata Percentages; PROVIDED, HOWEVER, that the failure of
any Lender to make any Loan shall not in
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itself relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of
any other Lender to make any Loan required to be made by such other Lender).
Each Competitive Loan shall be made in accordance with the procedures set
forth in Section 2.03 hereof, and shall reduce the Short Term Commitment or
the Long Term Commitment as designated by the Borrower in accordance with the
terms of Section 2.03 below, provided that, if the Borrower fails to
designate, then such Competitive Loan shall reduce (i) first, the Short Term
Commitment, and if the Short Term Commitment is zero, then the Long Term
Commitment, by the amount of each such outstanding Competitive Loan. If the
Total Commitment has been reduced to zero, Competitive Loans shall not be
available hereunder. Except for Loans deemed made pursuant to Section
2.02(f) hereof, the Loans comprising any Borrowing shall be in an aggregate
principal amount that is (i) (x) with respect to any Competitive Borrowing,
an integral multiple of $1,000,000 and not less than $3,000,000 and (y) with
respect to any other Borrowing, an integral multiple of $1,000,000 and not
less than $3,000,000 or (ii) equal to the remaining available balance of the
Total Commitments.
(b) Subject to Sections 2.09 and 2.14 hereof, each Competitive Borrowing
shall be comprised entirely of Eurodollar Competitive Loans or Fixed Rate
Loans, and each other Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans as the Borrower may request pursuant to Section 2.03 or 2.04
hereof, as applicable; PROVIDED, HOWEVER, that Borrowings on the Closing Date
shall be comprised entirely of ABR Loans. Each Lender may at its option make
any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan; provided that any exercise of such option
shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement. Borrowings of more than one
Type may be outstanding at the same time; PROVIDED, HOWEVER, that the
Borrower shall not be entitled to request any Borrowing that, if made, would
result in more than twelve Eurodollar Borrowings outstanding hereunder at any
time. For purposes of the foregoing, Borrowings having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds to such
account in Dallas, Texas as the Administrative Agent may designate not later
than 12:00 noon, Dallas, Texas time, and the Administrative Agent shall by
3:00 p.m., Dallas, Texas time, credit the amounts so received to an account
in the name of the Borrower, maintained with the Administrative Agent and
designated by the Borrower in the applicable Borrowing Request or Competitive
Bid Request or, if a Borrowing shall not occur on such date because any
condition precedent herein specified shall not have been met, return the
amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative
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Agent such Lender's portion of such Borrowing, the Administrative Agent may
assume that such Lender has made such portion available to the Administrative
Agent on the date of such Borrowing in accordance with paragraph (c) above
and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If the
Administrative Agent shall have so made funds available then, to the extent
that such Lender shall not have made such portion available to the
Administrative Agent, such Lender and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Administrative Agent at (i) in the case of the Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, a rate determined by the Administrative Agent to
represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to
the Administrative Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
(e) The Borrower acknowledges that if the Borrower requests any
Borrowing with an Interest Period that would end after the Short Term
Revolving Loan Maturity Date or the Long Term Revolving Loan Maturity Date,
as applicable, a Breakage Event (as defined in Section 2.15 hereof) will
occur on the Short Term Revolving Loan Maturity Date or the Long Term
Revolving Loan Maturity Date, as applicable, and the Borrower will be
obligated to indemnify the Lenders in accordance with the terms of Section
2.15 hereof.
(f) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.21(e) hereof within the time
specified in such Section, the Issuing Bank will promptly notify the
Administrative Agent of the L/C Disbursement and the Administrative Agent
will promptly notify each Lender of such L/C Disbursement and its Pro Rata
Percentage thereof. Each Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., Dallas,
Texas time, on such date (or, if such Lender shall have received such notice
later than 12:00 (noon), Dallas, Texas time, on any day, not later than 10:00
a.m., Dallas, Texas time, on the immediately following Business Day), an
amount equal to such Lender's Pro Rata Percentage of such L/C Disbursement
(it being understood that such amount shall be deemed to constitute an ABR
Loan of such Lender and such payment shall be deemed to have reduced the L/C
Exposure), and the Administrative Agent will promptly pay to the Issuing Bank
amounts so received by it from the Lenders. The Administrative Agent will
promptly pay to the Issuing Bank any amounts received by it from the Borrower
pursuant to Section 2.21(e) hereof prior to the time that any Lender makes
any payment pursuant to this paragraph (f); any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the
Administrative Agent to the Lenders that shall have made such payments and to
the Issuing Bank, as their interests may appear. If any Lender shall not
have made its Pro Rata Percentage of such L/C Disbursement available to the
Administrative Agent as provided above, such Lender and the
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Borrower severally agree to pay interest on such amount, for each day from
and including the date such amount is required to be paid in accordance with
this paragraph to but excluding the date such amount is paid, to the
Administrative Agent at (i) in the case of the Borrower, a rate per annum
equal to the interest rate applicable to ABR Loans pursuant to Section 2.07
hereof, and (ii) in the case of such Lender, for the first such day, the
Federal Funds Effective Rate, and for each day thereafter, the Alternate Base
Rate.
SECTION 2.03. COMPETITIVE BID PROCEDURE.
(a) In order to request Competitive Bids, the Borrower shall hand
deliver or telecopy to the Administrative Agent a duly completed Competitive
Bid Request (i) in the case of a Eurodollar Competitive Borrowing, not later
than 10:00 a.m., Dallas, Texas time, four Business Days before the proposed
date of such Borrowing and (ii) in the case of a Fixed Rate Borrowing, not
later than 10:00 a.m., Dallas, Texas time, one Business Day before the
proposed date of such Borrowing. A Competitive Bid Request shall not be made
within five Business Days after the date of any previous Competitive Bid
Request. No ABR Loan shall be requested in, or made pursuant to, a
Competitive Bid Request. A Competitive Bid Request that does not conform
substantially to the format of EXHIBIT D-1 hereto may be rejected by the
Administrative Agent and the Administrative Agent shall notify the Borrower
of such rejection as promptly as practicable. Each Competitive Bid Request
shall refer to this Agreement and specify (i) whether the Borrowing being
requested is to be a Eurodollar Borrowing or a Fixed Rate Borrowing; (ii) the
date of such Borrowing (which shall be a Business Day); (iii) the number and
the location of the account to which funds are to be disbursed (which shall
be an account that complies with the requirements of Section 2.02(c) hereof);
(iv) the aggregate principal amount of such Borrowing, which shall be a
minimum of $3,000,000 and an integral multiple of $1,000,000; (v) the
Interest Period with respect thereto and (vi) whether such Competitive Loan
is being made under the Short Term Commitment or under the Long Term
Commitment. Promptly after its receipt of a Competitive Bid Request that is
not rejected, the Administrative Agent shall by telecopy in the form set
forth in EXHIBIT D-2 invite the Lenders to bid to make Competitive Loans
pursuant to the Competitive Bid Request. Each Competitive Loan may only be
made in an amount equal to or less than (i) the amount by which the Total
Commitment exceeds the Total Exposure on such date, (ii) if such Competitive
Loan was made under the Short Term Revolving Commitment, the amount by which
the Short Term Commitment exceeds the sum of (A) the aggregate outstanding
Short Term Revolving Loans, (B) the L/C Exposure attributable to the Short
Term Commitment and (C) the aggregate outstanding Competitive Loans
attributable to the Short Term Commitment, and (iii) if such Competitive Loan
was made under the Long Term Revolving Commitment, the amount by which the
Long Term Commitment exceeds the sum of (A) the aggregate outstanding Long
Term Revolving Loans, (B) the L/C Exposure attributable to the Long Term
Commitment and (C) the aggregate outstanding Competitive Loans attributable
to the Long Term Commitment.
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(b) Each Lender may make one or more Competitive Bids to the Borrower
responsive to a Competitive Bid Request. Each Competitive Bid by a Lender
must be received by the Administrative Agent by telecopy, (i) in the case of
a Eurodollar Competitive Borrowing, not later than 9:30 a.m., Dallas, Texas
time, three Business Days before the proposed date of such Competitive
Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later than
9:30 a.m., Dallas, Texas time, on the proposed date of such Competitive
Borrowing. Competitive Bids that do not conform substantially to the format
of EXHIBIT D-3 may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the applicable Lender as promptly as
practicable. Each Competitive Bid shall refer to this Agreement and specify
(x) the principal amount (which shall be a minimum of $3,000,000 and an
integral multiple of $1,000,000 and which may equal the entire principal
amount of the Competitive Borrowing requested by the Borrower) of the
Competitive Loan or Loans that the Lender is willing to make, (y) the
Competitive Bid Rate or Rates at which the Lender is prepared to make such
Loan or Loans and (z) the Interest Period applicable to such Loan or Loans
and the last day thereof.
(c) The Administrative Agent shall promptly notify the Borrower by
telecopy of the Competitive Bid Rate and the principal amount of each
Competitive Loan in respect of which a Competitive Bid shall have been made
and the identity of the Lender that shall have made each bid.
(d) The Borrower may, subject only to the provisions of this paragraph
(d), accept or reject any Competitive Bid. The Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopy in the form of a
Competitive Bid Accept/Reject Letter, whether and to what extent it has
decided to accept or reject each Competitive Bid, (x) in the case of a
Eurodollar Competitive Borrowing, not later than 10:30 a.m., Dallas, Texas
time, three Business Days before the date of the proposed Competitive
Borrowing, and (y) in the case of a Fixed Rate Borrowing, not later than
10:30 a.m., Dallas, Texas time, on the proposed date of the Competitive
Borrowing; PROVIDED, HOWEVER, that (i) the failure of the Borrower to give
such notice shall be deemed to be a rejection of each Competitive Bid, (ii)
the Borrower shall not accept a Competitive Bid made at a particular
Competitive Bid Rate if the Borrower has decided to reject a Competitive Bid
made at a lower Competitive Bid Rate, (iii) the aggregate amount of the
Competitive Bids accepted by the Borrower shall not exceed the principal
amount specified in the Competitive Bid Request, (iv) if the Borrower shall
accept a Competitive Bid or Bids made at a particular Competitive Bid Rate
but the amount of such Competitive Bid or Bids would cause the total amount
to be accepted by the Borrower to exceed the amount specified in the
Competitive Bid Request, then the Borrower shall accept a portion of such
Competitive Bid or Bids in an amount equal to the amount specified in the
Competitive Bid Request less the amount of all other Competitive Bids so
accepted, which acceptance, in the case of multiple Competitive Bids at such
Competitive Bid Rate, shall be made pro rata in accordance with the amount of
each such Bid, and (v) except pursuant to clause (iv) above, no Competitive
Bid shall be accepted for a Competitive Loan unless such
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Competitive Loan is in a minimum principal amount of $3,000,000 and an
integral multiple of $1,000,000; PROVIDED FURTHER, HOWEVER, that if a
Competitive Loan must be in an amount less than $3,000,000 because of the
provisions of clause (iv) above, such Competitive Loan may be for a minimum
of $1,000,000 or any integral multiple thereof, and in calculating the pro
rata allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
Borrower. A notice given by the Borrower pursuant to this paragraph (d)
shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender
by telecopy whether or not its Competitive Bid has been accepted (and, if so,
in what amount and at what Competitive Bid Rate), and each successful bidder
will thereupon become bound, upon the terms and subject to the conditions
hereof, to make the Competitive Loan in respect of which its Competitive Bid
has been accepted.
(f) If the Administrative Agent shall elect to submit a Competitive Bid
in its capacity as a Lender, it shall submit such Competitive Bid directly to
the Borrower at least one quarter of an hour earlier than the time by which
the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) above.
SECTION 2.04. BORROWING PROCEDURE. In order to request a Borrowing
(other than a Competitive Borrowing or a deemed Borrowing pursuant to Section
2.02(f) hereof, as to which this Section 2.04 shall not apply), the Borrower
shall hand deliver or telecopy to the Administrative Agent a duly completed
Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., Dallas, Texas time, three Business Days before a proposed
Borrowing, and (b) in the case of an ABR Borrowing, not later than 10:00
a.m., Dallas, Texas on the date (which shall be a Business Day) of a proposed
Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by
or on behalf of the Borrower and shall specify the following information: (i)
whether the Borrowing then being requested is to be a Eurodollar Borrowing or
an ABR Borrowing (it being understood that the Borrowing on the Closing Date
shall be an ABR Borrowing); (ii) the date of such Borrowing (which shall be a
Business Day); (iii) the number and location of the account to which funds
are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(c)) hereof; (iv) the amount of such Borrowing;
(v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period
with respect thereto; and (vi) if the Borrower has complied with each
condition set forth in Section 2.02(b) hereof and Section 4.03 hereof,
whether such Borrowing is to be a Short Term Revolving Loan or a Long Term
Revolving Loan; provided, however, that, notwithstanding any contrary
specification in any Borrowing Request, each requested Borrowing shall comply
with the requirements set forth in Section 2.03 hereof. If no election as to
the Type of Borrowing is specified in any such notice, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period with respect to
any Eurodollar Borrowing is specified in any such notice, then the Borrower
shall be deemed to have selected
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an Interest Period of one month's duration. The Administrative Agent shall
promptly advise the Lenders of any notice given pursuant to this Section 2.04
hereof (and the contents thereof), and of each Lender's portion of the
requested Borrowing.
SECTION 2.05. EVIDENCE OF DEBT; REPAYMENT OF LOANS.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of the Lenders (i) the then unpaid
principal amount of each Competitive Loan, on the last day of the Interest
Period applicable to such Loan or, if earlier, on the Short Term Revolving
Loan Maturity Date or the Long Term Revolving Loan Maturity Date, (ii) the
then unpaid principal amount of each Short Term Revolving Loan on the Short
Term Revolving Loan Maturity Date, and (iii) the then unpaid principal amount
of each Long Term Revolving Loan on the Long Term Revolving Loan Maturity
Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid such Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will
record (i) whether such Loan is a Short Term Revolving Loan or a Long Term
Revolving Loan, the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) above shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided however, that the failure of
any Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to
repay the Loans in accordance with their terms.
(e) As evidence of the Loans hereunder, on the Closing Date the Borrower
shall deliver to each Lender one promissory note evidencing its Pro Rata
Percentage of the Loans made hereunder. Such promissory note will evidence
each Lenders' Pro Rata Percentage of each Revolving Loan, L/C Exposure and
each Lenders' exposure under any Competitive Loan, if any.
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SECTION 2.06. FEES.
(a) The Borrower agrees to pay to each Lender, through the
Administrative Agent, such Facility Fees as are set forth in any Fee Letters
(the "FACILITY FEES") in accordance with such terms set forth in the Fee
Letters.
(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees set forth in its Fee Letter at the times and
in the amounts specified therein (the "ADMINISTRATIVE AGENT FEES").
(c) The Borrower agrees to pay (i) to each Lender, through the
Administrative Agent, on the last day of March, June, September and December
of each year and on the date on which the Short Term Commitment and Long Term
Commitment of such Lender shall be terminated as applicable and as provided
herein, a fee (an "L/C PARTICIPATION FEE") calculated on such Lender's Pro
Rata Percentage of the average daily aggregate L/C Exposure (excluding the
portion thereof attributable to unreimbursed L/C Disbursements) during the
preceding quarter (or shorter period commencing with the date hereof or
ending with the Short Term Revolving Loan Maturity Date, or the Long Term
Revolving Loan Maturity Date, as applicable, or the date on which all Letters
of Credit have been canceled or have expired and the Commitments of all
Lenders shall have been terminated) at a rate equal to the Applicable
Percentage from time to time used to determine the interest rate on
Borrowings comprised of Eurodollar Loans pursuant to Section 2.07 hereof, and
(ii) to the Issuing Bank with respect to each Letter of Credit the standard
fronting, issuance and drawing fees specified from time to time by the
Issuing Bank (the "ISSUING BANK FEES"). Subject to Section 9.09 hereof and
Applicable Law, all L/C Participation Fees and Issuing Bank Fees shall be
computed on the basis of the actual number of days elapsed in a year of 365
or 366 days, as applicable.
(d) Subject to Section 9.09 hereof, commencing on December 31, 1996 and
continuing on the last day of March, June, September and December of each
year on and until the date on which the Commitments of such Lender shall be
terminated as provided herein, the Borrower shall pay to the Administrative
Agent for the account of Lenders commitment fees (the "COMMITMENT FEES") on
the average daily amount of the difference between (A) the Total Commitment
and (B) the Total Exposure, at a per annum rate (the "Commitment Fee Rate")
based on the Leverage Ratio for the most recently completed full fiscal
quarter as set forth below:
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LEVERAGE RATIO PER ANNUM COMMITMENT FEE RATE
-------------- -----------------------------
CATEGORY 1
Greater than or
equal to 1.50 to 1.00 0.2500%
CATEGORY 2
Less than 1.50 to 1.00 0.1875%
Notwithstanding anything in this Agreement to the contrary, in each
determination of the Total Commitment in connection with this Section
2.06(d), the amount of all Competitive Loans deducted from the Total
Commitment in accordance with the definitions of both the Short Term
Commitment and Long Term Commitment shall be added back to the Total
Commitment. Except as set forth below, the Leverage Ratio utilized for
purposes of determining the Commitment Fee Rate shall be that in effect as of
the last day of the most recent fiscal quarter of the Borrower in respect of
which financial statements have been delivered pursuant to this Agreement.
From the date hereof until the earliest to occur of the initial delivery of
financial statements pursuant to Section 5.04(a) or (b) hereof, the
Borrower's failure to timely deliver such financial statements or the
occurrence of an Event of Default, the Leverage Ratio shall be deemed to be
within Category 1 above. The Commitment Fee Rate from time to time in effect
shall be based on the Leverage Ratio from time to time in effect, and each
change in the Commitment Fee Rate resulting from a change in (or the initial
establishment of) the Leverage Ratio shall be effective with respect to the
Commitment Fee Rate outstanding on and after the date of delivery to the
Administrative Agent of the financial statements and certificates required by
Section 5.04(a) or (b) hereof indicating such change to and including the
date immediately preceding the next date of delivery of such financial
statements and certificates indicating another such change. Notwithstanding
the foregoing, (a) at any time during which the Borrower has failed to
deliver the financial statements and certificates required by Section 5.04(a)
or (b) hereof, or (b) at any time after the occurrence and during the
continuance of an Event of Default, the Leverage Ratio shall be deemed to be
in Category 1 above for purposes of determining the Commitment Fee Rate.
Subject to Section 9.09 hereof and Applicable Law, all Commitment Fees shall
be computed on the basis of the actual number of days elapsed in a year of
365 or 366 days, as applicable.
(e) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly
to the Issuing Bank. Once paid, none of the Fees shall be refundable, except
in accordance with the provisions of Section 9.09 hereof.
SECTION 2.07. INTEREST ON LOANS.
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(a) Subject to the provisions of Section 2.08 hereof, the Loans
comprising each ABR Borrowing shall bear interest (computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, when the Alternate Base Rate is determined by reference to the Prime
Rate and over a year of 360 days at all other times) at a rate per annum
equal to the Alternate Base Rate. If the amount of interest payable in
respect of any interest computation period is limited to the Highest Lawful
Rate in accordance with the definition of Alternate Base Rate, and the amount
of interest payable in respect of any subsequent interest computation period
would be less than the Maximum Amount, then the amount of interest payable in
respect of such subsequent interest computation period shall be automatically
increased to the Maximum Amount; PROVIDED that at no time shall the aggregate
amount by which interest paid has been increased pursuant to this sentence
exceed the aggregate amount by which interest has been reduced had the
Alternate Base Rate not been limited to the Highest Lawful Rate.
(b) Subject to the provisions of Section 2.08 hereof, the Loans
comprising each Eurodollar Borrowing shall bear interest (computed on the
basis of the actual number of days elapsed over a year of 360 days) at a rate
per annum equal to (i) in the case of each Revolving Loan, the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Percentage in effect from time to time, and (ii) in the case of each
Competitive Loan, the LIBO Rate for the Interest Period in effect for such
Borrowing plus the Margin offered by the Lender making such Loan and accepted
by the Borrower pursuant to Section 2.03 hereof.
(c) Subject to the provisions of Section 2.08 hereof, each Fixed Rate
Loan shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 360 days) at a rate per annum equal to the fixed rate
of interest offered by the Lender making such Loan and accepted by the
Borrower pursuant to Section 2.03 hereof.
(d) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.08. DEFAULT INTEREST. Notwithstanding any other provision of
this Agreement and the other Loan Papers except Section 9.09 hereof to the
contrary, if there shall exist any Event of Default hereunder, at the
election of the Required Lenders by written notice to the Borrower, the
Borrower shall pay interest on the Obligations to but excluding the date of
actual payment (after as well as before judgment) at a rate per annum equal
to the lesser of (a) the Highest Lawful Rate and (b) a rate per annum
(computed on the basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, when determined
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by reference to the Prime Rate and over a year of 360 days at all other
times) equal to the sum of the Alternate Base Rate plus 1.00%.
SECTION 2.09. ALTERNATE RATE OF INTEREST. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered
will not adequately and fairly reflect the cost to the Required Lenders of
making or maintaining Eurodollar Loans during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the
Administrative Agent shall, as soon as practicable thereafter, give written
or telecopy notice of such determination to the Borrower and the Lenders. In
the event of any such determination, until the Administrative Agent shall
have advised the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist, any request by the Borrower for a Eurodollar
Borrowing pursuant to Section 2.04 hereof shall be deemed to be a request for
an ABR Borrowing provided that, any request by the Borrower for a Eurodollar
Competitive Borrowing pursuant to Section 2.03 hereof shall be of no force
and effect and shall be denied by the Administrative Agent. Each
determination by the Administrative Agent hereunder shall be conclusive
absent manifest error.
SECTION 2.10. TERMINATION AND REDUCTION OF COMMITMENTS; EXTENSION OF THE
SHORT TERM REVOLVING LOAN MATURITY DATE.
(a) MATURITY DATES. The Short Term Commitments shall automatically
terminate on the Short Term Revolving Loan Maturity Date (and the same may be
extended pursuant to paragraph (g) of this Section 2.10). The Long Term
Commitments shall automatically terminate on the Long Term Revolving Loan
Maturity Date. The L/C Commitment shall terminate upon the termination of
the Total Commitments.
(b) VOLUNTARY REDUCTION OF THE COMMITMENTS. Upon at least three
Business Days' prior irrevocable written or telecopy notice to the
Administrative Agent (specifying whether such reduction or termination shall
be applied to the Short Term Commitments or the Long Term Commitments, and
the amount of reduction), the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the either or
both of the Commitments; PROVIDED, HOWEVER, that (i) each partial reduction
shall be in an integral multiple of $1,000,000 and in a minimum amount of
$5,000,000 and (ii) the Total Commitment shall not be reduced to an amount
that is less than the Total Exposure.
(c) REDUCTION OF SHORT TERM COMMITMENT BY INCREASE OF LONG TERM
COMMITMENT. The Short Term Commitments shall be reduced immediately and
automatically dollar for dollar on the date and in the amount of each
increase of the Long Term Commitments, as further described in Section 4.03
hereof.
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(d) TOTAL EXPOSURE IN EXCESS OF TOTAL COMMITMENTS. If, as a result of
any reduction of the Commitments, the Total Exposure exceeds the Total
Commitments, then the Borrower shall, on the date of such reduction, repay
Loans in accordance with this Agreement in an aggregate principal amount
sufficient to eliminate such excess. If, as a result of any reduction of the
Short Term Commitments, the aggregate outstanding Short Term Revolving Loans
exceeds the aggregate Short Term Commitments, then the Borrower shall, on the
date of such reduction, repay Short Term Revolving Loans in accordance with
this Agreement in an aggregate principal amount sufficient to eliminate such
excess. If, as a result of any reduction of the Long Term Commitments, the
aggregate outstanding Long Term Revolving Loans exceeds the aggregate Long
Term Commitments, then the Borrower shall, on the date of such reduction,
repay Long Term Revolving Loans in accordance with this Agreement in an
aggregate principal amount sufficient to eliminate such excess.
(e) COMMITMENT REDUCTION DUE TO ASSET DISPOSITIONS. The Short Term
Commitments or the Long Term Commitments (as specified by the Borrower)
relating to any Loan prepaid pursuant to Section 2.12(c) hereof shall be
automatically and permanently reduced, on the date of such prepayment, in an
amount equal to the amount of such prepayment.
(f) COMMITMENT REDUCTION, GENERALLY. Each reduction in the Commitments
hereunder shall be made ratably among the Lenders in accordance with their
respective Commitments. The Borrower shall pay, to the Administrative Agent
for the account of the applicable Lenders, on the date of each termination or
reduction, the Commitment Fees on the amount of the Commitments so terminated
or reduced accrued to but excluding the date of such termination or
reduction.
(g) EXTENSION OF SHORT TERM COMMITMENTS. The Borrower may, by giving
written notice to the Administrative Agent (which shall promptly deliver a
copy to each of the Lenders) not fewer than 15 days prior to the then current
Short Term Revolving Loan Maturity Date (the "EXISTING MATURITY DATE"),
extend the Short Term Revolving Loan Maturity Date to the date that occurs
364 days after the Existing Maturity Date (or if such 364th day is not a
Business Day, the immediately preceding Business Day); PROVIDED, HOWEVER,
that the Borrower may effect only four extensions pursuant to this Section
2.10(g) hereof. Notwithstanding the foregoing, the extension of the Existing
Maturity Date shall not be effective with respect to any Lender unless (i) no
Default or Event of Default shall have occurred and be continuing on both the
date of the notice requesting such extension and on the Existing Maturity
Date and (ii) each of the representations and warranties set forth in Article
III hereof (including, without limitation, those set forth in Section 3.06
hereof and Section 3.09 hereof) shall be true and correct in all material
respects on and as of each of the date of the notice requesting such
extension and the Existing Maturity Date with the same force and effect as if
made on and as of each such date, except to the extent such representations
and warranties expressly relate to an earlier date.
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SECTION 2.11. CONVERSION AND CONTINUATION OF BORROWINGS.
(a) The Borrower shall have the right at any time upon prior irrevocable
notice to the Administrative Agent (x) not later than 12:00 (noon), Dallas,
Texas time, one Business Day prior to conversion, to convert any Eurodollar
Borrowing into an ABR Borrowing, (y) not later than 10:00 a.m., Dallas, Texas
time, three Business Days prior to conversion or continuation, to convert any
ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar
Borrowing as a Eurodollar Borrowing for an additional Interest Period, and
(z) not later than 10:00 a.m., Dallas, Texas time, three Business Days prior
to conversion, to convert the Interest Period with respect to any Eurodollar
Borrowing to another permissible Interest Period, subject in each case to the
following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.09(b)
hereof regarding the principal amount and maximum number of Borrowings
of the relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrower shall pay,
upon demand, any amounts due to the Lenders pursuant to Section 2.15 hereof;
(v) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing; and
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(vii) after the occurrence and during the continuance of a Default
or an Event of Default, no outstanding Loan may be converted into, or
continued for an additional interest period as, a Eurodollar Loan.
(b) Each notice pursuant to this Section 2.11 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day), (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto, and (v) whether such Borrowing is made under the Short Term
Revolving Loans or the Long Term Revolving Loans. If no Interest Period is
specified in any such notice with respect to any conversion to or continuation
as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an
Interest Period of one month's duration. The Administrative Agent shall advise
the Lenders of any notice given pursuant to this Section 2.11 and of each
Lender's portion of any converted or continued Borrowing. If the Borrower shall
not have given notice in accordance with this Section 2.11 to continue any
Borrowing into a subsequent Interest Period (and shall not otherwise have given
notice in accordance with this Section 2.11 to convert such Borrowing), such
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be continued into a new
Interest Period as an ABR Borrowing. The Borrower shall not have the right to
continue or convert the Interest Period with respect to any Competitive
Borrowing pursuant to this Section 2.11.
SECTION 2.12. PREPAYMENT.
(a) VOLUNTARY PREPAYMENT. The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, whether such Borrowing is a Short
Term Revolving Loan or a Long Term Revolving Loan, in whole or in part, upon at
least two Business Days' prior written or telecopy notice (or telephone notice
promptly confirmed by written or telecopy notice) to the Administrative Agent
before 11:00 a.m., Dallas, Texas time; provided, however, that each partial
prepayment shall be in an amount that is an integral multiple of $1,000,000 and
not less than $3,000,000.
(b) MANDATORY PREPAYMENT AND CASH COLLATERALIZATION. In the event of any
termination of the Commitments, the Borrower shall repay or prepay all its
outstanding Borrowings (and irrevocably cash collateralize the L/C Exposure in
the manner contemplated by Section 2.21(j) hereof) on the date of such
termination. In the event of any partial reduction of the Commitments, then (i)
at or prior to the effective date of such reduction or termination, the
Administrative Agent shall notify the Borrower and the Lenders of the aggregate
amount of outstanding Revolving Loans or Total Exposure, as the case may be,
after giving effect thereto and (ii) if the sum of the aggregate amount of
outstanding Revolving
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Loans or Total Exposure, as the case may be, and the aggregate outstanding
principal amount of the Competitive Loans, at the time would exceed the Total
Commitments, after giving effect to such reduction or termination, then the
Borrower shall, on the date of such reduction or termination, repay or prepay
Borrowings in an amount sufficient to eliminate such excess.
(c) ASSET DISPOSITIONS. Whenever and on each occasion that the Borrower
or any Subsidiary of the Borrower receives Net Cash Proceeds from an Asset
Disposition (not including any transaction in which the Borrower transfers
control through a sale, corporate transaction or other disposition, of the hotel
contracts and related assets for its hotel customers outside of the United
States) which, when taken together with all such Net Cash Proceeds theretofore
received, exceeds $25,000,000 (any such Net Cash Proceeds in excess of such
amount being referred to as "Excess Proceeds"), the Borrower will, substantially
simultaneously with (and in any event not later than the Business Day next
following) the receipt of such Excess Proceeds, pay to the Administrative Agent
(for application to the prepayment of the Loans as designated by the Borrower,
however, upon the failure of the Borrower to designate, application shall be
made to reduce Short Term Revolving Loans first, and then to the Long Term
Revolving Loans) an amount equal to such Excess Proceeds. To the extent such
prepayment is applied to the Short Term Revolving Loans, the Short Term
Commitment relating to the Short Term Revolving Loans so prepaid will
automatically be permanently reduced in an amount equal to the amount of such
prepayment. When all Short Term Revolving Loans have been prepaid to zero and
the Short Term Commitment is zero, the remaining amounts shall repay amounts
owed under the Long Term Revolving Loans. To the extent such prepayment is
applied to the Long Term Revolving Loans, the Long Term Commitment relating to
the Long Term Revolving Loans so prepaid will automatically be permanently
reduced in an amount equal to the amount of such prepayment.
(d) ESCROW AMOUNTS FOR REPAYMENT OF FIXED RATE BORROWINGS AND EURODOLLAR
BORROWINGS. In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the applicable outstanding ABR
Loans (the amount of any such excess being called the "ESCROW AMOUNT"), the
Borrower shall have the right, in lieu of making such prepayment in full, to
prepay all the outstanding applicable ABR Loans and to deposit an amount equal
to the Escrow Amount with the Administrative Agent in a cash collateral account
maintained by and in the sole dominion and control of the Administrative Agent.
Any amounts so deposited shall be held by the Administrative Agent as collateral
for the Obligations and applied to the prepayment of outstanding Eurodollar
Loans at the end of the current Interest Periods applicable thereto. On any
Business Day on which (x) collected amounts remain on deposit in or to the
credit of such cash collateral account after giving effect to the payments made
on such day and (y) the Borrower shall have delivered to the Administrative
Agent a written request or telephonic request (which shall be promptly confirmed
in writing) that such remaining collected amounts be invested in the Permitted
Investments specified in such request, the Administrative Agent shall use its
reasonable efforts to invest such remaining collected amounts in such Permitted
Investments; PROVIDED, HOWEVER,
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that the Administrative Agent shall have continuous dominion and full control
over any such investments (and over any interest that accrues thereon) to the
same extent that it has dominion and control over such cash collateral account
and no Permitted Investment shall mature after the end of the Interest Period
for which it is to be applied. The Borrower shall NOT have the right to
withdraw any amount from such cash collateral account until such Eurodollar
Loans and accrued interest thereon are paid in full or if a Default or Event
of Default then exists or would result.
(e) NOTICE OF VOLUNTARY PREPAYMENT. Each notice of prepayment shall
specify the prepayment date, the principal amount of each Borrowing (or portion
thereof) to be prepaid and whether such amount is to prepaid under the Short
Term Revolving Loan or the Long Term Revolving Loan. Each such notice shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.12 shall be subject to Section 2.15 hereof but otherwise without premium or
penalty. All prepayments under this Section 2.12 shall be accompanied by
accrued interest on the principal amount being prepaid to the date of payment.
(f) PREPAYMENT AS A RESULT OF THE TOTAL EXPOSURE IN EXCESS OF TOTAL
COMMITMENTS. Whenever and on each occasion that the Total Exposure exceeds the
Total Commitments, the Borrower will immediately prepay the Revolving Loans by
the amount necessary to reduce the Total Exposure to an amount less than or
equal to the Total Commitments. Any such prepayment shall be applied as
directed by the Borrower, however, upon failure of the Borrower to so direct,
such amounts shall first be applied to prepay Short Term Revolving Loans and
then to prepay Long Term Revolving Loans. Whenever and on each occasion that
the aggregate outstanding Short Term Revolving Loans exceeds the Short Term
Commitments, the Borrower will immediately prepay the Short Term Revolving Loans
by the amount necessary to reduce the aggregate outstanding Short Term Revolving
Loans to an amount less than or equal to the Short Term Commitments. Whenever
and on each occasion that the aggregate outstanding Long Term Revolving Loans
exceeds the Long Term Commitments, the Borrower will immediately prepay the Long
Term Revolving Loans by the amount necessary to reduce the aggregate outstanding
Long Term Revolving Loans to an amount less than or equal to the Long Term
Commitments.
SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.
(a) Notwithstanding any other provision of this Agreement, if after the
date of this Agreement any change in any Law or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
Law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan or Fixed Rate Loan
made by such Lender or any Fees or other amounts payable hereunder (other than
changes in respect of taxes imposed on the overall net income (including without
limitation franchise taxes
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on net income, branch profit taxes and alternate minimum income taxes) of such
Lender or the Issuing Bank by the jurisdiction in which such Lender or the
Issuing Bank is incorporated or has its principal office or by any political
subdivision or taxing authority therein), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by any Lender or
the Issuing Bank (except any such reserve requirement which is reflected in
the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans or Fixed Rate Loans made by such Lender or any Letter of
Credit or participation therein, and the result of any of the foregoing shall
be to increase the cost to such Lender or the Issuing Bank of making or
maintaining any Eurodollar Loan or Fixed Rate Loan or increase the cost to any
Lender of issuing or maintaining any Letter of Credit or purchasing or
maintaining a participation therein or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Bank hereunder whether of
principal, interest or otherwise, by an amount deemed by such Lender or the
Issuing Bank to be material, then the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, upon demand such additional amount or
amounts as will compensate such Lender or the Issuing Bank, as the case may
be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any Law, agreement or guideline regarding
capital adequacy, or any change after the date hereof in any such Law, agreement
or guideline (regardless of whether the change in such Law, agreement or
guideline has been adopted) or in the interpretation or administration thereof
by any Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or any lending office of such Lender) or
the Issuing Bank or any Lender's or the Issuing Bank's holding company with any
request or directive regarding capital adequacy (whether or not having the force
of Law) of any Governmental Authority has or would have the effect of reducing
the rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made or participations in Letters of
Credit purchased by such Lender pursuant hereto or the Letters of Credit issued
by the Issuing Bank pursuant hereto to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy) by an amount deemed by such Lender or the Issuing Bank to be material,
then from time to time the Borrower shall pay to such Lender or the Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
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(c) A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the basis for computation of the amount or amounts necessary
to compensate such Lender or the Issuing Bank or its holding company, as
applicable, as specified in paragraph (a) or (b) above shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided,
however, that in no event shall the Borrower be obligated to make any payment
under this Section 2.13 in respect of increased costs incurred prior to the
period commencing 90 days prior to the date on which demand for compensation in
respect of such increased costs is first made. In addition, the Borrower shall
not incur liability for additional amounts with respect to changes in the basis
of taxation described above for periods of time before such Lender or Issuing
Bank becomes aware of the change in such basis except in the case of any
retroactive application of such a change. The protection of this Section shall
be available to each Lender and the Issuing Bank regardless of any possible
contention of the invalidity or inapplicability or the Law, agreement, guideline
or other change or condition that shall have occurred or been imposed.
Notwithstanding any other provision of this Section, no Lender shall be entitled
to demand compensation hereunder in respect of any Competitive Loan if it shall
have been aware of the event or circumstance giving rise to such demand at the
time it submitted the Competitive Bid pursuant to which such Loan was made.
SECTION 2.14. CHANGE IN LEGALITY.
(a) Notwithstanding any other provision of this Agreement, if, after the
date hereof, any change in any Law or in the interpretation thereof by any
Governmental Authority charged with the administration or interpretation thereof
shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby with respect to any
Eurodollar Loan, then, by written notice to the Borrower and to the
Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness) be made by such Lender hereunder
(or be continued for additional Interest Periods and ABR Loans will not
thereafter (for such duration) be converted into Eurodollar Loans),
whereupon such Lender shall not submit a Competitive Bid in response to a
request for a Eurodollar Competitive Loan and any request for a Eurodollar
Borrowing (or to convert an ABR Borrowing to a Eurodollar Borrowing or to
continue a Eurodollar Borrowing for an additional interest Period) shall,
as to such Lender only, be deemed a request for an ABR Loan (or a request
to
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continue an ABR Loan as such for an additional Interest Period or to
convert a Eurodollar Loan into an ABR Loan, as the case may be), unless
such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically converted to ABR Loans as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.15. INDEMNITY. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
(a) any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (i) such Lender receiving or being
deemed to receive any amount on account of the principal of any Fixed Rate Loan
or Eurodollar Loan prior to the end of the Interest Period in effect therefor,
(ii) the conversion of any Eurodollar Loan to an ABR Loan, or the conversion of
the Interest Period with respect to any Eurodollar Loan, in each case other than
on the last day of the Interest Period in effect therefor, or (iii) any Fixed
Rate Loan or Eurodollar Loan to be made by such Lender (including any Eurodollar
Loan to be made pursuant to a conversion or continuation under Section 2.11
hereof) not being made after notice of such Loan shall have been given by the
Borrower hereunder for any reason other than default by a Lender (any of the
events referred to in this clause (a) being called a "BREAKAGE EVENT") or (b)
any default in the making of any payment or prepayment required to be made
hereunder. In the case of any Breakage Event, such loss shall include an amount
equal to the excess, as reasonably determined by such Lender, of (i) its cost of
obtaining funds for the Fixed Rate Loan or Eurodollar Loan that is the subject
of such Breakage Event for the period from the date of such Breakage Event to
the last day of the Interest Period in effect (or that would have been in
effect) for such Loan over (ii) the amount of interest likely to be realized by
such Lender in redeploying the funds released or not utilized by reason of such
Breakage Event for such period. A certificate of any such Lender shall be
delivered to the Borrower and shall be conclusive absent manifest error, so long
as such certificate sets forth in reasonable detail any
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amount or amounts which such Lender is entitled to receive pursuant to this
Section 2.15 and the basis of computation of the amount or amounts necessary
to compensate such Lender.
SECTION 2.16. PRO RATA TREATMENT. Except as provided below in this
Section 2.16 with respect to Competitive Borrowings and as required under
Section 2.14 hereof, each Borrowing, each payment or prepayment of principal of
any Borrowing, each payment of interest on the Loans, each payment of the
Facility Fees and Commitment Fees, each reduction of the Commitments and each
conversion of any Borrowing to or continuation of any Borrowing as a Borrowing
of any Type shall be allocated pro rata among the Lenders in accordance with
their respective applicable Commitments (or, if such Commitments shall have
expired or been terminated, in accordance with the respective principal amounts
of their outstanding Loans). Each payment of principal of any Competitive
Borrowing shall be allocated pro rata among the Lenders participating in such
Borrowing, in accordance with the respective principal amounts of their
outstanding Competitive Loans comprising such Borrowing. Each payment of
interest on any Competitive Borrowing shall be allocated pro rata among the
Lenders participating in such Borrowing in accordance with the respective
amounts of accrued and unpaid interest on their outstanding Competitive Loans
comprising such Borrowing. For purposes of determining the available
Commitments of the Lenders at any time, each outstanding Competitive Borrowing
shall be deemed to have utilized the Commitments of the Lenders (including those
Lenders which shall not have made Loans as part of such Competitive Borrowing)
pro rata in accordance with such respective Commitments. Each Lender agrees
that in computing such Lender's portion of any Borrowing to be made hereunder,
the Administrative Agent may, in its discretion, round each Lender's percentage
of such Borrowing to the next higher or lower whole dollar amount.
SECTION 2.17. SHARING OF SETOFFS. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any Debtor Relief Law or
other similar Law or otherwise, or by any other means, obtain payment (voluntary
or involuntary) in respect of any Loan or Loans or L/C Disbursement as a result
of which the unpaid principal portion of its Loans and participations in L/C
Disbursements shall be proportionately less than the unpaid principal portion of
the Loans and participations in L/C Disbursements of any other Lender, it shall
be deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, a
participation in the Loans and L/C Exposure of such other Lender, so that the
aggregate unpaid principal amount of the Loans and L/C Exposure and
participations in Loans and L/C Exposure held by each Lender shall be in the
same proportion to the aggregate unpaid principal amount of all Loans and L/C
Exposure then outstanding as the principal amount of its Loans and L/C Exposure
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Loans and L/C Exposure outstanding prior to
such exercise of banker's lien,
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setoff or counterclaim or other event; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section
2.17 and the payment giving rise thereto shall thereafter be recovered, such
purchase or purchases or adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustment restored without
interest. The Borrower expressly consents to the foregoing arrangements and
agrees that any Lender holding a participation in a Loan or L/C Disbursement
deemed to have been so purchased may exercise any and all rights of banker's
lien, setoff or counterclaim with respect to any and all moneys owing by the
Borrower to such Lender by reason thereof as fully as if such Lender had made
a Loan directly to the Borrower in the amount of such participation.
SECTION 2.18. PAYMENTS.
(a) The Borrower shall make each payment (including principal of or
interest on any Borrowing or any L/C Disbursement or any Fees or other amounts)
hereunder not later than 12:00 (noon), Dallas, Texas time, on the date when due
in immediately available dollars, without setoff, defense or counterclaim. Each
such payment (other than Issuing Bank Fees, which shall be paid directly to the
Issuing Bank,) shall be made to the Administrative Agent at its offices at 901
Main, 64th Floor, Dallas, Texas 75202.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment may be made on
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of interest or Fees, if applicable.
SECTION 2.19. TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.18 hereof, free and clear of and without deduction for
any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto EXCLUDING (i) income
taxes imposed on the net income (including without limitation, branch profit
taxes and alternative minimum income taxes of the Administrative Agent, any
Lender or the Issuing Bank (or any transferee or assignee thereof, including a
participation holder (any such entity a "TRANSFEREE")), (ii) franchise taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or Transferee), in each case by the jurisdiction under the Laws of which
the Administrative Agent, such Lender or the Issuing Bank (or Transferee) is
organized or any political subdivision thereof or by the jurisdiction in which
the applicable lending or issuing office of the Administrative Agent, such
Lender, or the Issuing Bank (or Transferee) is located or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charge, withholdings and liabilities, collectively or individually, being called
"TAXES"). If the Borrower shall be required to deduct
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any Taxes from or in respect of any sum payable hereunder to the
Administrative Agent, any Lender or the Issuing Bank (or and Transferee), (i)
the sum payable shall be increased by the amount (an "ADDITIONAL AMOUNT")
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.19) the
Administrative Agent, such Lender or the Issuing Bank or Transferee), as the
case may be, shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental
Authority in accordance with Applicable Law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from and payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
("OTHER TAXES").
(c) The Borrower will indemnify the Administrative Agent, each Lender and
the Issuing Bank (or Transferee) for the full amount of Taxes and Other Taxes
paid by the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, and any liability, (including penalties,
interest and expenses (including reasonable attorney's fees and expenses))
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability prepared by the
Administrative Agent, a Lender or the Issuing Bank (or Transferee), or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Administrative Agent, any Lender or the
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.
(d) If the Administrative Agent, a Lender or the Issuing Bank (or
Transferee) receives a refund in respect of any Taxes or Other Taxes as to which
it has been indemnified by the Borrower or with respect to which the Borrower
has paid additional amounts pursuant to this Section 2.19, it shall within 30
days from the date of such receipt pay over to the Borrower (a) such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent, such Lender or the Issuing Bank (or Transferee) and (b)
interest paid by the relevant Governmental Authority with respect to such
refund; PROVIDED, HOWEVER, that the Borrower, upon the request of the
Administrative Agent, such Lender or the Issuing Bank (or Transferee), shall
repay the amount paid over to the Borrower (plus penalties, interest or other
charges) to the Administrative Agent, such Lender or the Issuing Bank (or
Transferee) in the event the Administrative Agent, such Lender or the Issuing
Bank (or Transferee) is required to repay such refunds to such Governmental
Authority. If the Borrower determines in good faith that a reasonable basis
exists for contesting any Tax or Other Tax, the Administrative Agent,
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Lender, Issuing Bank or Transferee, as applicable, shall cooperate with the
Borrower in challenging such Tax or Other Tax at the Borrower's expense if
requested by the Borrower (it being understood and agreed that the
Administrative Agent, Lender, Issuing Bank or Transferee, as applicable,
shall have no obligation to contest or responsibility for contesting such Tax
or Other Tax).
(e) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrower to the relevant Governmental Authority, the Borrower will
deliver to the Administrative Agent, at its address referred to in Section 9.01
hereof, the original or a certified copy of any receipt actually issued by such
Governmental Authority evidencing payment thereof.
(f) Each Lender (or Transferee) that is organized under the Laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "NON-U.S. LENDER") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate containing representations regarding the status of such
Non-U.S. Lender as not being a bank for purposes of Section 881(c) of the Code,
as not being a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and as not being a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or reduced rate of, U.S. Federal withholding
tax on payments by the Borrower under this Agreement. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of a Transferee that is a participation holder,
on or before the date such participation holder becomes a Transferee hereunder)
and on or before the date, if any, such Non-U.S. Lender changes its applicable
lending office by designating a different lending office (a "NEW LENDING
OFFICE"). In addition, each Non-U.S. Lender shall deliver such forms promptly
upon the obsolescence or invalidity of any form previously delivered by such
Non-U S. Lender. Notwithstanding any other provision of this Section 2.19(f), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.19(f) that such Non-U.S. Lender is not legally able to deliver.
(g) The Borrower shall not be required to indemnify any Non-U.S. Lender or
to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder)
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or, with respect to payments to a New Lending Office, the date such Non-U.S.
Lender designated such New Lending Office with respect to a Loan; provided,
however, that this paragraph (g) shall not apply (x) to any Transferee or New
Lending Office that becomes a Transferee or New Lending Office as a result of
an assignment, participation, transfer or designation made at the request of
the Borrower and (y) to the extent the indemnity payment or additional
amounts any Transferee, or any Lender (or Transferee), acting through a New
Lending Office, would be entitled to receive (without regard to this
paragraph (g)) do not exceed the indemnity payment or additional amounts that
the Person making the assignment, participation or transfer to such
Transferee, or Lender (or Transferee) making the designation of such New
Lending Office, would have been entitled to receive in the absence of such
assignment, participation, transfer or designation or (ii) the obligation to
pay such additional amounts would not have arisen but for a failure by such
Non-U.S. Lender to comply with the provisions of paragraph (g) above.
(h) Nothing contained in this Section 2.19 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
(i) Each Bank represents that, to the best of its knowledge, it is not a
party to any "conduit financing arrangement" as defined under applicable
Treasury Regulations promulgated under the Code.
(j) Any Non-U.S. Lender that could become completely exempt from
withholding of any tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof ("U.S.
TAXES") in respect of payment of any obligations due to such Non-U.S. Lender
under this Agreement ("LENDER OBLIGATIONS") if the Lender Obligations were in
registered form for U.S. Federal income tax purposes may request the Borrower
(through the Administrative Agent), and the Borrower agrees thereupon, to
exchange any promissory note(s) evidencing such Lender Obligations for
promissory note(s) registered as provided in subsection (k) below (each, a
"REGISTERED NOTE"). Registered Notes may not be exchanged for promissory notes
that are not Registered Notes.
(k) From and after the time, if any, when any Lender requests a Registered
Note, the Borrower shall maintain, or cause to be maintained, a register (the
"REGISTER") on which it enters the name of each registered owner of the Lender
Obligation(s) evidenced by a Registered Note. A Registered Note and the Lender
Obligation(s) evidenced thereby may be assigned or otherwise transferred in
whole or in part only by registration of such assignment or transfer of such
Registered Note and the Lender Obligation(s) evidenced thereby on the Register
(and each Registered Note shall expressly so provide). Any assignment or
transfer of all or part of such Lender Obligation(s) and the Registered Note(s)
evidencing the same shall be registered on the Register only upon surrender for
registration of assignment or transfer of the Registered Note(s) evidencing such
Lender Obligation(s), duly endorsed by (or
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accompanied by a written instrument of assignment or transfer duly executed
by) the Registered Noteholder thereof, and thereupon one or more new
Registered Note(s) in the same aggregate principal amount shall be issued to
the designated assignee(s) or transferee(s) pursuant to, in accordance with,
and subject to the restrictions of, Section 9.04 hereof). Prior to the due
presentment for registration of assignment or transfer of any Registered
Note, the Borrower and the Administrative Agent shall treat the Person in
whose name such Lender Obligation(s) and the Registered Note(s) evidencing
the same is registered as the owner thereof for the purpose of receiving all
payments thereon and for all other purposes, notwithstanding any notice to
the contrary. The Register shall be available for inspection by the
Administrative Agent and any Lender at any reasonable time upon reasonable
prior notice.
SECTION 2.20. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES; DUTY
TO MITIGATE.
(a) In the event (i) any Lender or the Issuing Bank delivers a certificate
requesting compensation pursuant to Section 2.13 hereof, (ii) any Lender or the
Issuing Bank delivers a notice described in Section 2.14 hereof or (iii) the
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.19 hereof, the Borrower may, at its sole expense and
effort (including with respect to the processing and recordation fee referred to
in Section 9.04(b) hereof), upon notice to such Lender or the Issuing Bank and
the Administrative Agent, require such Lender or the Issuing Bank to transfer
and assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04 hereof), all of its interests, rights and obligations
under this Agreement to an assignee that shall assume such assigned obligations
which assignee may be another Lender, if a Lender accepts such assignment);
provided that (x) such assignment shall not conflict with any Law, rule or
regulation or order of any court or other Governmental Authority having
jurisdiction, (v) the Borrower shall have received the prior written consent of
the Administrative Agent (and, if a Commitment is being assigned, of the Issuing
Bank), which consent shall not unreasonably be withheld, and (z) the Borrower or
such assignee shall have paid to the affected Lender or the Issuing Bank in
immediately available funds an amount equal to the sum of the principal of and
interest accrued to the date of such payment on the outstanding Loans and
participations in L/C Disbursements of such Lender or the Issuing Bank plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.13 hereof and Section 2.15
hereof); provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.13 hereof or notice under Section 2.14
hereof or the amounts paid pursuant to Section 2.19 hereof, as the case may be,
cease to cause such Lender or the Issuing Bank to suffer increased costs or
reductions in amounts received or receivable or reduction in return on capital,
or cease to have the consequences specified in Section 2.14, or cease to result
in amounts being payable under Section 2.19 hereof, as the case may be,
including as a result of any action taken by such Lender or the Issuing Bank
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pursuant to paragraph (b) below), or if such Lender or the Issuing Bank shall
waive its right to claim further compensation under Section 2.13 hereof in
respect of such circumstances or event or shall withdraw its notice under
Section 2.14 hereof or shall waive its right to further payments under Section
2.19 hereof in respect of such circumstances or event, as the case may be, then
such Lender or the Issuing Bank shall not thereafter be required to make any
such transfer and assignment hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.13 hereof, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.14 hereof or (iii) the Borrower is required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.19, then such Lender or the Issuing Bank shall use reasonable efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with
its internal policies or legal or regulatory restrictions or suffer any
disadvantage or burden deemed by it to be significant) (x) to file any
certificate or document reasonably requested in writing by the Borrower or (y)
to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.13 hereof or enable it
to withdraw its notice pursuant to Section 2.14 hereof or would reduce accounts
payable pursuant to Section 2.19 hereof, as the case may be, in the future. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender or the Issuing Bank in connection with any such filing or assignment,
delegation and transfer.
SECTION 2.21. LETTERS OF CREDIT.
(a) GENERAL. The Borrower may request the issuance of a Letter of Credit,
in a form reasonably acceptable to the Administrative Agent and the Issuing
Bank, appropriately completed, for the account of the Borrower, at any time and
from time to time while the Commitments remain in effect. The face amount of
each Letter of Credit may never be greater than the lesser of (i) $10,000,000
and (ii) the amount by which the Total Commitment exceeds the Total Exposure on
the date of issuance. This Section shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall hand deliver or
telecopy to the Issuing Bank and the Administrative Agent (reasonably in advance
of the requested date of issuance, amendment, renewal or extension) a completed
Application and a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to
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expire (which shall comply with paragraph (c) below), the amount of such
Letter of Credit, the name and address of the beneficiary thereof, whether
such Letter of Credit is being issued under the Short Term Commitment or the
Long Term Commitment and such other information as shall be necessary to
prepare such Letter of Credit. In connection with a request for the issuance
of a Letter of Credit, in the event of any inconsistency between the terms of
any Application and the provisions of this Agreement, the provisions of this
Agreement shall be controlling. A Letter of Credit shall be issued, amended,
renewed or extended only if, and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that, after giving effect to such issuance, amendment, renewal or
extension (A) the L/C Exposure shall not exceed $10,000,000, (B) the sum of
the Total Exposure shall not exceed the Total Commitment, and (C) as
applicable, (I) the sum of the aggregate outstanding Short Term Revolving
Loans plus L/C Exposure attributable to the Short Term Commitment (after
giving effect to the issuance of such Letter of Credit) does not exceed the
Short Term Commitment, and (II) the sum of the aggregate outstanding Long
Term Revolving Loans plus L/C Exposure attributable to the Long Term
Commitment (after giving effect to the issuance of such Letter of Credit)
does not exceed the Long Term Commitment. The Issuing Bank shall not enter
into any amendment of an outstanding Letter of Credit which has not been
requested or approved in writing by the Borrower.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the Short
Term Revolving Loan Maturity Date or the Long Term Revolving Loan Maturity Date,
as applicable, unless such Letter of Credit (i) expires by its terms on an
earlier date or (ii) has a one-year tenor and provides for the renewal thereof
for additional one-year periods, so long as such periods referred to in this
clause (ii) shall not in any event expire at a date later than the date that is
five Business Days prior to the Short Term Revolving Loan Maturity Date or the
Long Term Revolving Loan Maturity Date, as applicable.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each such Lender hereby acquires from the
applicable Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Pro Rata Percentage of the aggregate amount available to bc drawn under
such Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement
made by the Issuing Bank and not reimbursed by the Borrower forthwith on the
date due as provided in Section 2.02(f) hereof. Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the
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occurrence and continuance of a Default or an Event of Default, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than two hours after
the Borrower shall have received notice from the Issuing Bank that payment of
such draft will be made, or, if the Borrower shall have received such notice
later than 10:00 a.m., Dallas, Texas time, on any Business Day, not later than
10:00 a.m., Dallas, Texas time, on the immediately following Business Day.
(f) OBLIGATIONS ABSOLUTE. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any other Loan Paper, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right
that the Borrower, any other party guaranteeing, or otherwise obligated
with, the Borrower, any Subsidiary of the Borrower or other Affiliate
thereof or any other Person may at any time have against the beneficiary
under any Letter of Credit, the Issuing Bank, the Administrative Agent or
any Lender or any other Person, whether in connection with this Agreement
or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other Person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrower's obligations
hereunder.
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The foregoing shall not be construed to excuse the Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by Applicable Law) suffered by the Borrower
that are caused by the Issuing Bank's gross negligence or wilful misconduct in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary and, in making any payment under any Letter of
Credit (i) the Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
the Issuing Bank
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Issuing Bank and the Lenders with
respect to any such L/C Disbursement. The Administrative Agent shall promptly
give each Lender notice thereof.
(h) INTERIM INTEREST. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided in Section 2.09(f) hereof, at the rate per annum that would
apply to such amount if such amount were an ABR Loan.
(i) RESIGNATION OR REMOVAL OF THE ISSUING BANK. The Issuing Bank may
resign at any time by giving 90 days' prior written notice to the Administrative
Agent, the Lenders and the Borrower, and may be removed at any time by the
Borrower by notice to the Issuing Bank, the Administrative Agent and the
Lenders. Subject to the next succeeding paragraph, upon the
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acceptance of any appointment as the Issuing Bank hereunder by a Lender that
shall agree to serve as successor Issuing Bank, such successor shall succeed
to and become vested with all the interests, rights and obligations of the
retiring Issuing Bank and the retiring Issuing Bank shall be discharged from
its obligations to issue additional Letters of Credit hereunder. At the time
such removal or resignation shall become effective, the Borrower shall pay all
accrued and unpaid fees pursuant to Section 2.06(c) hereof. The acceptance of
any appointment as the Issuing Bank hereunder by a successor Lender shall be
evidenced by an agreement entered into by such successor, in a form
satisfactory to the Borrower and the Administrative Agent, and, from and after
the effective date of such agreement, (i) such successor Lender shall have all
the rights and obligations of the previous Issuing Bank under this Agreement
and (ii) references herein to the term Issuing Bank, shall be deemed to refer
to such successor or to any previous Issuing Bank, or to such successor and
all previous Issuing Banks, as the context shall require. After the
resignation or removal of the Issuing Bank hereunder, the retiring Issuing
Bank shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall occur and be
continuing, the Borrower shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders holding participations in outstanding Letters of
Credit representing greater than 50% of the aggregate undrawn amount of all
outstanding Letters of Credit thereof and of the amount to be deposited, deposit
in an account with the Administrative Agent, for the benefit of the Lenders, an
amount in cash equal to the L/C Exposure as of such date. Such deposit shall be
held by the Administrative Agent as collateral for the payment and performance
of the obligations of the Borrower under this Agreement. The Administrative
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account and, if so requested by the Borrower, shall
invest the deposits therein in Permitted Investments. Other than any interest
earned on the investment of such deposits in Permitted Investments, which
investments shall be made at the option and sole discretion of the
Administrative Agent, such deposits shall not bear interest or profits, if any,
on such investments shall accumulate in such account. Moneys in such account
shall (i) automatically be applied by the Administrative Agent to reimburse the
Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be
held for the satisfaction of the reimbursement obligations of the Borrower for
the L/C Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit), be applied to satisfy
other obligations of the Borrower under this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Administrative Agent, the
Issuing Bank and each of the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. The Borrower and each of its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, (c) is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement, the other Loan Papers and each other agreement or
instrument contemplated thereby to which it is or will be a party and to borrow
hereunder.
SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by
the Borrower of this Agreement, the promissory notes, the execution of the
guaranties by the Guarantors, the execution of all other Loan Papers by the
Obligors and the borrowings hereunder (collectively, the "Transactions") (a)
have been duly authorized by all requisite corporate and, if required,
stockholder action and (b) will not (i) violate (A) any provision of Law,
statute, rule or regulation, or of the certificate or articles of incorporation
or other constitutive documents or by-laws of the Borrower or any Subsidiary of
the Borrower, (B) any order of any Governmental Authority or (C) any provision
of any indenture, material agreement or other material instrument to which the
Borrower or any Subsidiary of the Borrower is a party or by which any of them or
any of their property is or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such indenture,
agreement or other instrument or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary of the Borrower.
SECTION 3.03. ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Borrower and constitutes a legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with its terms.
All other Loan Papers have been duly executed and delivered by the Borrower and
the Obligors and each constitutes a legal, valid and binding obligation of the
Borrower and the Obligors, as appropriate, enforceable against the Borrower and
the Obligors, as appropriate, in accordance with its terms.
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SECTION 3.04. GOVERNMENTAL APPROVALS. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for such as have
been made or obtained and are in full force and effect.
SECTION 3.05. FINANCIAL STATEMENTS. OCV has heretofore furnished to the
Lenders its balance sheets and statements of income and equity and cash flow (a)
as of and for the fiscal year ended December 31, 1995, audited by and
accompanied by the opinion of Deloitte & Touche, LLP, independent public
accountants, and (b) as of and for the fiscal quarter and the portion of the
fiscal year ended June 30, 1996. Such financial statements present fairly the
financial condition and results of operations and cash flows of OCV as of such
dates and for such periods. Such balance sheets and the notes thereto disclose
all material liabilities, direct or contingent, of such entities as of the dates
thereof. Such financial statements were prepared in accordance with GAAP
applied on a consistent basis. The Pro Forma Financial Statements were prepared
in good faith and management believes them to be based on reasonable assumptions
and to fairly present the pro forma financial condition and results of
operations of the Borrower and its Subsidiaries consistent with the rules and
regulations of the Securities and Exchange Commission.
SECTION 3.06. NO MATERIAL ADVERSE CHANGE. There has been no material
adverse change in the business, assets, operations, financial condition, or
material agreements of the Borrower and its Subsidiaries, taken as a whole,
since June 30, 1996.
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each of the Borrower and its Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its material properties and
assets, except for minor defects in title that do not interfere with its ability
to conduct its business as currently conducted or to utilize such properties and
assets for their intended purposes. All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 6.02
hereof.
(b) Each of the Borrower and its Subsidiaries has complied with all
material obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Each of the Borrower and its Subsidiaries owns or possesses, or could
obtain ownership or possession of, on terms not materially adverse to it, all
patents, trademarks, service marks, trade names, copyrights, licenses and rights
with respect thereto necessary for the present conduct of its business, without
any known conflict with the rights of others, and free from any burdensome
restrictions, except where such conflicts and restrictions could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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SECTION 3.08. SUBSIDIARIES. SCHEDULE 3.08 hereto sets forth as of the
date hereof a list of all Subsidiaries of the Borrower and the percentage
ownership interest of the Borrower therein. As of the date hereof, the shares
of Capital Stock or other ownership interests so indicated on SCHEDULE 3.08 are
fully paid and non-assessable and are owned by the Borrower, directly or
indirectly, free and clear of all Liens.
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 3.09 hereof, there are not any
actions, suits or proceedings at Law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any Subsidiary of the Borrower
or any business, property or rights of any such Person (i) that involve this
Agreement or the Transactions or (ii) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(b) None of the Borrower or any of its Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any Law, or is in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where such violation
or default could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. AGREEMENTS.
(a) Neither the Borrower nor any of its Subsidiaries is a party to any
agreement or subject to any corporate restriction that, since December 31, 1995,
has resulted or could reasonably be expected to result in a Material Adverse
Effect, except as disclosed on SCHEDULE 3.10 hereof.
(b) Neither the Borrower nor any of its Subsidiaries is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness, or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, where such default could reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.11. FEDERAL RESERVE REGULATIONS.
(a) Neither the Borrower nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of buying or carrying Margin Stock.
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(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation
G, U or X.
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither the Borrower nor any Subsidiary of the Borrower is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement.
SECTION 3.14. TAX RETURNS. Each of the Borrower and its Subsidiaries has
filed or caused to be filed all Federal, state, and material local and foreign
tax returns or materials required to have been filed by it and has paid or
caused to be paid all taxes due and payable by it and all assessments received
by it, except (a) taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, shall
have set aside on its books adequate reserves, and (b) taxes owed by Spectradyne
or its Subsidiaries, as described on SCHEDULE 3.14 hereto.
SECTION 3.15. NO MATERIAL MISSTATEMENTS. None of (a) the S-4 Registration
Statement (at the time it is declared effective under the Securities Act of
1933), or (b) any other written information, report, financial statement,
exhibit or schedule prepared by the Borrower and furnished to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement and the
other Loan Papers or in connection with any of the Corporate Restructuring
transactions, or included herein or delivered pursuant hereto contained (in the
case of subsection (a)) and contained, contains or will contain (in the case of
subsection (b)) when furnished any material misstatement of fact or omitted,
omits or will omit when furnished to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they were,
are or will be made, not misleading.
SECTION 3.16. EMPLOYEE BENEFIT PLANS. Each of the Borrower and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events,
could reasonably be expected to result in liability of the Borrower or any
Subsidiary of the Borrower which would be material to the Borrower and its
Subsidiaries on a consolidated basis.
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SECTION 3.17. SOLVENCY.
(a) Immediately after the consummation of the Transactions and the other
transactions to occur on the Closing Date and immediately following the
making of each Loan made and the issuance of each Letter of Credit issued and
after giving effect to the application of the proceeds thereof, (i) the fair
value of the assets of the Borrower and its Subsidiaries on a consolidated
basis, at a fair valuation, will exceed the debts and liabilities, direct,
subordinated, contingent or otherwise, of the Borrower and its Subsidiaries
on a consolidated basis; (ii) the present fair saleable value of the property
of the Borrower and its Subsidiaries on a consolidated basis will be greater
than the amount that will be required to pay the probable liability of the
Borrower and its Subsidiaries on a consolidated basis on their debts and
other liabilities, direct, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (iii) the Borrower
and its Subsidiaries on a consolidated basis will be able to pay their debts
and liabilities, direct, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured; and (iv) the Borrower and its
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted following the
Closing Date.
(b) The Borrower does not intend to, and does not believe that it or any
Subsidiary of the Borrower will, incur debts beyond its ability to pay such
debts as they mature, taking into account the timing and amounts of cash to
be received by it or any such Subsidiary and the timing and amounts of cash
to be payable on or in respect of its Indebtedness or the Indebtedness of any
such Subsidiary.
SECTION 3.18. INSURANCE. SCHEDULE 3.18 hereto sets forth a true,
complete and correct description of all insurance maintained by or for the
Borrower or for or by its Subsidiaries as of the date hereof and the Closing
Date. As of each such date, such insurance is in full force and effect and
all premiums have been duly paid. The Borrower and its Subsidiaries have
insurance in such amounts and covering such risks and liabilities as are in
accordance with normal industry practice.
SECTION 3.19. LABOR MATTERS. As of the date hereof and the Closing
Date, there are no strikes, lockouts or slowdowns against the Borrower or any
of its Subsidiary pending or, to the knowledge of the Borrower, threatened
which could reasonably be expected to have a Material Adverse Effect. The
hours worked by and payments made to employees of the Borrower and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or
any other applicable Federal, state, local or foreign Law dealing with such
matters. All payments due from the Borrower or any Subsidiary of the
Borrower, or for which any claim may be made against the Borrower or any
Subsidiary of the Borrower, on account of wages and employee health and
welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation
of the
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Transactions to be consummated on or prior to the Closing Date will not give
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any
Subsidiary of the Borrower is bound.
SECTION 3.20. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
3.20:
(a) The properties owned, operated or leased by the Borrower and its
Subsidiaries (the "PROPERTIES") do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute, or constituted a violation
of, or (ii) could reasonably be expected to give rise to liability under,
Environmental Laws, which violations and liabilities, in the aggregate, could
reasonably be expected to result in a Material Adverse Effect;
(b) All Environmental Permits have been obtained and are in effect with
respect to the Properties and operations of the Borrower and its
Subsidiaries, and the Properties and all operations of the Borrower and its
Subsidiaries are in compliance, and in the last two years have been in
compliance, with all Environmental Laws and all necessary Environmental
Permits, except to the extent that such non-compliance or failure to obtain
any necessary permits, in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect;
(c) Neither the Borrower nor any of its Subsidiaries has received any
notice of an Environmental Claim in connection with the Properties or the
operations of the Borrower or its Subsidiaries or with regard to any Person
whose liabilities for environmental matters the Borrower or any of its
Subsidiaries has retained or assumed, in whole or in part, contractually,
which, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect, nor do the Borrower or any of its Subsidiaries have knowledge
that any such notice will be received or is being threatened;
(d) Hazardous Materials have not been transported from the Properties,
nor have Hazardous Materials been generated, treated, stored or disposed of
at, on or under any of the Properties in a manner that could reasonably be
expected to give rise to liability under any Environmental Law, nor have the
Borrower or its Subsidiaries retained or assumed any liability contractually,
with respect to the generation, treatment, storage or disposal of Hazardous
Materials, which transportation, generation, treatment, storage or disposal,
or retained or assumed liabilities, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.21. ACQUISITION OF SPECTRADYNE; MERGER OF OCV.
(a) ACQUISITION; BANKRUPTCY PROCEEDINGS. An order has been entered
confirming the Reorganization Plan and the time for reconsideration,
rehearing or new trial and the time to appeal or to seek a petition for
review or certiorari has expired and no post-trial motion,
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appeal or request for review is pending. All notices to creditors pursuant
to Debtor Relief Laws relating to the solicitation of votes and confirmation
of a plan of reorganization have been made within the time required by Debtor
Relief Laws. The Acquisition has been consummated in accordance with the
terms of the Acquisition Agreement. The Capital Stock of Spectradyne and all
of the assets of Spectradyne are wholly owned by the Borrower, free and clear
of any Liens on the terms set forth in the Acquisition Agreement and in the
Reorganization Plan.
(b) MERGER. No condition to closing of either the Merger or the
Acquisition has been waived by the Borrower. The Merger has been consummated
in accordance with the terms of the Merger Agreement. On the Closing Date,
there are no shareholders who have effectively exercised their appraisal
rights with respect to the Capital Stock of OCV. After the Closing Date,
there are no shareholders who have effectively exercised, or continue to have
the right to effectively exercise, their appraisal rights with respect to the
Capital Stock of OCV, the result of which exercise could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Papers shall be deemed to be made at and as of the Closing Date and at and as
of the date of each Borrowing under either of the Revolving Loans, and each
shall be true and correct when made, except to the extent (a) previously
fulfilled in accordance with the terms hereof, (b) subsequently inapplicable,
or (c) previously waived in writing by the Administrative Agent and Lenders
with respect to any particular factual circumstance. The representations and
warranties made under this Agreement and the other Loan Papers shall be
deemed applicable to each Subsidiary of the Borrower as of the formation or
acquisition of such Subsidiary and at and as of each date the representations
and warranties are remade pursuant to this provision. All representations
and warranties made under this Agreement and the other Loan Papers shall
survive, and not be waived by, the execution hereof by the Administrative
Agent and Lenders, any investigation or inquiry by the Administrative Agent
or any Lender, or by the making of any Loan under this Agreement and the
other Loan Papers.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. ALL CREDIT EVENTS. On the date of each Borrowing, and on
the date of each issuance of a Letter of Credit (each such event being called
a "CREDIT EVENT"):
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(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 or 2.04 hereof, as applicable (or such
notice shall have been deemed given in accordance with Section 2.04 hereof),
or, in the case of the issuance of a Letter of Credit, the Issuing Bank and
the Administrative Agent shall have received a duly completed Application and
a notice requesting the issuance of such Letter of Credit, required by
Section 2.21(b) hereof.
(b) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects on and as of the date of
such Credit Event with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to
an earlier date, and there shall have occurred no event which caused a
Material Adverse Effect.
(c) The Borrower and each of its Subsidiaries shall be in compliance in
all material respects with the terms and provisions set forth herein on its
part to be observed or performed, and at the time of and immediately after
such Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and
warranty by the Borrower on the date of such Credit Event as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. FIRST CREDIT EVENT. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of itself,
the Lenders and the Issuing Bank, a favorable written opinion of (i) the
General Counsel of the Borrower and its Subsidiaries and (ii) Latham &
Watkins, in connection with the Transactions and the Corporate Restructuring,
in each case (y) dated the Closing Date, and (z) covering such other matters
relating to this Agreement, the Transactions and the Corporate Restructuring
as the Administrative Agent shall reasonably request in form reasonably
acceptable to the Administrative Agent and its counsel, and the Borrower
hereby requests and instructs such counsel to deliver such opinions. The
opinions shall be addressed to the Issuing Bank, the Administrative Agent and
the Lenders. The Administrative Agent shall have also received copies of (i)
all opinions delivered by each counsel to the Borrower and each of its
Affiliates in connection with the Corporate Restructuring, and (ii) all
opinions addressed to the Borrower or any of its Affiliates from counsel to
any party in connection with the Corporate Restructuring, in each case, with
reliance letters authorizing the Administrative Agent and the Lenders to rely
on such opinions.
(b) All legal matters incident to this Agreement, the Borrowings, the
Corporate Restructuring, the Transaction and extensions of credit hereunder
shall be reasonably satisfactory to the Lenders, to the Issuing Bank and to
the Administrative Agent.
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(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments thereto,
of the Borrower and each of its Subsidiaries, except foreign organized
Subsidiaries, certified as of a recent date by the Secretary of State of the
state of its organization, and a certificate as to the good standing of the
Borrower and each of its Subsidiaries as of a recent date, from such
Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of the Borrower and each of its Subsidiaries, except foreign
organized Subsidiaries, dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of the Borrower
and each of its Subsidiaries as in effect on the Closing Date and at all
times since a date prior to the date of the resolutions described in clause
(B) below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of the Borrower and each
of its Subsidiaries authorizing the execution, delivery and performance of
this Agreement and the borrowings hereunder, as applicable, and that such
resolutions have not been modified rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation of the
Borrower and each of its Subsidiaries have not been amended since the date of
the last amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above, (D) as to the incumbency and specimen
signature of each officer executing this Agreement or any other document
delivered in connection herewith on behalf of the Borrower and each of its
Subsidiaries, (E) that attached thereto is a true and complete copy of the
Acquisition Agreement, the Merger Agreement, the EDS Agreement and the
Reorganization Plan, each as in effect on the Closing Date, and (F) that
attached thereto is a true and complete copy of each of the Ascent Agreements
as in effect on the Closing Date; (iii) a certificate of another officer as
to the incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to (ii) above; and (iv) such
other documents as the Lenders, the Issuing Bank or Donohoe, Jameson &
Carroll, P.C., counsel for the Administrative Agent, may reasonably request.
(d) The Lenders shall have received a duly completed Compliance
Certificate dated the Closing Date and executed by a Financial Officer of the
Borrower, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01 hereof, with paragraphs (f), (g), (i),
(j) and (k) of this Section 4.02, and demonstrating compliance by the
Borrower with the provisions of Sections 6.09 and 6.10 hereof, and certifying
to the fact that there exists no Default or Event of Default under the terms
of this Agreement, and consummating the Agreement and making the initial
Loans hereunder would not cause a Default or Event of Default.
(e) Each Lender and the Administrative Agent shall have received payment
in full of all Fees and other amounts due and payable on or prior to the
Closing Date, including reimbursement or payment of all reasonable
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.
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(f) The Borrower shall have delivered duly executed and completed copies
to each of the Lenders of each of the following documents and agreements, in
form and substance satisfactory to each Lender: this Agreement, applicable
Fee Letters and guaranties of the Obligations executed by all Guarantors.
The Borrower shall have delivered a promissory note to each Lender, in form
and substance satisfactory to each such Lender, and any other Loan Paper
reasonably required by any Lender in connection with this Agreement.
(g) An order has been entered confirming the Reorganization Plan, and
the time for reconsideration, rehearing or new trial and the time to appeal
or to seek a petition for review or certiorari has expired and no post-trial
motion or request for review is pending. All notices to creditors required
under Debtor Relief Laws in order to confirm such Plan have been made within
the time required by Debtor Relief Laws. No condition to closing of either
the Merger or the Acquisition has been waived by the Borrower. The
Acquisition has been consummated (or will be consummated on the Closing Date)
in accordance with the terms of the Acquisition Agreement and the Merger has
been consummated (or will be consummated simultaneous with this Transaction)
in accordance with the terms of the Merger Agreement. The Capital Stock of
Spectradyne and all of the assets of Spectradyne are wholly owned by the
Borrower (or will be wholly owned by the Borrower on the Closing Date) free
and clear of any Liens in accordance with the terms of the Acquisition
Agreement and the Reorganization Plan. There are no shareholders who have
effectively exercised, or continue to have the right to effectively exercise,
their appraisal rights with respect to the Capital Stock of OCV.
(h) Except with respect to certain FCC licenses of Spectradyne described
on SCHEDULE 4.02(h) hereto, all governmental and third party approvals
necessary or advisable in connection with the Corporate Restructuring, the
Transactions, and the continuing operations of the Borrower and its
Subsidiaries shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being
taken or threatened by any Governmental Authority which would restrain,
prevent or otherwise impose adverse conditions on the Corporate Restructuring
or the Transactions.
(i) There shall not have occurred any material change in the
capitalization (whether in debt or in equity), corporate structure or assets
of the Borrower or any of its Subsidiaries from that set forth in the S-4
Registration Statement.
(j) No action, suit, litigation or similar proceeding by or before any
Governmental Authority shall exist or, in the case of litigation by a
Governmental Authority, be threatened, with respect to the Corporate
Restructuring or the Transactions contemplated thereby or otherwise, which
would be likely in the reasonable opinion of the Required Lenders to have a
Material Adverse Effect.
(k) The structure and documentation of the Corporate Restructuring and
the Transactions contemplated thereby, and all corporate and other
proceedings taken or to be
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taken and all documents incidental thereto, shall be reasonably satisfactory
in form and substance to the Administrative Agent and Donohoe, Jameson &
Carroll, P.C., counsel for the Administrative Agent, and each Lender shall
have received copies of all such documents as such Lender, acting through the
Administrative Agent, may reasonably request. All transactions necessary to
consummate the Corporate Restructuring shall have been completed in
accordance with the terms and conditions of the Merger Agreement, the
Acquisition Agreement and the Reorganization Plan.
(l) The Lenders shall have received a certification from the chief
financial officer of the Borrower, in form and substance reasonably
satisfactory to the Lenders, as to the solvency of the Borrower and its
Subsidiaries on a consolidated basis after giving effect to the Corporate
Restructuring and the consummation of the other transactions contemplated
hereby.
(m) The Ascent Loan Facility shall have closed, or shall close
simultaneously with, this Transaction.
SECTION 4.03. INCREASE OF LONG TERM COMMITMENT. The Long Term
Commitment may only be increased if each of the following conditions has been
satisfied:
(a) The Borrower and each of its Subsidiaries, and the Guarantors, shall
have satisfied each condition in Section 4.01 hereof, and there shall exist
no Default or Event of Default on the date the Borrower requests such
advance, and both immediately before and after such increase.
(b) The Borrower shall give not less than five Business Day's notice of
a requested increase in the Long Term Commitment specifying (i) that such
notice is for an increase in the Long Term Commitment (with a corresponding
decrease in the Short Term Commitment) in accordance with the terms of
Section 2.01(b) hereof and this Section 4.03, (ii) the date that such
proposed increase is to be effective and (iii) the amount of such increase in
the Long Term Commitment (which such amount must be in excess of $5,000,000
and in integral multiples of $5,000,000 in excess thereof and otherwise
comply with subsection (c) below).
(c) The sum of (i) the aggregate outstanding Revolving Loans plus (ii)
the aggregate amount of outstanding Competitive Loans shall never exceed
$125,000,000 (as such $125,000,000 amount is reduced by each reduction in the
Commitments and Total Commitment in accordance with Section 2.10 hereof).
(d) Every increase in the Long Term Commitment shall reduce the Short
Term Commitment immediately and automatically in the amount of each such
increase. No increase in the Long Term Commitment may be made if such
increase would, upon reduction of the Short Term Commitment in accordance
with the terms of this subsection (d), reduce the Short Term Commitment to a
number less than zero.
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ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been
terminated and the Obligations shall have been paid in full and all Letters
of Credit have been canceled or have expired and all amounts drawn thereunder
have been reimbursed in full, the Borrower will, and will cause each of its
Subsidiaries to:
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES.
(a) Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence, except as otherwise
expressly permitted under Section 6.05 hereof.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and
trade names material to the conduct of its business; comply in all material
respects with all applicable Laws, rules, regulations and decrees and orders
of any Governmental Authority, whether now in effect or hereafter enacted;
and at all times maintain and preserve all property material to the conduct
of such business and keep such property in good repair, working order and
condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may
be properly conducted at all times.
SECTION 5.02. INSURANCE. Keep its insurable properties insured in
accordance with industry standards at all times by financially sound and
reputable insurers; maintain such other insurance, to such extent and against
such risks, including fire and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses
operating in the same or similar locations, including public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it; and maintain such other insurance as may
be required by Law.
SECTION 5.03. OBLIGATIONS AND TAXES. Pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its property before the same
shall become delinquent or in default, as well as all lawful claims for
labor, materials and supplies or otherwise that, if unpaid, might give rise
to a Lien upon such properties or any part thereof; PROVIDED, HOWEVER, that
such payment and discharge shall not be required with respect to any such
tax, assessment, charge,
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levy or claim so long as the validity or amount thereof shall be contested in
good faith by appropriate proceedings and the Borrower shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP
and such contest operates to suspend collection of the contested obligation,
tax, assessment or charge and enforcement of a Lien, and with respect to
those matters listed on SCHEDULE 3.14 hereto.
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 105 days after the end of each fiscal year, its consolidated
and consolidating balance sheet and related consolidated and consolidating
statements of income and cash flow, showing the financial condition of the
Borrower and its consolidated Subsidiaries as of the close of such fiscal
year and the results of their operations during such year, and a comparison
of such financial position and results of operations as of the corresponding
date and for the previous fiscal year, all audited (in the case of the
consolidated financial statements) by Deloitte & Touche, LLP or other
independent public accountants of recognized national standing acceptable to
the Required Lenders and accompanied by an opinion of such accountants (which
shall not be qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated balance sheet and related
consolidated statements of earnings and cash flow showing the financial
condition of the Borrower and its consolidated Subsidiaries as of the close
of such fiscal quarter and the results of their operations during such fiscal
quarter and the then elapsed portion of the fiscal year, and a comparison of
such financial position and results of operations as of the corresponding
date and for the corresponding periods in the previous fiscal year, all
certified by one of its Financial Officers as fairly presenting the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustment;
(c) (i) concurrently with any delivery of financial statements under
sub-paragraph (a) above, a certificate of the accounting firm opining on or
certifying such statements (which certificate may be limited to accounting
matters and disclaim responsibility for legal interpretations) certifying
that no Event of Default has occurred in Sections 6.01, 6.02(h), 6.03, 6.04,
6.05, 6.06, 6.09 and 6.10 hereof; and (ii) concurrently with any delivery of
financial statements under sub-paragraph (a) or (b) above, a Compliance
Certificate of a Financial Officer of the Borrower certifying that no Event
of Default or Default has occurred or, if such an Event of Default or Default
has occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and setting
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forth computations demonstrating compliance with the covenants contained in
Sections 6.01, 6.03, 6.04, 6.06, 6.09 and 6.10 hereof;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements, registration statements (other
than on Form S-8) and other similar materials filed by the Borrower or any
Subsidiary of the Borrower with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the function of said
Commission, or with any national securities exchange, or distributed
generally to its shareholders, as the case may be; and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary of the Borrower, or compliance with the terms of this Agreement
and the other Loan Papers, as the Administrative Agent or any Lender may
reasonably request.
SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to the
Administrative Agent, the Issuing Bank and each Lender prompt written notice
of the following:
(a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) taken or proposed to be taken with
respect thereto;
(b) the (i) filing or commencement of, or any written threat or notice
of intention of any Person to file or commence, any action, suit or
proceeding, whether at Law or in equity or by or before any Governmental
Authority, or (ii) the making of any written claim, in either case against
the Borrower or any Affiliate thereof as to which there is a reasonable
possibility of an adverse determination and which if adversely determined,
could reasonably be expected to result in a Material Adverse Effect; and
(c) any development (including developments in pending litigation and
developments in pending or threatened labor disruption) that has resulted in,
or could reasonably be expected to result in, a Material Adverse Effect.
SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply in all material respects
with the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within
10 days after any Responsible Officer of the Borrower or any ERISA Affiliate
knows or has reason to know that, any ERISA Event has occurred that, alone or
together with any other ERISA Event could reasonably be expected to result in
liability of the Borrower in an aggregate amount exceeding $55,000,000, a
statement of a Financial Officer of the Borrower setting forth details as to
such ERISA Event and the action, if any, that the Borrower proposes to take
with respect thereto.
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SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS.
Keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all requirements of Law are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior written notice, to visit and inspect the financial records
and the properties of the Borrower or any Subsidiary of the Borrower at
reasonable times and as often as reasonably requested and to make extracts
from and copies of such financial records, and permit any representatives
designated by the Administrative Agent or any Lender to discuss the affairs,
finances and condition of the Borrower or any Subsidiary of the Borrower with
the officers thereof and (with the concurrence of the Administrative Agent)
independent accountants therefor (provided that the Borrower has the right to
have a representative present for any meeting with the Borrower's independent
accountants).
SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in
the preamble to this Agreement.
SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Comply, and exercise best efforts to cause all lessees and other
Persons occupying its Properties to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; and obtain and renew all material Environmental Permits necessary
for its operations and Properties; and conduct any Remedial Action to the
extent required by and in accordance with Environmental Laws; provided,
however, that none of the Borrower or any of its Subsidiaries shall be
required to undertake any Remedial Action to the extent that its obligation
to do so is being contested in good faith and by proper proceedings and
appropriate reserves are being maintained with respect to such circumstances.
(b) If a Default caused by reason of a breach of paragraph (a) above or
Section 3.20 hereof shall have occurred and be continuing, at the request of
the Required Lenders through the Administrative Agent, provide to the Lenders
within 45 days after such request, at the expense of the Borrower, a "Phase
1" environmental site assessment report for the Properties which are the
subject of such default prepared by an environmental consulting firm
acceptable to the Administrative Agent and indicating the presence or absence
of Hazardous Materials and the estimated cost of any compliance or Remedial
Action in connection with such Properties.
SECTION 5.10. COMPLIANCE WITH MATERIAL CONTRACTS. Except as set forth
in Section 6.07 hereof, maintain in full force and effect (including
exercising any available renewal option), and without amendment or
modification, each material contract, unless the failure so to maintain any
such material contract or replacement contract or contracts thereof
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(or any amendment or modification thereto) could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been
terminated and the Obligations have been paid in full and all Letters of
Credit have been canceled or have expired and all amounts drawn thereunder
have been reimbursed in full:
SECTION 6.01. INDEBTEDNESS OF THE SUBSIDIARIES OF THE BORROWER. The
Borrower will not cause or permit any of its Subsidiaries to, issue any
Preferred Stock, or to issue, incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness of any Subsidiary of the Borrower for borrowed money
existing on the date hereof and set forth in SCHEDULE 6.01 hereto, but not
any extensions, renewals or replacements of such Indebtedness; and
(b) Indebtedness of any Subsidiary of the Borrower owed to the Borrower
or to a Wholly Owned Subsidiary of the Borrower that does not otherwise
violate any provision of this Agreement or any other Loan Paper.
SECTION 6.02. LIENS. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, create, incur, assume or permit to exist
any Lien on any of its property or assets (including stock or other
securities of any Person, including any Subsidiary) now owned or hereafter
acquired by it or them or on any income or revenues or rights in respect of
any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth in SCHEDULE 6.02 hereto; provided
that such Liens shall secure only those obligations which they secure on the
date hereof;
(b) any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary of the Borrower; provided that (i)
such Lien is not created in contemplation of or in connection with such
acquisition and (ii) such Lien does not apply to any other property or assets
of the Borrower or any Subsidiary of the Borrower;
(c) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03 hereof;
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(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and securing
obligations that are not due and payable or which are being contested in
compliance with Section 5.03 hereof, which, in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;
(e) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security Laws or regulations;
(f) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course or business;
(g) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount and
do not materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries; and
(h) purchase money security interests in real property, equipment or
other assets hereafter acquired by the Borrower or any Subsidiary of the
Borrower; provided that (i) such security interests secure Indebtedness
(including, as applicable, Capital Lease Obligations) permitted by Section
6.01(c) hereof, (ii) such security interests are incurred, and the
Indebtedness secured thereby is created, within 180 days after such
acquisition, (iii) the Indebtedness secured thereby does not exceed 100% of
the cost of such real property, equipment or other assets at the time of such
acquisition and (iv) such security interests do not apply to any other
property or assets of the Borrower or any Subsidiary of the Borrower.
SECTION 6.03. SALE AND LEASE BACK TRANSACTIONS; OFF-BALANCE SHEET
FINANCINGS. The Borrower will not, and will not cause or permit any of its
Subsidiaries to:
(a) Enter into any arrangement, directly or indirectly, with any person
whereby it shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold
or transferred; PROVIDED, HOWEVER, that the Borrower or a Subsidiary of the
Borrower may enter into (i) any operating lease, (ii) Equipment Lease
Transactions permitted by paragraph (b) of this Section and (iii) Capital
Lease Obligations secured by purchase money
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security interests permitted by Section 6.02(h) hereof to finance the initial
acquisition of real property, equipment or other assets.
(b) Directly or indirectly enter into or be or become liable with
respect to any Equipment Lease Transactions, other than Equipment Lease
Transactions of the Borrower and all of its Subsidiaries, which do not in the
aggregate at any time have Attributable Debt in an amount in excess of 20% of
the Borrower's Consolidated Tangible Net Worth as of the last day of the most
recently ended fiscal quarter of the Borrower.
SECTION 6.04. INVESTMENTS, ACQUISITIONS, LOANS AND ADVANCES. The
Borrower will not, and will not cause or permit any of its Subsidiaries to,
purchase, hold or acquire any Capital Stock, evidences of indebtedness or
other securities of, make or permit to exist any loans or advances to, or
make or permit to exist any investment or any other interest in, or make any
acquisition of assets of any other Person as a going concern (each, an
"INVESTMENT"), except:
(a) Investments existing on the date hereof in the Capital Stock set
forth on SCHEDULE 6.04 hereto;
(b) Permitted Investments;
(c) Investments consisting of loans or advances to (i) a Wholly Owned
Subsidiary, provided that such loans or advances are not subordinated to any
other Indebtedness or other obligations of such Subsidiary and rank pari
passu with all senior, unsecured Indebtedness of such Subsidiary, or (ii)
employees of the Borrower or the Wholly Owned Subsidiaries, provided that
such loans or advances are made in the ordinary course of business and in
accordance with company policy, and provided further that the proceeds of
such loan or advance are used to finance employee related expenses (including
relocation expenses and travel and entertainment expenses);
(d) additional equity Investments in any Subsidiary of the Borrower
which is in existence on the date hereof provided that, immediately after
giving effect thereto, (i) the ratio of such Subsidiary's consolidated
liabilities (less borrowings by such Subsidiary allowed and outstanding under
this Agreement, deferred compensation, deferred income and allocation of
income to minority interests in earnings of consolidated subsidiaries) to
such Subsidiary's consolidated assets (determined in accordance with GAAP)
shall be less than 1.00 to 4.00 and (ii) the ratio of Consolidated
Liabilities (less borrowings allowed and outstanding under this Agreement,
deferred compensation, deferred income and allocation of income to minority
interests in earnings of consolidated subsidiaries) to Consolidated Assets
shall be less than 1.00 to 4.00;
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(f) Investments consisting of non-cash consideration received in
connection with a sale or disposition of assets permitted under Section 6.05
hereof; and
(g) Investments (other than Investments described in clauses (a) through
(f) above and other than equity Investments in Subsidiaries of the Borrower) to
the extent the aggregate amount thereof made in any fiscal year does not exceed
10% of the Consolidated Assets as of the last day of the immediately preceding
fiscal year.
SECTION 6.05. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Borrower
will not, and will not cause or permit any of its Subsidiaries to:
(a) merge into or consolidate with any Person, or permit any other Person
to merge into or consolidate with it, provided that, if there exists no Default
or Event of Default at the time thereof or immediately after giving effect
thereto (i) any Wholly Owned Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any Wholly
Owned Subsidiary may merge into or consolidate with any other Wholly Owned
Subsidiary in a transaction in which the surviving entity is a Wholly Owned
Subsidiary and no Person other than the Borrower or a Wholly Owned Subsidiary
receives any consideration; or
(b) sell, transfer, lease or otherwise dispose of (in one transaction or
in a series of transactions) all or any substantial part of its assets (whether
now owned or hereafter acquired) or any amount of Capital Stock of any
Subsidiary of the Borrower, except that (a) the Borrower and any Subsidiary of
the Borrower may sell or dispose of inventory and obsolete equipment in the
ordinary course of business, (b) if at the time thereof and immediately after
giving effect thereto no Event of Default or Default shall have occurred and be
continuing, the Borrower or any of its Subsidiaries may sell or dispose of
assets (not including Capital Stock owned by the Borrower or any Subsidiary of
the Borrower) for fair market value outside the ordinary course of business
(each an "ASSET DISPOSITION") so long as the cumulative aggregate noncash
consideration for all such Asset Dispositions after the date hereof shall not
exceed $10,000,000 in fair market value and provided that the aggregate Net Cash
Proceeds of all such Asset Dispositions are, to the extent they exceed
$25,000,000, applied in accordance with the terms of Section 2.12(c) hereof to
repay the Loans and reduce the Commitments, and (c) if at the time thereof and
immediately after giving effect thereto no Event of Default or Default shall
have occurred and be continuing, the Borrower may transfer control, through a
sale, corporate transaction or other disposition, of the hotel contracts and
related assets for its hotel customers outside of the United States.
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a
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combination thereof, with respect to any shares of its Capital Stock or
directly or indirectly redeem, purchase, retire or otherwise acquire for
value (or permit any Subsidiary of the Borrower to purchase or acquire) any
shares of any class of its Capital Stock or set aside any amount for any such
purpose; provided, however, that (a) any Subsidiary of the Borrower may
declare and pay dividends or make other distributions to another Wholly Owned
Subsidiary or to the Borrower, and (b) so long as there exists no Default or
Event of Default both before and after giving effect to such dividend,
distribution or repurchase (i) the Borrower may make redemptions or
repurchases of its Capital Stock in connection with employee stock options
upon termination of such employment, for an aggregate amount of consideration
paid from and after the date hereof of up to $10,000,000, in connection with
any employee stock option or incentive plans, (ii) the Borrower may declare
and pay dividends or distributions to its shareholders, and redeem, purchase,
retire or otherwise acquire for value any shares of any class of its Capital
Stock, and (iii) any Subsidiary of the Borrower may declare and/or pay any
dividends in accordance with the terms of the Reorganization Plan.
SECTION 6.07. TRANSACTIONS WITH AFFILIATES. Except in accordance with the
terms of Section 6.06 hereof, the Borrower will not, and will not cause or
permit any of its Subsidiaries to, sell or transfer any property or assets to,
or purchase or acquire any property or assets from, or otherwise engage in any
other transactions with, or permit any Subsidiary of the Borrower to sell or
transfer any property or assets to, or purchase or acquire any property or
assets from, or otherwise engage in any other transactions with any of its
Affiliates, except that the Borrower or any Subsidiary of the Borrower may
engage in any of the foregoing transactions in the ordinary course of business
at prices and on terms and conditions not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm's length basis from unrelated third
parties; PROVIDED, HOWEVER, that the foregoing shall not preclude the Borrower
nor any Subsidiary of the Borrower from performing and complying with its
obligations under (a) the Ascent Agreements in accordance with the terms thereof
on the date hereof or, so long as any such amendment (or extension to additional
services, in the case of the Services Agreement) does not materially adversely
affect the interests of the Administrative Agent, the Issuing Bank or the
Lenders, as the same may be hereafter amended (or extended to additional
services) or (b) the transactions necessary to consummate the Corporate
Restructuring. Notwithstanding anything in this Agreement or the other Loan
Papers to the contrary, it is understood by all parties hereto that all or any
of the Ascent Agreements may be terminated by the parties thereto at any time
during the term of this Agreement.
SECTION 6.08. LIMITATION ON RESTRICTIVE AGREEMENTS. The Borrower will
not, and will not cause or permit any of its Subsidiaries to, enter into any
indenture, agreement, instrument, financing document or other arrangement which,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon: (a) the granting
of Liens, (b) the making or granting of Guarantees, (c) the payment of dividends
or distributions, (d) the purchase, redemption or retirement of any Capital
Stock, (e) the making of loans or advances or (f) transfers or sales of property
or
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assets (including Capital Stock) by the Borrower or any of its Subsidiaries,
other than restrictions on the granting of Liens on, or the transfer of, assets
that are encumbered by Liens permitted under clauses (b), (h) and (i) of Section
6.02 hereof with respect to the property or assets covered by such Lien only.
SECTION 6.09. LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio as of the last day of any fiscal quarter ending during any period set
forth below to be more than the ratio set forth below for such period:
QUARTER ENDING RATIO RATIO
-------------------- -----
From the Closing Date to
through December 31, 1997 2.50 to 1.00
January 1, 1998 and thereafter 2.00 to 1.00
In the event that the Borrower shall complete, directly or through a
Subsidiary of the Borrower, a permitted acquisition, the Leverage Ratio shall be
determined thereafter, to the extent necessary, by computing such ratio on a pro
forma basis as if such acquisition had been completed on the first day of the
period of four consecutive fiscal quarters ending on the dates indicated above
occurring after the date of such acquisition.
SECTION 6.10. COVERAGE RATIO. The Borrower will not permit the Coverage
Ratio as of the last day of any fiscal quarter ending during any period set
forth below to be less than 4.00 to 1.00. In the event that the Borrower shall
complete, directly or through a Subsidiary of the Borrower, a permitted
acquisition, the Coverage Ratio shall be determined thereafter, to the extent
necessary, by computing such ratio on a pro forma basis as if such acquisition
had been completed on the first day of the period of four consecutive fiscal
quarters ending on the dates indicated above occurring after the date of such
acquisition.
SECTION 6.11. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. The Borrower will
not, and will not cause or permit any of its Subsidiaries to, enter into any
amendment of any term or provision, or accept any consent or waiver with respect
to any such provision, of its articles of incorporation, by-laws, or its
organizational documents, as applicable, in any manner that is material and
adverse to the Lenders.
ARTICLE VII
EVENTS OF DEFAULT
In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):
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(a) (i) any representation or warranty made or deemed made by the
Borrower or any of its Subsidiaries (except representations and warranties
by or on behalf of Spectradyne and its Subsidiaries on the Closing Date)
in, or in connection with, this Agreement or in any other Loan Paper, or in
connection with any agreement related to the Corporate Restructuring or the
borrowings or issuances of Letters of Credit hereunder, or any
representation, warranty, statement or written information contained in any
report, certificate, financial statement or other instrument prepared by
the Borrower or any Subsidiary of the Borrower (except Spectradyne and its
Subsidiaries) and furnished by the Borrower or any Subsidiary of the
Borrower (except Spectradyne and its Subsidiaries) in connection with or
pursuant to this Agreement or any other Loan Paper, or in connection with
any of the transactions contemplated to occur as of the Closing Date, shall
prove to have been false or misleading in any material respect when so
made, deemed made or furnished; or
(ii) any representation or warranty made or deemed made by or on
behalf of Spectradyne or any of its Subsidiaries on the Closing Date: in or
in connection with, this Agreement or in any other Loan Paper, or in
connection with any agreement related to the Corporate Restructuring or the
borrowings or issuances of Letters of Credit hereunder, or any
representation, warranty, statement or written information contained in any
report, certificate, financial statement or other instrument prepared by
Spectradyne or any Subsidiary of Spectradyne and furnished by the Borrower
or any Subsidiary of the Borrower in connection with or pursuant to this
Agreement or any other Loan Paper, or in connection with any of the
transactions contemplated to occur as of the Closing Date, shall prove to
have been false or misleading in any material respect when so made, deemed
made or furnished, and which could reasonably be expected to have a
Material Adverse Effect;
(b) default shall be made in the payment of any principal of any Loan or
the reimbursement of principal with respect to any L/C Disbursement when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or
any Fee or L/C Disbursement or any other amount (other than an amount referred
to in (b) above) due under this Agreement or any other Loan Paper, when and as
the same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of the Borrower of any covenant, condition or
agreement contained in Sections 5.01(a), 5.05 or 5.08 hereof or in Article VI
hereof;
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(e) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of the Borrower of any covenant, condition or
agreement contained in this Agreement (other than those specified in (b), (c) or
(d) above) or in any other Loan Paper and such default shall continue unremedied
for a period of 15 days after notice thereof from the Administrative Agent or
any Lender to the Borrower;
(f) the Borrower or any Subsidiary of the Borrower shall (i) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $10,000,000, when and as the
same shall become due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Indebtedness if the effect of any failure
referred to in this clause (ii) is to cause, or to permit the holder or holders
of such indebtedness or a trustee on its or their behalf (with or without the
giving of notice, the lapse of time or both) to cause, such Indebtedness to
become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower or any Subsidiary of the Borrower, or of a
substantial part of the property or assets of the Borrower or a Subsidiary of
the Borrower, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar Law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any Subsidiary of the Borrower or for a substantial part of the
property or assets of the Borrower or a Subsidiary of the Borrower or (iii) the
winding-up or liquidation of the Borrower or any Subsidiary of the Borrower; and
such proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered;
(h) the Borrower or any Subsidiary of the Borrower shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code, as now constituted or hereafter amended, or any other
Federal, state or foreign bankruptcy, insolvency, receivership or similar Law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
Subsidiary of the Borrower, or for a substantial part of the property or assets
of the Borrower or any Subsidiary of the Borrower, (iv) file an answer admitting
the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts as they become
due or (vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate amount
in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary
of the Borrower
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or any combination thereof and the same shall remain undischarged for a
period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to levy
upon assets or properties of the Borrower or any Subsidiary of the Borrower
to enforce any such judgment;
(j) an ERISA Event shall have occurred that, when taken together with all
other such ERISA Events, could reasonably be expected to result in liability of
the Borrower, any Subsidiary of the Borrower, or any combination thereof, in an
aggregate amount exceeding $10,000,000;
(k) there shall have occurred a Change in Control;
(l) Ascent shall: (i) fail to pay any principal or interest, regardless of
amount, due in respect of the Ascent Loan Facility, when and as the same shall
become due and payable taking into account any applicable period of grace
thereunder, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or instrument evidencing or
governing the Ascent Loan Facility if the effect of any failure referred to in
this clause (ii) is to cause, or to permit the holder or holders of such
indebtedness or a trustee on its or their behalf (with or without the giving of
notice, the lapse of time or both) to cause, such Indebtedness to become due
prior to its stated maturity;
(m) any of the following shall occur: (i) This Agreement, any guarantee
or promissory note executed in connection with this Agreement (collectively, the
"Material Agreements"), or any material provision of any thereof shall, for any
reason, not be valid and binding on the Obligor signatory thereto, or not be in
full force and effect, or shall be declared to be null and void; or (ii) the
validity or enforceability of any Material Agreement shall be contested by any
Obligor, the Borrower, any Subsidiary of the Borrower or any of their
Affiliates; or (iii) any Obligor shall deny in writing that it has any or
further liability or obligation under its respective Material Agreements; or
(iv) any default or breach under any provision of any Material Agreement shall
continue after the applicable grace period, if any, specified in such Material
Agreement;
(n) the occurrence of either of the following two events:
(i) confirmation of the Reorganization Plan is revoked; or (ii) the
Reorganization Plan is modified after confirmation in any manner not described
on SCHEDULE 7.0 hereto (A)without prior written notice to the Lenders or (B) in
any manner material and adverse to the interest of the Lenders (as determined by
the Required Lenders in their sole discretion) and without the prior written
consent of the Administrative Agent and the Required Lenders; or
(o) at any time that the debt limitation on the Borrower in the Corporate
Agreement with Ascent operates to limit the ability of the Borrower to make a
borrowing hereunder at a time when the Borrower needs such ability to meet
operating expenses or capital requirements
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in each case approved by the Borrower's Board of Directors (as such approval
may be amended), provided that, no amendment to any such approval may be made
once operating expenses or capital requirements have been incurred or made,
or to avoid a Default or an Event of Default under this subsection (v);
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the either or both of the Short Term Commitment or the Long Term Commitment,
(ii) declare the Loans then outstanding to be forthwith due and payable in whole
or in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder, shall become forthwith
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding or (iii) require cash
collateral as contemplated by Section 2.21(j) hereof; and in any event with
respect to the Borrower described in paragraph (g) or (h) above, all the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest hereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding. Notwithstanding anything in
this Agreement or in any Loan Paper to the contrary, to the extent any Default
or Event of Default under any of subsections (a), (d) or (e) above is due
exclusively to the actions, inactions or misrepresentations with respect to any
foreign Subsidiary of the Borrower, then such event shall not be a Default or
Event of Default unless such event could also reasonably be expected to cause a
Material Adverse Effect.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement and
the other Loan Papers, NationsBank is hereby appointed to act as Administrative
Agent on behalf of the Lenders and the Issuing Bank. Each of the Lenders and
each assignee of any such Lender, hereby irrevocably authorizes the
Administrative Agent to take such actions on behalf of such Lender or assignee
or the Issuing Bank and to exercise such powers as are specifically delegated to
the Administrative Agent by the terms and provisions hereof, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Bank,
without hereby limiting any implied
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authority, (a) to receive on behalf of the Lenders and the Issuing Bank all
payments of principal of and interest on the Loans, all payments in respect of
L/C Disbursements and all other amounts due to the Lenders hereunder, and
promptly to distribute to each Lender or the Issuing Bank its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders
to the Borrower of any Event of Default specified in this Agreement and the
other Loan Papers of which the Administrative Agent has actual knowledge
acquired in connection with its agency hereunder; and (c) to distribute to
each Lender copies of all notices, financial statements and other materials
delivered by the Borrower pursuant to this Agreement and the other Loan Papers
as received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower of any of the terms, conditions, covenants or agreements contained
herein. The Administrative Agent shall not be responsible to the Lenders for
the due execution, genuineness, validity, enforceability or effectiveness of
this Agreement, the other Loan Papers or any other instruments or agreements.
The Administrative Agent shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. The Administrative Agent shall, in the absence of knowledge to the
contrary, be entitled to rely on any instrument or document believed by it in
good faith to be genuine and correct and to have been signed or sent by the
proper Person or Persons. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall have any responsibility to the
Borrower on account of the failure of or delay in performance or breach by any
Lender or the Issuing Bank of any of its obligations hereunder or to any Lender
or the Issuing Bank on account of the failure of or delay in performance or
breach by any other Lender or the issuing Bank or the Borrower of any of their
respective obligations hereunder or in connection herewith. The Administrative
Agent may execute any and all duties hereunder by or through agents or employees
and shall be entitled to rely upon the advice of legal counsel selected by it
with respect to all matters arising hereunder and shall not be liable for any
action taken or suffered in good faith by it in accordance with the advice of
such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be under
no duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement or any other Loan Paper unless it shall be
requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
notifying the Lenders and
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the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent which shall be a bank having a combined capital
and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 9.05 hereof shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Administrative Agent.
With respect to the Loans made by it hereunder, the Administrative Agent in
its individual capacity and not as Administrative Agent shall have the same
rights and powers as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or any Subsidiary of the Borrower or other
Affiliate thereof as if it were not Administrative Agent.
Each Lender agrees (a) to reimburse the Administrative Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Administrative Agent,
including reasonable counsel fees and compensation of agents and employees paid
for services rendered on behalf of the Lenders, that shall not have been
reimbursed by the Borrower and (b) to indemnify and hold harmless the
Administrative Agent and any of its directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be Imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Paper, or any action taken or omitted by it or
any of them under this Agreement or any other Loan Paper, to the extent the same
shall not have been reimbursed by the Borrower; provided that no Lender shall be
liable to the Administrative Agent or any such other indemnified Person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of the Administrative Agent or any of
its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent, or any other Lender and based on such documents
and information as it
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has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and the other Loan Papers. Each Lender also acknowledges
that it will, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information as it shall
from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement and the other
Loan Papers, or any related agreement or any document furnished hereunder or
thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at:
On Command Corporation
3301 Olcott Street
Santa Clara, CA 85054
Attn: Brian Steel
Telephone: (408) 496-1800
Telecopy No.: (408) 496-0668
With a copy to:
Ascent Entertainment Group., Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: W. D. Minami
Telephone: (303) 626-7030
Telecopy No.: (303) 595-0823
With a copy to:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: Arthur Aaron, Esq.
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Telephone: (303) 626-7040
Telecopy No.: (303) 595-0127
(b) if to the Administrative Agent, to it at:
NationsBank of Texas, National Association
NationsBank Plaza
901 Main Street, 64th Floor
Dallas, Texas 75202
Telephone No.: (214) 508-0860
Telecopier No.: (214) 508-9390
Attention: Mr. Gregory I. Meador
Vice President
With a copy to:
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Telephone No.: (214) 698-3814
Telecopier No.: (214) 744-0231
Attention: Melissa Ruman Stewart
(c) if to a Lender, to it at its address (or telecopy number) set forth on
the signature pages hereto or in the Assignment and Acceptance pursuant to which
such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement and the other Loan Papers shall be deemed
to have been given on the date of receipt if delivered by hand or overnight
courier service or sent by telecopy or on the date five Business Days after
dispatch by certified or registered mail if mailed, in each case delivered, sent
or mailed (properly addressed) to such party as provided in this Section 9.01 or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement and the other Loan Papers shall be considered to have
been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
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Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Paper is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.13. 2.15, 2.19 and 9.05
hereof shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Paper, or any investigation made by or on behalf of the Administrative Agent,
any Lender or the Issuing Bank.
SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
SECTION 9.04. SUCCESSORS AND ASSIGNS.
(a) Whenever in this Agreement or any other Loan Paper any of the parties
hereto is referred to, such reference shall be deemed to include the permitted
successors and assigns of such party, and all covenants, promises and agreements
by or on behalf of the Borrower, the Administrative Agent, the Issuing Bank or
the Lenders that are contained in this Agreement and the other Loan Papers shall
bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement and the other Loan
Papers (including all or a portion of its Commitments and the Loans at the time
owing to it); PROVIDED, HOWEVER, that (i) except in the case of an assignment to
a Lender or an Affiliate of such Lender, (x) the Borrower and the Administrative
Agent (and, in the case of any assignment of a Commitment, the Issuing Bank)
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld) and (y) the amount of the Commitments of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $10,000,000 (or, if less, the
entire remaining amount of such Lender's Commitments) and will not result in the
unassigned portion, if any, of the assigning Lender's Commitments being less
than $10,000,000 (provided, however, that the $10,000,000 amounts referred to in
this clause (i) shall be reduced ratably in accordance with any reductions in
the Total Commitments) (ii) the parties to each such assignment shall execute
and deliver to the Administrative Agent an Assignment and Acceptance, together
with a processing and recordation fee of $3,500 and (iii) the assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
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Administrative Questionnaire. Upon acceptance and recording pursuant to
paragraph (e) of this Section 9.04, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this Agreement
and the other Loan Papers and (B) the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement and the other Loan Papers (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement and the other
Loan Papers, such Lender shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05 hereof, as
well as to any Fees accrued for its account and not yet paid). The Borrower
shall, at its expense, issue to the assignor and assignee new promissory notes,
as applicable, in the respective amounts of each such Lender's Pro Rata
Percentage in the Loans, each in the form of the promissory notes delivered by
the Borrower on the Closing Date.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitments, and the outstanding balances of its Revolving Loans and
Competitive Loans, in each case without giving effect to assignments thereof
which have nor become effective, are as set forth in such Assignment and
Acceptance; (ii) except as set forth in (i) above, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Paper, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Paper, or any other instrument or document furnished pursuant hereto, or
the financial condition of the Borrower or any Subsidiary of the Borrower or the
performance or observance by the Borrower or any Subsidiary of the Borrower of
any of its obligations under this Agreement or any other Loan Paper or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 3.05 or delivered pursuant to Section 5.04 and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (v) such
assignee will independently and without reliance upon the Administrative Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Papers; (vi) such assignee appoints and authorizes the Administrative
Agent to take such action as
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agent on its behalf and to exercise such powers under this Agreement and the
other Loan Papers as are delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Agreement and the other Loan
Papers are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at its offices in Dallas, Texas a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "REGISTER"). The entries in the Register shall be conclusive and
the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement and the other
Loan Papers, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Issuing
Bank and the Administrative Agent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Lenders and the Issuing Bank. No assignment shall be effective unless it has
been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Issuing Bank
or the Administrative Agent sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
and the other Loan Papers (including all or a portion of its Commitments and the
Loans owing to it); PROVIDED, HOWEVER, that (i) such Lender's obligations under
this Agreement and the other Loan Papers shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participating banks or other entities
shall be entitled to the benefit of the cost protection provisions contained in
Sections 2.13, 2.15 and 2.19 hereof to the same extent as if they were Lenders
and (iv) the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Papers, and such Lender shall retain the sole right to enforce
the obligations of the Borrower relating to the Loans or L/C Disbursements and
to approve any amendment, modification or waiver of any provision of this
Agreement and the other Loan Papers (other
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than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is
payable on the Loans, extending any scheduled principal payment date or date
fixed for the payment of interest on the Loans or increasing or extending the
Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04. disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; PROVIDED that, prior to any such disclosure
of information designated by the Borrower as confidential, each such assignee
or participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information
on terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16 hereof.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement and the other Loan Papers to a Federal Reserve Bank to
secure extensions of credit by such Federal Reserve Bank to such Lender;
PROVIDED that no such assignment shall release a Lender from any of its
obligations hereunder or substitute any such Bank for such Lender as a party
hereto. In order to facilitate such an assignment to a Federal Reserve Bank,
the Borrower shall, at the request of the assigning Lender, duly execute and
deliver to the assigning Lender a promissory note or notes evidencing the
Loans made to the Borrower by the assigning Lender hereunder.
(i) The Borrower shall not assign or delegate any of its rights or
duties hereunder without the prior written consent of the Administrative
Agent, the Issuing Bank and each Lender, and any attempted assignment without
such consent shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, a Division of
McGraw-Hill, Inc., Moody's Investors Service, Inc., and Thompson's BankWatch
(or Insurance Watch Ratings Service, in the case of Lenders that are
insurance companies (or Best's Insurance Reports, if such insurance company
is not rated by Insurance Watch Ratings Service)) shall, after the date that
any Lender becomes a Lender, downgrade the longterm certificate deposit
ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3
and C (or BB, in the case of a Lender that is an insurance company (or B, in
the case of an insurance company not rated by Insurance Watch Ratings
Service)), then the Issuing Bank shall have the right, but not the
obligation, at its own expense, upon notice to such Lender and the
Administrative Agent, to replace (or to request the Borrower to use its
reasonable efforts to replace) such Lender with an assignee (in accordance
with and subject to the restrictions contained in paragraph (b) above), and
such Lender hereby agrees to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in paragraph (b)
above) all its interests, rights and obligations in respect of its
Commitments to such assignee; PROVIDED,
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HOWEVER, that (i) no such assignment shall conflict with any Law, rule and
regulation or order of any Governmental Authority and (ii) the Issuing Bank
or such assignee, as the case may be, shall pay to such Lender in immediately
available funds on the date of such assignment the principal of and interest
accrued to the date of payment on the Loans made by such Lender hereunder and
all other amounts accrued for such Lender's account or owed to it hereunder.
SECTION 9.05. EXPENSES; INDEMNITY.
(a) The Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Administrative Agent and the Issuing Bank in connection with
the syndication of the credit facilities provided for herein and the
preparation and administration of this Agreement and the other Loan Papers or
in connection with any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions hereby or thereby contemplated shall
be consummated) or incurred by the Administrative Agent or any Lender in
connection with the enforcement or protection of its rights in connection
with this Agreement and the other Loan Papers, or in connection with the
Loans made or Letters of Credit issued hereunder, including the reasonable
fees, charges and disbursements of Donohoe, Jameson & Carroll, P.C., counsel
for the Administrative Agent, and, in connection with any such enforcement or
protection, the fees, charges and disbursements of any other counsel for the
Administrative Agent or any Lender.
(b) The Borrower agrees to indemnify the Administrative Agent, each
Lender and the Issuing Bank, each Affiliate of any of the foregoing Persons
and each of their respective directors, officers, employees and agents (each
such Person being called an "INDEMNITEE") against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of,
in any way connected with, or as a result of (i) the execution or delivery of
this Agreement and the other Loan Papers or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby, (ii) the use of the proceeds of
the Loans or issuance of Lenders of Credit, (iii) the Corporate Restructuring
or any transactions connected therewith or (iv) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnitee is a party thereto; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of, or breach of contract by,
such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the other Loan Papers, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the
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expiration of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement,
any other Loan Paper, or any investigation made by or on behalf of the
Administrative Agent, any Lender or the Issuing Bank. All amounts due under
this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by Law, to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of the Borrower against any of and
all the obligations of the Borrower now or hereafter existing under this
Agreement and the other Loan Papers held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement
and although such obligations may be unmatured. The rights of each Lender
under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN PAPERS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS (EXCEPT, IN THE CASE OF CERTAIN OF THE LOAN PAPERS, TO THE EXTENT
THE LAWS OF ANOTHER JURISDICTION GOVERN THE PERFECTION AND EFFECT OF
PERFECTION OR NON-PERFECTION OF CERTAIN LIENS). EACH LETTER OF CREDIT SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OR RULES
DESIGNATED IN SUCH LETTER OF CREDIT OR IF NO SUCH LAWS OR RULES ARE
DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993
REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE
"UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS,
THE LAWS OF THE STATE OF TEXAS.
SECTION 9.08. WAIVERS; AMENDMENT.
(a) No failure or delay of the Administrative Agent, any Lender or the
Issuing Bank in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of the Administrative
Agent, the Issuing Bank and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or any other Loan Paper, or consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any
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case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof or in any other Loan
Paper may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required Lenders;
PROVIDED, HOWEVER, that no such agreement shall (i) decrease the principal
amount of, or extend the maturity of or any scheduled principal payment date
or date for the payment of any interest on any Loan or any date for
reimbursement of an L/C Disbursement, or waive or excuse any such payment or
any part thereof, or decrease the rate of interest on any Loan or L/C
Disbursement, without the prior written consent of each Lender affected
thereby (ii) change or extend the Commitments or decrease the Commitment Fees
or the Facility Fees of any Lender without the prior written consent of such
Lender, or (iii) amend or modify the provisions of Sections 2.16 or 9.04(i)
hereof, the provisions of this Section or the definition of the term
"Required Lenders", without the prior written consent of each Lender;
PROVIDED FURTHER that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent or the Issuing Bank
hereunder without the prior written consent of the Administrative Agent or
the Issuing Bank.
SECTION 9.09. INTEREST RATE LIMITATION. It is not the intention of any
party to any Loan Papers to make an agreement violative of the Laws of any
applicable jurisdiction relating to usury. In no event shall the Borrower or
any other Person be obligated to pay any amount in excess of the Maximum
Amount. If Administrative Agent or any Lender ever receives, collects or
applies, as interest, any such excess, such amount which would be excessive
interest shall be deemed a partial repayment of principal and treated
hereunder as such; and if principal is paid in full, any remaining excess
shall be paid to the Borrower or the other Person entitled thereto. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, each Obligor, Administrative Agent
and each Lender shall, to the maximum extent permitted under Applicable Law,
(a) characterize any nonprincipal payment as an expense, fee or premium
rather than as interest, (b) exclude voluntary prepayments and the effect
thereof, and (c) amortize, prorate, allocate and spread in equal parts, the
total amount of interest throughout the entire contemplated term of the
Obligation so that the interest rate is uniform throughout the entire term of
the Obligation; PROVIDED that if the Obligation is paid and performed in full
prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum
Amount, Administrative Agent or Lenders, as appropriate, shall refund to the
Borrower the amount of such excess or credit the amount of such excess
against the total principal amount owing, and, in such event, neither
Administrative Agent nor any Lender shall be subject to any penalties
provided by any Laws for contracting for, charging or receiving interest in
excess of the Maximum Amount. This SECTION 9.09 shall control every other
provision of all agreements among the parties to the Loan Papers pertaining
to the transactions contemplated by or contained in the Loan Papers.
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SECTION 9.10. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN PAPER. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN PAPERS BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Paper should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts),
each of which shall constitute an original but all of which when taken
together shall constitute a single contract, and shall become effective as
provided in Section 9.03 hereof. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of
a manually signed counterpart of this Agreement.
SECTION 9.14. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
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SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any Texas State
court or Federal court of the United States of America sitting in Dallas,
Texas and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or any other Loan Paper, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such Texas State
or, to the extent permitted by Law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law. Nothing in this Agreement
or in any other Loan Paper shall affect any right that the Administrative
Agent, the Issuing Bank or any Lender may otherwise have to bring any action
or proceeding relating to this Agreement or any other Loan Paper against the
Borrower or its properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Paper in any Dallas, Texas State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by Law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement and any other Loan Paper irrevocably
consents to service of process in the manner provided for notices in Section
9.01 hereof. Nothing in this Agreement or any other Loan Paper will affect
the right of any party to this Agreement or any other Loan Paper to serve
process in any other manner permitted by Law.
SECTION 9.16. CONFIDENTIALITY. The Administrative Agent, the Issuing
Bank and each of the Lenders agrees to keep confidential (and to use its best
efforts to cause its respective agents and representatives to keep
confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Administrative Agent, the Issuing Bank or any Lender shall be permitted
to disclose Information (a) to such of its respective officers, directors,
employees, agents, affiliates and representatives as need to know such
Information, (b) to the extent requested by any regulatory authority, (c) to
the extent otherwise required by Applicable Laws and regulations or by any
subpoena or similar legal process, (d) in connection with any suit, action or
proceeding relating to the enforcement of its rights hereunder or (e) to the
extent such Information (i) becomes publicly available other than as a result
of a breach of this Section 9.16 or (ii) becomes available to the
Administrative Agent the Issuing Bank or any Lender on a nonconfidential
basis from a source other than the Borrower. For the purposes of this
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Section, "INFORMATION" shall mean all financial statements, certificates,
reports, agreements and information (including all analyses, compilations and
studies prepared by the Administrative Agent, the Issuing Bank or any Lender
based on any of the foregoing) that are received from the Borrower and
related to the Borrower, any shareholder of the Borrower or any employee,
customer or supplier of the Borrower, other than any of the foregoing that
were available to the Administrative Agent, the Issuing Bank or any Lender on
a nonconfidential basis prior to its disclosure thereto by the Borrower, and
which are in the case of Information provided after the date hereof, clearly
identified at the time of delivery as confidential. The provisions of this
Section 9.16 shall remain operative and in full force and effect regardless
of the expiration and term of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
THE BORROWER: ON COMMAND CORPORATION
/s/ BRIAN A. C. STEEL
-----------------------------------------
By: Brian A. C. Steel
-------------------------------------
Its: Executive Vice President, Chief
Operating Officer and Chief
Financial Officer
------------------------------------
THE ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
/s/ GREGORY I. MEADOR
-----------------------------------------
By: Gregory I. Meador
Its: Vice President
LENDERS:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION,
individually as a Lender
PRO RATA PERCENTAGE:
100%
Address:
901 Main Street
64th Floor
Dallas, Texas 75202 /s/ GREGORY I. MEADOR
--------------------------------------
By: Gregory I. Meador
Attn.: Gregory I. Meador Its: Vice President
Telephone: (214) 508-0860
Telecopy: (214) 508-9390
91
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92
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is dated
as of the 23rd day of March 1997, and entered into among ON COMMAND CORPORATION,
a Delaware corporation (the "Borrower"), the Lenders signatory thereto, and
NATIONSBANK OF TEXAS, N.A., a national banking association, individually and as
Administrative Agent (in such latter capacity, the "Administrative Agent").
WITNESSETH:
WHEREAS, the Borrower, the Lenders, and the Administrative Agent entered
into a Credit Agreement, dated as of October 8, 1996 (as amended, restated,
waived or otherwise modified from time to time, the "Credit Agreement"); and
WHEREAS, the Lenders, the Administrative Agent, and the Borrower have
agreed to amend the Credit Agreement to make certain changes to the terms
therein upon the terms and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Borrower the Lenders and the Administrative Agent agree as follows:
SECTION 1. DEFINITIONS. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
SECTION 2. AMENDMENTS TO THE COVER PAGE AND PAGE 1 OF THE CREDIT
AGREEMENT.
(a) The number $125,000,000 both on the cover page and at the top of page
1 of the Credit Agreement shall be amended in their entirety to read
$150,000,000.
(b) The second and third paragraphs on Page 1 of the Credit Agreement
shall be deleted and the following paragraphs shall be substituted in their
stead:
The Borrower has requested the Lenders to extend credit in the
form of revolving loans, competitive bid rate loans, and letters of credit
(such letters of credit in an aggregate face amount not to exceed
$10,000,000), in a maximum aggregate principal amount for all such
facilities at any time outstanding not in excess of $150,000,000. The
proceeds of the Loans are to be used to refinance existing indebtedness and
for general corporate purposes of the Borrower and its Subsidiaries,
including, without limitation, working capital and strategic acquisitions
permitted under the terms hereof.
<PAGE>
The Lenders are willing to extend a $150,000,000 aggregate credit
facility to the Borrower in the form of either revolving loans, competitive
bid rate loans or letters of credit, as elected by the Borrower, in each
case on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
SECTION 3. AMENDMENT TO THE DEFINITION OF "EBITDA". The definition of
EBITDA on page 8 of the Credit Agreement shall be deleted in its entirety and
the following definition substituted in its stead:
"EBITDA" shall mean, with respect to any Person and its subsidiaries
on a consolidated basis for any period, the consolidated net income of such
Person and its subsidiaries for such period, computed in accordance with
GAAP, plus, to the extent deducted in computing such consolidated net
income and without duplication, the sum of (a) income tax expense, (b)
interest expense, (c) depreciation and amortization expense, (d) allocation
of income to minority interests in earnings of consolidated subsidiaries
and (e) extraordinary losses (including restructuring provisions) during
such period minus, to the extent added in computing such consolidated net
income and without duplication, (y) extraordinary gains during such period
and (z) allocation of losses to minority interests in earnings of
consolidated subsidiaries. EBITDA shall be calculated in accordance with
GAAP as in effect and applied by the Borrower on the date of this Agreement
and, accordingly, shall exclude the effects of any changes in GAAP or its
application by the Borrower after the date hereof, provided that,
notwithstanding anything to the contrary in the preceding definition,
"EBITDA" shall not include the $6,700,000 one-time extraordinary charges
incurred in the fourth fiscal quarter of 1996.
SECTION 4. AMENDMENT TO SECTION 4.03(c), INCREASE OF LONG TERM COMMITMENT.
Section 4.03(c) on page 58 of the Credit Agreement is hereby deleted in its
entirety and the following Section 4.03 is hereby substituted in its stead:
(c) The sum of (i) the aggregate outstanding Revolving Loans plus
(ii) the aggregate amount of outstanding Competitive Loans shall never
exceed $150,000,000 (as such $150,000,000 amount is reduced by each
reduction in the Commitments and Total Commitment in accordance with
Section 2.10 hereof).
SECTION 5. AMENDMENT TO SECTION 5.06, EMPLOYEE BENEFITS. The number
$55,000,000 in Section 5.06 on page 61 of the Credit Agreement is hereby amended
to read $5,000,0000.
SECTION 6. AMENDMENTS TO SCHEDULES 2.01(a) AND 2.01(b). Schedules 2.01(a)
and 2.01(b) to the Credit Agreement shall be deleted and the Schedules 2.01(a)
and 2.01(b) attached to this First Amendment shall be substituted in their
stead.
2
<PAGE>
SECTION 7. AFFIRMATION. The Borrower hereby acknowledges and agrees that
nothing in this First Amendment shall affect the Borrower's obligations under
the Credit Agreement or the other Loan Papers executed in connection therewith
(except as specifically provided in this First Amendment), which remain valid,
binding and enforceable, and except as amended hereby, unamended, or shall
constitute a waiver by the Lenders of any of their rights or remedies, now or at
any time in the future, with respect to any requirement under the Credit
Agreement or the other Loan Papers or with respect to an Event of Default or
Default, occurring now or at any time in the future.
SECTION 8. CONDITIONS PRECEDENT. This First Amendment shall not be
effective until
(a) all proceedings of the Borrower taken in connection with this
First Amendment and the transactions contemplated hereby shall be
satisfactory in form and substance to the Administrative Agent and Lenders
signatory hereto,
(b) the Administrative Agent shall have received new promissory notes
for each Lender satisfactory to it and appropriately evidencing the
Obligations,
(c) the Administrative Agent shall have received all other Loan
Papers and documentation required by it to satisfactorily evidence the
Obligations,
(d) the Administrative Agent shall have received an opinion of
counsel to the Borrower in form and substance acceptable to it, as to the
enforceability of this First Amendment and all the Loan Papers, and as to
such other matters as requested by the Administrative Agent,
(e) affirmation of those certain guaranties executed by On Command
Development Corporation, On Command Video Corporation, and SpectraVision,
Inc., affirming the guaranties executed and delivered in connection with
the Credit Agreement and acknowledging and guaranteeing the increase in the
facility, and
(f) the Administrative Agent and Lenders shall have each received such
documents, instruments, and certificates, copies of resolutions, etc., each
in form and substance satisfactory to the Lenders, as the Lenders shall
deem necessary or appropriate in connection with this First Amendment and
the transactions contemplated hereby.
SECTION 9. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lenders and the Administrative Agent that (a) this First
Amendment constitutes its legal, valid, and binding obligations, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (b) there
exists no Event of Default or Default under the Credit Agreement after giving
effect to this First Amendment, (c) its representations and warranties set forth
in the Credit Agreement and other
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<PAGE>
Loan Papers are true and correct on the date hereof after giving effect to this
First Amendment, (d) it has complied with all agreements and conditions to be
complied with by it under the Credit Agreement and the other Loan Papers by the
date hereof, (e) the Credit Agreement, as amended hereby, and the other Loan
Papers remain in full force and effect, and (f) no notice to, or consent of, any
Person is required under the terms of any agreement of the Borrower in
connection with the execution of this First Amendment.
SECTION 10. FURTHER ASSURANCES. The Borrower shall execute and deliver
such further agreements, documents, instruments, and certificates in form and
substance satisfactory to the Administrative Agent, as the Administrative Agent
or any Lender may deem reasonably necessary or appropriate in connection with
this First Amendment.
SECTION 11. COUNTERPARTS. This First Amendment and the other Loan Papers
may be executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument. In making proof of any such agreement,
it shall not be necessary to produce or account for any counterpart other than
one signed by the party against which enforcement is sought.
SECTION 12. PRIOR WAIVER; ENTIRE AGREEMENT. THIS FIRST AMENDMENT AND THE
OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
SECTION 13. GOVERNING LAW. (a) THIS FIRST AMENDMENT AND ALL LOAN PAPERS
SHALL BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO THE
EXTENT FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF ALL OR ANY PART OF THIS FIRST AMENDMENT AND ALL LOAN PAPERS.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BORROWER AND EACH SUBSIDIARY
AGREES THAT THE COURTS OF TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION HEREWITH.
(b) THE BORROWER AND EACH SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE OF ANY
LEGAL PROCESS UPON IT. IN ADDITION, THE BORROWER AND EACH SUBSIDIARY AGREES
THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO THE BORROWER AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER
THE CREDIT AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
RECEIPT BY THE BORROWER. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY
4
<PAGE>
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 14. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
THE BORROWER EACH SUBSIDIARY AND EACH LENDER HEREBY WAIVES ANY RIGHT THAT IT MAY
HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS FIRST AMENDMENT, THE
OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executed as
of the date first set forth above.
BORROWER: ON COMMAND CORPORATION
---------------------------------------------
By:
----------------------------------------
Its:
----------------------------------------
LENDERS: NATIONSBANK OF TEXAS N.A., as Administrative
Agent, and individually as a Lender
----------------------------------------
By: Gregory I. Meador
Its: Vice President
5
<PAGE>
SCHEDULE 2.01(a) - SHORT TERM COMMITMENTS
$100,000,000.00 - NationsBank of Texas, N.A.,
901 Main Street, 64th Floor
Dallas, Texas 75202
<PAGE>
SCHEDULE 2.01(b) - LONG TERM COMMITMENTS
$50,000,000.00 - NationsBank of Texas, N.A.,
901 Main Street, 64th Floor
Dallas, Texas 75202
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of June 3, 1996, by and between Ascent Sports,
Inc., a Delaware corporation (the "Company"), a wholly owned subsidiary of
Ascent Entertainment Group, Inc., a Delaware corporation ("Ascent"), and Ellen
Robinson, a resident of the State of Colorado (the "Executive").
WHEREAS, the Company is the General Partner of The Denver Nuggets Limited
Partnership (the "Basketball Club"), a Delaware limited partnership which owns
and operates the Denver Nuggets professional basketball team (the "Basketball
Team"), a franchise of the National Basketball Association (the "NBA"); and
WHEREAS, the Company and Ascent are the sole members with joint and several
management authority of Colorado Avalanche, LLC, (the "Hockey Club"), a Colorado
limited liability company which owns and operates the Colorado Avalanche
professional hockey team (the "Hockey Team"), a franchise of the National Hockey
League (the "NHL"); and
WHEREAS, the Company has proposed constructing, owning and managing,
possibly with other joint venture partners, a new state-of-the-art arena in the
Denver metropolitan area in which the Basketball Team and the Hockey Team would
play their home games (the "Arena Project"), and related developments (the
"Related Developments"); and
WHEREAS, the Company desires to employ the Executive as its President, and
the Executive desires to become an employee of the Company, on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, the Company and the
Executive agree as follows:
1. EMPLOYMENT; DUTIES. (a) EMPLOYMENT AND EMPLOYMENT PERIOD. The
Company shall employ the Executive to serve as (i) President of the Company and
(ii) an officer of an affiliate of the Company as mutually agreed upon by the
Executive and the President and Chief Executive Officer of Ascent (the
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<PAGE>
"CEO") in connection with the management of the business and affairs of the
Company. Such employment shall be for a continuous period (the "Employment
Period") commencing June 3, 1996 (the "Effective Date") and ending on June 3,
1999 with respect to the office set forth in clause (i) above, and for such
periods as reasonably determined by the Executive and the CEO with respect to
the office set forth in clause (ii) above.
(b) DUTIES AND RESPONSIBILITIES. The Executive shall report directly
to the CEO, which position is currently held by Charlie Lyons. The Executive
shall have such duties and responsibilities (i) as designated by the CEO from
time to time so long as such duties are consistent with the office of President
and (ii) as are customarily accorded a President, including, without limitation,
the lead responsibility with full autonomy, subject to customary authority and
direction of the Board of Directors of the Company (the "Board"), to direct and
develop the capabilities and performance of the Company. The Executive's
management of the Company shall be in accordance with the policies of the Board
and the policies and procedures of the Company, both as in effect from time to
time. The Executive shall have no responsibility for or authority over the
basketball operations of the Basketball Team or the hockey operations of the
Hockey Team. All employees of the Company, as reflected on the organizational
chart attached hereto as Exhibit A, will report, directly or indirectly, to the
Executive. The parties hereto understand that the Executive shall at all times
be subject to the authority and direction of the Board. The Executive shall be
primarily responsible for recruiting, hiring and firing those employees of the
Company that report, directly or indirectly, to her in accordance with policies
and procedures of the Company and Ascent, which includes consultation with
officers of Ascent as appropriate.
For each fiscal year of the Company, the Basketball Club and the Hockey
Club during the term of this Agreement, the Executive shall prepare an annual
budget setting forth the expected revenues, expenses and other expenditures
(including capital
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<PAGE>
improvements) of such entities. Such budget shall be approved by the Board of
Directors of Ascent (the "Ascent Board"). The 1996 budget for the Company is
set forth at Exhibit B. The Executive may not authorize the Company or its
employees (excluding the operations and employees of the Hockey Club and the
Basketball Club over which the Executive does not have authority) to exceed the
budgeted line item amount for such expenses or other expenditures in such budget
by more than 5% of the budgeted amount or otherwise incur non-budgeted expenses
or expenditures, without the prior written approval of the CEO or the Executive
Vice President, Finance and Chief Operating Officer of Ascent (the "COO");
provided, however, that no such single excess may exceed 1% of the total budget
and all such excesses taken together may not exceed 5% of the total budget,
without prior approval of the CEO or COO. Upon such approval, the budget for
such item shall be deemed to have been increased by the amount approved by the
CEO or COO, as the case may be. The parties acknowledge and agree that the
Executive shall have no authority, control or responsibility for the basketball
operations or hockey operations budgets, or the budget of the Arena Project or
the Related Developments.
(c) DEVOTION TO INTERESTS OF THE COMPANY. During the Employment Period,
the Executive shall render her business services solely in the performance of
her duties hereunder. The Executive shall use her best efforts to promote the
interests and welfare of the Company and its affiliates. Notwithstanding the
foregoing, the Executive shall be entitled to undertake such outside activities
as do not unreasonably interfere with the performance of her duties hereunder
and are approved in advance by the CEO, such approval not to be unreasonably
withheld.
2. COMPENSATION AND FRINGE BENEFITS. In consideration for the
services to be performed and the obligations incurred by the Executive
hereunder, and subject to the terms and conditions hereof, during the Employment
Term the
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<PAGE>
Executive shall be entitled to the following compensation and benefits.
(a) BASE COMPENSATION. Effective as of the Effective Date, the
Company shall pay the Executive an annual base salary ("Base Salary") at the
rate of $250,000 per year during the Employment Period with payments made in
installments in accordance with the Company's regular practice for compensating
executive personnel, PROVIDED that in no event shall such payments be made less
frequently than twice per month. The Base Salary for the Executive shall be
reviewed for increases each year during the Employment Period commencing the
second year of the Employment Period. Any Base Salary increases shall be
approved by the Ascent Board in its sole discretion.
(b) BONUS COMPENSATION.
(i) ANNUAL BONUS. The Executive will be eligible to receive
bonuses ("Annual Bonus") during the Employment Period in accordance with
the following parameters: (i) the target bonus for each year during the
Employment Period shall be 30% of Base Salary for achieving 100% of the
target level for the performance measures; and (ii) the performance
measures, the relative weight to be accorded each performance measure and
the amount of bonus payable in relation to the target bonus for achieving
more or less than 100% of the target level for the performance measures
shall be determined for each year during the Employment Period by the
Compensation Committee of the Ascent Board (the "Compensation Committee")
after consultation with the CEO.
(ii) SIGNING BONUS. Within 30 days after the Effective Date, the
Executive will be paid a signing bonus (the "Signing Bonus") in an
aggregate amount of $50,000, subject to applicable withholding for federal,
state and local taxes, FICA, etc. If the Executive terminates her
employment within one year of the Effective Date and if such
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<PAGE>
termination is not the result of an "Executive Election Event" (as defined
in Section 5), she agrees to repay the Signing Bonus in its entirety,
unless otherwise agreed to by the Compensation Committee after consultation
with the CEO.
(c) FRINGE BENEFITS. The Executive also shall be entitled to
participate in group health, dental, disability insurance programs, and any
group profit sharing, deferred compensation, supplemental life insurance or
other benefit plans as are generally made available by Ascent to the senior
executives of Ascent. Such benefits shall include reimbursement of documented
expenses reasonably incurred in connection with travel and entertainment related
to the Company's business and affairs. The Company and Ascent reserve the right
to modify or terminate from time to time the fringe benefits provided to the
senior management group. Notwithstanding the foregoing, until such time as the
Company or Ascent shall implement group-health, dental, disability and life
insurance plans for its executives, the Executive will be entitled to
participate in the group health, dental, disability and life insurance plans of
COMSAT Corporation ("COMSAT") being made available to the senior management
group of Ascent on the Effective Date.
(d) STOCK OPTIONS. The Company shall cause Ascent to grant to
Executive as of the Effective Date options ("Options") under Ascent's 1995 Key
Employee Stock Plan (the "Option Plan") to purchase 50,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), each
such Option exercisable at the fair market value of the Common Stock on May 13,
1996. The Options shall be exercisable by the Executive according to the
following schedule: (i) 25% on or after June 3, 1997; (ii) an additional 25% on
or after June 3, 1998; and (iii) an additional 50% on or after June 3, 1999;
PROVIDED, HOWEVER, that for so long as COMSAT owns at least 80% of the
outstanding Common Stock, Executive shall not be entitled to exercise any of the
Options prior to December 18, 1998. Such options shall be represented by a
stock option agreement containing appropriate terms consistent with the
provisions of
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<PAGE>
this Agreement. The Options, to the extent they remain unexercised, shall
automatically and without further notice terminate and become of no further
force and effect at the time of the earliest of the following to occur: (x)
three months after the date upon which a termination for cause by the Company
(as provided in Section 5(b)) shall have become effective and final; or (y) ten
years after the Effective Date.
During the Employment Period, the Executive shall be granted additional
non-statutory stock options as determined by the Compensation Committee in its
sole discretion. Notwithstanding any other provision of this Agreement except
Section 5(b), the Compensation Committee may in its discretion provide that any
stock options granted to the Executive which have not vested prior to her
termination of employment shall continue to vest in accordance with their
original terms as if the Executive's employment had not terminated.
(e) TICKETS. While employed pursuant to this Agreement,
Executive shall have the complimentary use of (i) four (4) season tickets in a
prime location for both the Basketball Team and the Hockey Team and (ii) four
(4) tickets in a prime location to every event held at the new arena for which
the Company or its affiliates control the right to receive more than a nominal
number of tickets. The Executive agrees that these tickets shall not be club
seats. Upon termination of employment with the Company, unless the Executive's
employment is terminated by the Company for "cause", the Executive will have the
right, but not the obligation, to purchase the season tickets referenced in
clause (i) above on the terms offered to holders of season tickets in the same
seating location in the arena.
(f) CONFLICTING PROVISIONS. Solely to the extent of any
conflict between the provisions of this Agreement and the provisions of any
agreement between Executive, on the one hand, and the Company and/or any
affiliated or related entity of the Company, on the other hand, relating to
stock options (including the Options), life insurance, health insurance, any
other
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<PAGE>
employee equity participation, profit sharing or retirement plan, group health
plan or other employee benefits (individually and collectively, referred to
herein as the "Fringe Benefits"), the provisions of this Agreement will control.
(g) MISCELLANEOUS BENEFITS. The Company shall provide to the
Executive additional benefits consisting of (i) a monthly payment or
reimbursement of automobile related expenses of up to $1,000 per month during
the Employment Period; (ii) monthly reimbursement of expenses incurred in
connection with the Executive's employment with the Company related to the
purchase and use by Executive of a mobile telephone during the Employment
Period; and (iii) reimbursement of Executive's legal fees and costs, in an
amount not to exceed $5,000, incurred in connection with the drafting,
negotiating and execution of this Agreement.
3. TRADE SECRETS; RETURN OF DOCUMENTS AND PROPERTY.
(a) Executive acknowledges that during the course of her
employment she will receive secret, confidential and proprietary information
("Trade Secrets") of the Company and of other companies with which the Company
does business on a confidential basis and that in the course of performing
services for the Company the Executive will create and develop Trade Secrets for
the benefit of the Company. Trade Secrets shall include, without limitation,
literary, dramatic or other works, screenplays, stories, adaptations, scripts,
treatments, formats, "bibles," scenarios, characters, titles of any kind and any
rights therein, matters of a business nature, such as customer data and
proprietary information about costs, profits, markets and sales, custom
databases, "know-how," formulae, secret processes or machines, inventions,
computer programs (including documentation of such programs), sales, company
business strategies and plans and other information of a similar nature to the
extent not available to the public, and plans for future development. All Trade
Secrets disclosed to or created by Executive shall be deemed to be the exclusive
property of the Company (as the context may require). Executive acknowledges
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that Trade Secrets have economic value to the Company due to the fact that Trade
Secrets are not generally known to the public or the trade and that the
unauthorized use or disclosure of Trade Secrets is likely to be detrimental to
the interests of the Company and its subsidiaries. Executive therefore agrees
to hold in strict confidence and not to disclose to any third party any Trade
Secret acquired or created or developed by Executive during the term of this
Agreement except (i) when Executive is required to use or disclose any Trade
Secret in the proper course of the Executive's rendition of services to the
Company hereunder, (ii) when such Trade Secret becomes public knowledge other
than through a breach of this Agreement, or (iii) when Executive is required to
disclose any Trade Secret pursuant to any valid court order in which the
Executive is compelled to disclose such Trade Secret. The Executive shall
notify the Company immediately of any such court order in order to enable the
Company to contest such order's validity. After termination of this Agreement,
the Executive shall not use or otherwise disclose Trade Secrets unless such
information (x) becomes public knowledge or is generally known in the
entertainment industry other than through a breach of this Agreement, (y) is
disclosed to the Executive by a third party who is entitled to receive and
disclose such Trade Secret, or (z) is required to be disclosed pursuant to any
valid court order, in which case the Executive shall notify the Company
immediately of any such court order in order to enable the Company to contest
such order's validity.
(b) Upon the effective date of notice of the Executive's or the
Company's election to terminate this Agreement, or at any time upon the request
of the Company, the Executive (or her heirs or personal representatives) shall
deliver to the Company (i) all documents and materials containing or otherwise
relating to Trade Secrets or other information relating to the Company's
business and affairs, and (ii) all documents, materials and other property
belonging to the Company, which in either case are in the possession or under
the control of the Executive (or her heirs or personal representatives). The
Executive shall be entitled to keep her personal records relating
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to the Company's business and affairs except to the extent those contain
documents or materials described in clause (i) of the preceding sentence, in
which case the Executive may retain copies for her personal and confidential
use.
4. DISCOVERIES AND WORKS. All discoveries and works made or
conceived by the Executive during her employment by the Company pursuant to this
Agreement, jointly or with others, that relate to the Company's activities
("Discoveries and Works") shall be owned by the Company, it being understood
that the Discoveries and Works referred to in this paragraph are limited to
those that are made, disclosed, reduced to tangible or written form or
description, or are reduced to practice by the Executive in the course of her
performing services for the Company. Discoveries and Works shall include,
without limitation, literary, dramatic or other works, screenplays, stories,
adaptations, scripts, treatments, formats, "bibles," scenarios, characters,
titles of any kind and any rights therein, other works of authorship,
inventions, computer programs (including documentation of such programs),
technical improvements, processes and drawings. The Executive shall
(i) promptly notify, make full disclosure to, and execute and deliver any
documents reasonably requested by, the Company to evidence or better assure
title to such Discoveries and Works in the Company, (ii) assist the Company in
obtaining or maintaining for itself at its own expense United States and foreign
copyrights, trade secret protection or other protection of any and all such
Discoveries and Works, and (iii) promptly execute, whether during her employment
by the Company or thereafter, all applications or other endorsements necessary
or appropriate to maintain copyright and other rights for the Company and to
protect their title thereto. Any Discoveries and Works which, within twelve
months after the termination of the Executive's employment by the Company, are
made, disclosed, reduced to a tangible or written form or description, or are
reduced to practice by the Executive and which pertain to work performed by the
Executive while with the Company shall, as between the Executive and the Company
be
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presumed to have been made during the Executive's employment by the Company.
5. TERMINATION. This Agreement shall remain in effect during the
Employment Period, and this Agreement and Executive's employment with the
Company may be terminated only as follows:
(a) By the Executive (an "Executive Election") at any time upon
sixty (60) days advance written notice to the Company upon an "Executive
Election Event" (as defined below). In such event or if the Executive's
employment is terminated by the Company without "cause" (as defined below),
there will be no forfeiture, penalty, reduction or other adverse effect upon any
rights or interests relating to any Fringe Benefits, all of which will fully
vest, to the extent not previously vested, immediately upon such termination
becoming effective and final. Without limiting the foregoing, in the event of
an Executive Election or if the Executive's employment is terminated without
"cause," the Executive shall be entitled to receive the following benefits until
June 3, 1999 (the "Duration Period"): (i) her then current Base Salary; (ii) an
Annual Bonus equal to thirty percent (30%) of her then current Base Salary to be
paid in accordance with the provisions of Section 2(b) of this Agreement; and
(iii) all other benefits provided pursuant to Sections 2(c), (d) and (g) of this
Agreement. The Executive shall have an obligation to seek other employment in
the event of her termination pursuant to this paragraph (a), and 50% of her
compensation from any such employment obtained shall offset the Company's
obligations under clauses (i) and (ii) of this paragraph (a). All stock options
(including the Options) will remain exercisable for the maximum period provided
in each applicable grant.
An "Executive Election Event" shall be (i) any substantial reduction
(except in connection with the termination of her employment voluntarily by the
Executive or by the Company for "cause" as defined below) by the Company,
without the
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<PAGE>
Executive's express written consent, of her responsibilities as President of the
Company; or (ii) the Board's requiring the Executive to be based at any office
location other than the principal offices of the Company, or the relocation,
without Executive's consent, of such principal offices to a location outside the
greater Denver area prior to the second anniversary of the Effective Date.
(b) By the Company at any time for "cause." For purposes of
this Agreement, the Company shall have "cause" to terminate the Executive's
employment hereunder upon (i) the failure of the Executive to perform her
material duties (without regard to the achievement of any specific results based
on such performance) in accordance with the terms of this Agreement (other than
any such failure resulting from her incapacity due to physical or mental
illness), which failure continues for ten (10) business days following the
Executive's receipt of written notice from the CEO specifying the manner in
which the Executive is in default of her duties, (ii) the engaging by the
Executive in serious misconduct that is materially and demonstrably injurious to
the Company or its reputation, which misconduct, if it is reasonably capable of
being cured, is not cured by the Executive within ten (10) business days
following the Executive's receipt of written notice from the CEO specifying the
serious misconduct engaged in by the Executive, (iii) the conviction of the
Executive of commission of a felony involving a crime of moral turpitude,
whether or not such felony was committed in connection with the Company's
business, or (iv) any material breach by the Executive of Section 7 hereof. If
the Company shall terminate the Executive's employment for "cause," there will
be no forfeiture, penalty, reduction or other adverse effect upon any vested
rights or interests relating to any Fringe Benefits. In such event, the
Company, in full satisfaction of all of the Company's obligations under this
Agreement and in respect of the termination of the Executive's employment with
the Company, shall pay the Executive her Base Salary, and all other
compensation, benefits and reimbursement through the date of termination of her
employment, PROVIDED that the Options and any other stock options
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<PAGE>
granted to the Executive under the Option Plan or any successor plan shall
terminate three months after the date of termination of her employment for
"cause".
6. DISABILITY; DEATH.
(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform substantially her duties by
reason of disability or impairment of health for at least six consecutive
calendar months, the Company shall have the right to terminate this Agreement by
giving sixty (60) days written notice to the Executive to that effect, but only
if at the time such notice is given such disability or impairment is still
continuing. Following the expiration of the notice period, the Employment
Period shall terminate with the payment of all of the Executive's Base Salary
that has accrued and has not been paid by the Company through the date the
notice period expires along with a prorated Annual Bonus through such date, and
there will be no forfeiture, penalty, reduction or other adverse effect upon any
vested rights or interests relating to any Fringe Benefits. In the event of a
dispute as to whether the Executive is disabled within the meaning of this
paragraph (a), or the duration of any disability, either party may request a
medical examination of the Executive by a doctor appointed by the Chief of Staff
of a hospital selected by mutual agreement of the parties, or as the parties may
otherwise agree, and the written medical opinion of such doctor shall be
conclusive and binding upon the parties as to whether the Executive has become
disabled and the date when such disability arose. The cost of any such medical
examinations shall be borne by the Company.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, the Company shall pay to the Executive's estate
her Base Salary and a prorated Annual Bonus through the end of the month in
which the Executive's death occurred, at which time the Employment Period shall
terminate without further notice and there will be no
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<PAGE>
forfeiture, penalty, reduction or other adverse effect upon any vested rights or
interests relating to any Fringe Benefits; PROVIDED that upon the Executive's
death the Option and any other stock options granted to the Executive under the
Option Plan or any successor plan shall become fully vested and shall terminate
one year after the date of termination of the Executive's employment for death,
notwithstanding the limitations of Section 2(d) of this Agreement.
(c) Nothing contained in this Section 6 shall impair or
otherwise affect any rights and interests of the Executive under any
compensation plan or arrangement of the Company which may be adopted by the
Board.
7. NON-COMPETITION.
(a) As an inducement for the Company to enter into this
Agreement, the Executive agrees that for a period commencing as of the Effective
Date and running through the earlier of (i) the end of the Employment Period if
the Executive remains employed by the Company for the entire Employment Period
or (ii) two years following termination of the Executive's employment by the
Company for "cause" as defined in Section 5(b) hereof, or by the Executive for
any reason (other than an Executive Election Event, in which case the provisions
of this paragraph (a) shall not apply) (the "Non-Competition Period"), the
Executive shall not, without the prior written consent of the Board, engage or
participate, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual capacity whatsoever,
in the conduct or management of, or own any stock or any other equity investment
in or debt of, any business which is competitive with any business conducted by
the Company.
For the purpose of this Agreement, a business shall be considered to
be competitive with any business of the Company only if such business is engaged
in providing services or products (i) similar to (A) any service or product
currently
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<PAGE>
provided by the Company during the Employment Period; (B) any service or product
which evolves from or results from enhancements in the ordinary course during
the Non-Competition Period to the services or products provided by the Company
as of the date hereof or during the Employment Period; or (C) any future service
or product of the Company as to which the Executive materially and substantially
participated in the development or enhancement, and (ii) to customers,
distributors or clients served by the Company during the Non-Competition Period.
(b) NON-SOLICITATION OF EMPLOYEES. During the Non-Competition
Period, the Executive will not (for her own benefit or for the benefit of any
person or entity other than the Company) solicit, or assist any person or entity
other than the Company to solicit, any officer, director, executive or employee
(other than an administrative or clerical employee) of the Company to leave his
or her employment.
(c) REASONABLENESS; INTERPRETATION. The Executive acknowledges
and agrees, solely for purposes of determining the enforceability of this
Section 7 (and not for purposes of determining the amount of money damages or
for any other reason), that (i) the markets served by the Company are national
and international and are not dependent on the geographic location of executive
personnel or the businesses by which they are employed; (ii) the length of the
Non-Competition Period is linked to the term of the Employment Period and the
severance benefit provided for in Section 5(a); and (iii) the above covenants
are manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of the Company. In the event that the covenants in
this Section 7 shall be determined by any court of competent jurisdiction in any
action to be unenforceable by reason of their extending for too great a period
of time or over too great a geographical area or by reason of their being too
extensive in any other respect, they shall be interpreted to extend only over
-14-
<PAGE>
the maximum period of time for which they may be enforceable, and/or over the
maximum geographical area as to which they may be enforceable and/or to the
maximum extent in all other respects as to which they may be enforceable, all as
determined by such court in such action.
(d) INVESTMENT. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the Company,
PROVIDED that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or other
public market, or (ii) are approved by the Board.
8. INDEMNIFICATION; LIABILITY INSURANCE. The Executive shall be
entitled to indemnification and coverage under the Ascent's liability insurance
policy for directors and officers to the same extent as other directors and
officers of Ascent and its subsidiaries.
9. ENFORCEMENT. The Executive acknowledges that a breach of the
covenants or provisions contained in Sections 3, 4 and 7 of this Agreement will
cause irreparable damage to the Company, the exact amount of which will be
difficult to ascertain, and that the remedies at law for any such breach will be
inadequate. Accordingly, the Executive agrees that if the Executive breaches or
threatens to breach any of the covenants or provisions contained in Sections 3,
4 and 7 of this Agreement, in addition to any other remedy which may be
available at law or in equity, the Company shall be entitled to seek specific
performance and injunctive relief.
10. ARBITRATION.
(a) Subject to the Company's right to enforce Sections 3, 4 and
7 hereof by an injunction issued by a court
-15-
<PAGE>
having jurisdiction (which right shall prevail over and supersede the provisions
of this Section 10), any dispute relating to this Agreement, including the
enforceability of this Section 10, arising between the Executive and the Company
shall be settled by arbitration which shall be conducted in Denver, Colorado, or
any other location where the Executive and the Company mutually agree, before a
single arbitrator in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA"). The parties shall instruct the
arbitrator to use his or her best efforts to conclude the arbitration within 60
days after notice of the dispute to AAA.
(b) The award of any such arbitrator shall be final. Judgment
upon such award may be entered by the prevailing party in any federal or state
court sitting in Denver, Colorado or any other location where the Executive then
resides at the Company's request.
(c) The costs of arbitration proceedings, excluding attorneys'
fees, shall be paid by the party that does not, in the determination of the
arbitrator, prevail in the arbitration proceedings.
11. SEVERABILITY. Should any provision of this Agreement be
determined to be unenforceable or prohibited by any applicable law, such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition without invalidating the balance of such
provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12. ASSIGNMENT. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. The Company's rights and
obligations under this Agreement shall not be assignable by the Company, except
in connection with a "change in control" of the Company, in which
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<PAGE>
case this Agreement shall be assumed by the successor entity and, upon such
assumption, the Company shall be released from its obligations hereunder. For
this purpose, a "change in control" shall mean any transaction or related series
of transactions whereby, directly or indirectly, control of the Company, the
Basketball Team and the Hockey Team is acquired by a party or parties other than
Ascent and its affiliates in connection with a sale or exchange of stock, a
merger, consolidation or other reorganization, a sale of assets or any other
similar transaction or series of transactions.
13. NOTICES. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to Executive, addressed to:
Ellen Robinson
529 Elm Street
Denver, Colorado 80220
With a copy to:
Douglas A. Pluss, Esq.
Parcel, Mauro, Hultin & Spaanstra, P.C.
1801 California Street, Suite 3600
Denver, CO 80202
Telecopier No.: 303-295-3040
-17-
<PAGE>
If to the Company, addressed to:
Ascent Sports, Inc.
c/o Ascent Entertainment Group
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Charlie Lyons
Telecopier No. (303) 572-0396
With a copy to:
Ascent Entertainment Group
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Arthur M. Aaron, Esq.
Telecopier No. (303) 572-0396
14. MISCELLANEOUS. This Agreement constitutes the entire agreement,
and supersedes all prior agreements, of the parties hereto relating to the
subject matter hereof, and there are no written or oral terms or representations
made by either party other than those contained herein. No amendment,
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. The validity,
interpretation, performance and enforcement of the Agreement shall be governed
by the laws of the State of Colorado. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. LEAGUE RULES. Notwithstanding anything in this Agreement to the
contrary, this Agreement is subject to the rules, regulations, by-laws and
constitution of the NBA and the NHL, including, without limitation, the
decisions or requirements issued by, or under the authority of, their respective
Commissioners or Boards of Governors, and specifically the
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<PAGE>
provisions of Article 35.1 of the NBA Constitution and Section 18 of the NHL
By-laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ Ellen Robinson
-----------------------------------
Ellen Robinson, Executive
ASCENT SPORTS, INC.
/s/ Charlie Lyons
-----------------------------------
By: Charlie Lyons
Its: Chairman
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<PAGE>
EXHIBIT 10.21
PRIVATE AND CONFIDENTIAL
January 28, 1997
Mr. Wesley D. Minami
7926 Longridge Court
Cabin John, MD 20818
Dear Mr. Minami:
This letter agreement (this "Agreement") sets forth the substance of our
understandings and agreements with respect to your employment relationship with
Ascent Entertainment Group, Inc., a Delaware corporation (together with its
affiliates, the "Company"), as a result of your resignation. Subject to the
conditions listed below, you will remain in the employ of the Company as
described below through December 1, 1997 (the "Expiration Date"). Based on the
foregoing and the terms and conditions stated below, the Company and you agree
as follows:
1. (a) You resign as Vice President, Chief Financial Officer and
Treasurer of the Company, and from any and all other offices,
positions or agencies with the Company and its affiliates effective
December 1, 1996.
(b) During the period from December 1, 1996 through the Expiration
Date (the "Severance Period"), you agree to provide advice to the
Company and its affiliates with respect to matters which may arise in
connection with your former duties, subject at all times to your
availability to provide such services. In consideration for your
prior service to the Company, your entering into this Agreement, and
your providing the advice described in the immediately preceding
sentence, during the Severance Period the Company will pay you your
current base salary and provide the other benefits described in this
Agreement. All expenses incurred by you in connection with your
employment by
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 2
the Company for travel between your home in Maryland and the Company's
headquarters in Denver, and your temporary living expenses in the
Denver area, shall be reimbursed by the Company and, if such
reimbursements are reported as income to you, shall be "grossed-up"
for tax purposes.
(c) During the Severance Period, you will continue to be eligible for
all of employee benefits for which you would otherwise be eligible,
including, without limitation, standard outplacement services, the
Company's Flexible Benefits program, and the Savings and
Profit-Sharing Plan, except as set forth in the following sentence.
You will not be eligible for the following benefits otherwise
available to employees of the Company: salary increases of any nature;
additional stock-based bonuses or awards of any nature or any cash
bonuses or awards; educational assistance; your deferred compensation
shall accrue interest at the lower rate prescribed by the plan for
employees terminating their employment prior to retirement; or any
benefits for which employees or senior executives of the Company are
otherwise eligible as a result of a change in control of the Company;
PROVIDED, HOWEVER, that if a transaction is announced prior to March
1, 1997, and such transaction actually results in a change in control
during the Severance Period having a substantially similar economic
effect announced prior to March 1, 1997, or if a subsequent
transaction which effectively replicates the economic effects of the
previously announced transaction is announced within thirty days after
the previously announced transaction is abandoned and consummated
during the Severance Period, then any restricted stock or options of
the Company or COMSAT Corporation ("COMSAT") held by you shall vest on
the same basis as similar restricted stock or options held by other
officers of the Company (excluding the President and Chief Executive
Officer
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 3
and the Executive Vice President, Finance and Chief Operating Officer)
pursuant to any benefit plan or program adopted in connection with
such change in control. For all purposes of service credit under the
benefit plans of the Company or COMSAT , your last date of employment
will be December 1, 1997; PROVIDED, HOWEVER, that the Company shall
request that each of the Company's Compensation Committee and the
COMSAT Compensation Committee consider at their respective February
1997 meetings whether the restricted stock or options of the Company
or COMSAT, as the case may be, set forth on Exhibit A shall continue
to vest through March 1, 1998 and shall continue to be exercisable
through June 1, 1998, recognizing that each committee's decision shall
be made in the sole discretion of such committee. Attached hereto as
Exhibit A is a complete list of all restricted stock awards,
restricted stock units and stock options which you have been granted
by the Company or COMSAT. You may retain the laptop computer which
has been provided to you by the Company for your professional use, in
addition to any items which have been given to you by the Company for
your personal use.
(d) During the Severance Period, you shall be free at all times to
seek, take on and perform other business and employment opportunities
and responsibilities outside the Company ("Other Business"), whether
or not for compensation, subject only to the express terms and
conditions of this Agreement. In the event that you engage in any
Other Business in which you are gainfully employed on a full-time
basis, your compensation from such employment shall offset up to 50%
of the Company's continuing salary obligations under this Agreement.
2. In consideration of the Company's agreement to enter into this
Agreement, you agree to the general release and covenant not to sue
contained in this paragraph 2
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 4
and the other provisions of this Agreement, it being understood that
this release shall not waive any claim for benefits to which you are
or may be entitled under this Agreement, or any other payments or
other benefits to which you are entitled, or will become entitled
pursuant to the specific terms of any other employee benefit plans of
the Company or COMSAT.
(a) You, on behalf of yourself and your heirs, executors,
administrators, successors and assigns, agree to release, discharge
and covenant not to sue the Company, its affiliated companies and its
and their predecessors, successors, assigns, shareholders, directors,
officers, employees, administrators, fiduciaries and agents, in their
individual and representative capacities (hereinafter in this
paragraph 2 referred to collectively as "Ascent") with respect to all
claims, charges, causes of action, liabilities, suits, debts and
demands, of any kind or nature, which you had, have or may have
against Ascent (collectively "Waived Claims"), including, without
limitation, (i) any claims relating to your employment with Ascent;
(ii) any claims relating to the termination of your employment
pursuant to the terms of this Agreement; (iii) any claims relating to
the terms, conditions and benefits associated with such employment or
your termination from employment; (iv) any claims under any local,
state or federal antidiscrimination law, including, without
limitation, Title VII of the Civil Rights Act of 1964, as amended, the
Age Discrimination in Employment Act, the Americans With Disabilities
Act, the Employee Retirement Income Security Act of 1974, as amended,
and the Fair Labor Standards Act; (v) any claims at common law,
including, without limitation, claims for breach of an express or
implied contract, or wrongful discharge; or (vi) any other claims,
statutory or otherwise.
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 5
(b) You agree not to initiate or participate in or assist in any way
in any individual or class action lawsuit against Ascent with respect
to any Waived Claims, unless compelled to do so by legal process or
court order. You further agree to waive any remedy or recovery in any
action which may be brought on your behalf by any governmental agency
or other person with respect to any Waived Claims.
3. Except to the extent provided herein, you release and waive any and
all rights or claims you may have to reemployment with the Company or
any of its affiliated companies after the Expiration Date, and agree
that you will not apply for employment with the Company or any of its
controlled affiliates after such date without the express written
consent of the President of Ascent Entertainment Group, Inc. prior to
making such application, which consent may be withheld in his sole
discretion. Further, you agree that you will not apply for employment
with COMSAT or any of its controlled affiliates (other than the
Company and its controlled affiliates) after such date without the
express written consent of the Vice President, Human Relations and
Organizational Development, of COMSAT prior to making such
application, which consent may be withheld in his sole discretion.
You further understand and agree that the Company's compliance with
the terms of this Agreement during the Severance Period is conditioned
upon the following:
(a) You acknowledge that: (i) the business of the Company (the
"Business") is conducted in the United States of America generally and
the States of Colorado, California and Florida in particular; (ii) the
reputation and goodwill of the Company, which constitutes a part of
the Business, are an integral part of the success of the Business
throughout the areas where the Company conducts its business; and
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 6
(iii) if you deprive the Company of any of the Business's reputation
and goodwill or in any manner utilizes its reputation and goodwill in
competition with the Business, the Company will be deprived of the
benefits of its Business. Accordingly, as an inducement for the
Company to enter into this Agreement, you agree that during the
Severance Period you shall not, without the prior written consent of
the President of Ascent Entertainment Group, Inc. which consent shall
not be unreasonably withheld or delayed, engage or participate,
directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual capacity
whatsoever, in the conduct or management of, or own any stock or any
other equity investment in or debt of, any business which is
competitive with any business conducted by the Company (excluding
COMSAT), and you further agree that during the Severance Period you
shall not, without the prior written consent of the Vice President,
Human Relations and Organizational Development of COMSAT, which
consent shall not be unreasonably withheld or delayed, engage or
participate, directly or indirectly, as principal, agent, employee,
employer, consultant, stockholder, partner or in any other individual
capacity whatsoever, in the conduct or management of, or own any stock
or any other equity investment in or debt of, any business which is
competitive with any business conducted by COMSAT.
For the purpose of this Agreement, a business shall be considered
to be competitive with any business of the Company or COMSAT only if
such business is engaged in providing services or products (i) similar
to any service or product currently provided by the Company or COMSAT
or provided by the Company or COMSAT as of the date, and (ii) to
customers, distributors or
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 6
clients of the type served by the Company or COMSAT as of the date
hereof.
(b) You will not (for your own benefit or for the benefit of any
person or entity other than the Company or its affiliates) solicit, or
assist any person or entity other than the Company or its affiliates
to solicit, any officer, director, executive or employee (other than
an administrative or clerical employee) of the Company or its
affiliates to leave his or her employment.
(c) You acknowledge and agree that (i) the markets served by the
Company are national and international and are not dependent on the
geographic location of executive personnel or the businesses by which
they are employed; (ii) the length of the non-competition period and
solicitation period is linked to the term of the Severance Period; and
(iii) the above covenants are manifestly reasonable on their face, and
the parties expressly agree that such restrictions have been designed
to be reasonable and no greater than is required for the protection of
the Company.
(d) Nothing in this paragraph 3 shall be deemed to prohibit you
from owning equity or debt investments in any corporation, partnership
or other entity which is competitive with the Company, PROVIDED that
such investments (i) are passive investments and constitute two
percent (2%) or less of the outstanding equity securities of such an
entity the equity securities of which are traded on a national
securities exchange or other public market, or (ii) are approved by
the President of the Company.
(e) Further, you agree that you will not criticize, disparage,
slander, defame, impugn or make any statement to third parties orally
or in writing, or
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 8
take, or omit to take, any other actions that will damage or harm the
Company or its officers and directors, or the reputations of any of
them.
4. You agree that, except as agreed upon in writing by the Company, you
will not communicate or disclose, in any manner, the terms, nature or
scope of this Agreement to any person except: (a) as may be required
by law, rule, or regulation of any governmental agency; (b) to your
attorneys, accountants, or tax consultants; (c) to members of your
immediate family; or (d) to a court of competent jurisdiction for
purposes of enforcing the terms hereof.
5. Because of the nature of the terms of this Agreement and the general
release and covenant not to sue contained herein, by agreeing to this
Agreement you acknowledge that you have been advised, in writing, by
the Company to consult with an attorney prior to executing this
Agreement, that you have had an opportunity to do so and that you
understand the nature, terms and effects of this Agreement, and the
general release and covenant not to sue. You further acknowledge that
the Company has not made any representations to you, or your agents or
successors and assigns, concerning this Agreement, or the general
release and covenant not to sue, other than those contained herein.
6. Finally, you agree and acknowledge that this Agreement, and the
general release and covenant not to sue contained herein, shall not
operate or be construed as an admission by the Company of any
violation of your employment relationship with the Company or any
local, state or federal statute or regulation or of any duty at common
law or otherwise owed to you, your successors or assigns.
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 9
7. This Agreement shall inure to the benefit of and is binding upon the
Company and you, and our respective heirs, executors, administrators,
successors, representatives and assigns.
8. This Agreement may not be modified or amended except in writing signed
by the parties.
9. This Agreement shall be governed and construed exclusively under the
laws of the State of Colorado.
10. All notices required or permitted to be given hereunder shall be in
writing and shall be deemed to have been delivered on the date when
personally delivered or mailed, by certified or registered mail,
return receipt requested, addressed to the intended recipient as
follows:
(a) If to the Employee:
Mr. Wesley D. Minami
7926 Longridge Court
Cabin John, MD 20818
With a copy to:
Robert Gault, Esquire
Minsk, Levin, Cohn & Ferris
1 Financial Center
40th Floor
Boston, MA 02111
<PAGE>
Mr. Wesley D. Minami
January 28, 1997
Page 10
(b) If to the Company:
Mr. Charlie Lyons
President and Chief Executive Officer
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, CO 80202
With a copy to:
Arthur M. Aaron, Esq.
Vice President, Business and Legal Affairs
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, CO 80202
If you agree to the foregoing, please sign both originals of this letter in
the space provided below and return one original to the undersigned.
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ James A. Cronin, III
-------------------------------
Name: James A. Cronin, III
Title: Executive Vice President,
Finance and COO
Agreed and acknowledged
Date: 1/30/97
-----------------
/s/ Wesley D. Minami
- -----------------------
Wesley D. Minami
<PAGE>
EXHIBIT A
WESLEY D. MINAMI
STOCK OPTIONS (NON-QUALIFIED)
Shares Issue Date Exercise Price Exercise/Release Dates
- ------ ---------- -------------- ----------------------
COMSAT CORPORATION
6,000 05/03/93 $30.0625 6,000 vested as of
05/03/96
5,000 01/21/94 $27.6250 2,500 as of 01/21/96
2,500 on 01/21/97
6,000 01/20/95 $19.3125 1,500 on 01/20/96
1,500 on 01/20/97
3,000 on 01/20/98
ASCENT ENTERTAINMENT GROUP, INC.
100,000 12/18/95 $15.00 10,000 on 12/18/96*
15,000 on 12/18/97*
25,000 on 12/18/98*
25,000 on 12/18/99
25,000 on 12/18/00
RESTRICTED STOCK AWARDS
COMSAT CORPORATION
345 01/24/94 345 on 1/21/97
3,000 02/18/94 600 on 02/18/97
1,200 on 02/18/98
1,200 on 02/18/99
1,000 01/19/95 200 on 01/19/98
400 on 01/19/99
400 on 01/19/00
* These options vest but will not be exercisable until 12/18/98 so long as
COMSAT Corporation continues to hold 80% of the outstanding common stock of
Ascent. However, in light of the nature of this agreement, the Company
will use its reasonable
<PAGE>
efforts to cause such shares to be exercisable prior to the Expiration
Date, so long as such exercise will not cause COMSAT Corporation to hold
less than 80% of the outstanding common stock of Ascent. If such exercise
would cause COMSAT to go below 80%, the parties shall mutually agree upon
an alternative form of compensation.
<PAGE>
EXHIBIT 10.22
CORPORATE AGREEMENT
THIS CORPORATE AGREEMENT ("Agreement") is entered into as of October 8,
1996, by and between On Command Corporation, a Delaware corporation ("On
Command"), and Ascent Entertainment Group, Inc., a Delaware corporation
("Ascent").
RECITALS
A. Ascent owns all of the issued and outstanding common stock, par value $.01
per share ("Common Stock"), of On Command.
B. SpectraVision, Inc., SpectraDyne, Inc. ("SpectraDyne"), and each of the
other domestic subsidiaries of SpectraVision (the "Debtors") have filed a
petition for relief under Chapter 11 of the United States Bankruptcy Code in the
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), which
cases were procedurally consolidated for joint administration (collectively, the
"Bankruptcy Case").
C. Ascent has entered into an Acquisition Agreement (the "Acquisition
Agreement") with On Command, the Debtors and the Official Creditors Committee
appointed by the U.S. Trustee (the "Creditors Committee") pursuant to which On
Command will acquire (the "Acquisition") all of the outstanding capital stock of
SpectraDyne in exchange for approximately 27.5% of the Common Stock and warrants
to purchase 7% of the Common Stock on a fully diluted basis (the "SpectraVision
Warrants").
D. On Command and On Command Video Corporation ("OCV"), a majority owned
subsidiary of Ascent have entered into a Merger Agreement (the "Merger
Agreement") pursuant to which OCV will be merged (the "Merger", and together
with the Acquisition, the "Transactions") into a wholly owned subsidiary of On
Command and stockholders of OCV and designees of Ascent and OCV will receive at
least 72.5% of the Common stock and warrants to purchase 13% of the Common Stock
on a fully diluted basis.
E. After consummation of the Transactions, the Common Stock will be registered
under the Securities Exchange Act of 1934 (the "Exchange Act") and traded on the
NASDAQ Stock Market.
F. The parties desire to enter into this Agreement to set forth their
agreement regarding (i) the agreement of On Command to cause to be nominated
for election to its board of directors individuals designated by Ascent such
that such individuals comprise a majority of the board of directors of On
Command, (ii) the agreement of On Command not to amend its certificate of
incorporation or bylaws without the consent of Ascent, (iii) the agreement of
the parties that at least two directors of On Command be independent directors,
and (iv) the agreement of On Command regarding certain covenants and agreements
applicable to On Command.
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AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Ascent and On Command, for
themselves, their successors, and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. As used in this Agreement, the following terms will have
the following meanings, applicable both to the singular and the plural forms of
the terms described:
"ADDITIONAL INFORMATION" has the meaning ascribed thereto in Section
3.2(h).
"AFFILIATE" means, with respect to a given Person, any Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to vote a majority of
the securities having voting power for the election of directors (or other
Persons acting in similar capacities) of such Person or otherwise to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"AFTER-TAX BASIS" means, with respect to any payment to be received or
accrued by any Person, the amount of such payment supplemented by a further
payment or payments (which shall be payable either simultaneously with the
initial payment or, in the event that taxes resulting from the receipt or
accrual of such initial payment are not payable in the year of receipt or
accrual at the time or time such taxes become payable) so that the sum of all
such initial and supplemental payments, after deduction of all taxes imposed by
any taxing authority (after taking into account any credits or deductions or
other tax benefits arising therefrom to the extent such are currently utilized)
resulting from the receipt or accrual of such payments (whether or not such
taxes are payable in the year of receipt or accrual) shall be equal to the
initial payment to be so received or accrued.
"AGREEMENT" has the meaning ascribed thereto in the preamble hereto, as
such agreement may be amended and supplemented from time to time in accordance
with its terms.
"ASCENT" has the meaning ascribed thereto in the preamble hereto.
"ASCENT ENTITIES" means Ascent and its Subsidiaries (other than
Subsidiaries that constitute On Command Entities). "Ascent Entity" shall mean
any of the Ascent Entities.
"BEST EFFORTS" means all reasonable efforts within the power of a party to
effect a given action, but shall not be construed so as to require any party to
take any action that would have a material adverse consequence to the party
responsible for performance of such action or make a material payment if neither
customarily nor proximately related to the performance of such action.
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"BASE RATE" with respect to any party means the highest marginal interest
rate paid by that party on such party's outstanding indebtedness for borrowed
money in effect from time to time or, if the party does not then have any
outstanding indebtedness for borrowed money, ten percent per annum.
"CLOSING DATE" means the closing date for the Transactions.
"COMSAT ENTITIES" means COMSAT Corporation and its Subsidiaries (other than
Subsidiaries that constitute Ascent Entities or On Command Entities). "COMSAT
Entity" shall mean any of the COMSAT Entities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"GAAP" means generally accepted accounting principles.
"INTERCOMPANY RECEIVABLE ACCOUNT" has the meaning ascribed thereto in
Section 3.5.
"INTERCOMPANY SERVICES AGREEMENT" means the Intercompany Services Agreement
between Ascent and On Command entered into of even date herewith.
"LAWS" has the meaning ascribed thereto in Section 3.2(h).
"LOSSES" has the meaning ascribed thereto in Section 3.7.
"MERGER" has the meaning ascribed thereto in the Recitals.
"ON COMMAND" has the meaning ascribed thereto in the preamble hereto.
"ON COMMAND ENTITIES" means On Command and its Subsidiaries.
"PERSON" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government (and
any department or agency thereof) or other entity.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-4
(Registration No. 33-233-10407) pursuant to which On Command registered under
the Securities Act the shares of Common Stock and Warrants to be issued in the
Merger, as amended.
"REPRESENTATIVES" has the meaning ascribed thereto in Section 3.2(h).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
"SETTLEMENT DATE" has the meaning ascribed thereto in Section 3.5.
"SUBSIDIARY" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled directly or indirectly by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof. Subsidiary, when used
with respect to Ascent or On Command, shall also include any other entity
affiliated with Ascent or On Command, as the case may be, that Ascent and
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On Command may hereafter agree in writing shall be treated as a "Subsidiary" for
the purposes of this Agreement.
"TRANSACTION EXPENSES" has the meaning ascribed thereto in Section 3.3.
"TRANSACTIONS" has the meaning ascribed thereto in the Recitals.
1.2. INTERNAL REFERENCES. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement and references to the
parties shall mean the parties to this Agreement.
ARTICLE II
CORPORATE GOVERNANCE COVENANTS
2.1 ASCENT DIRECTORS. On Command covenants and agrees, for so long as the
Ascent Entities beneficially own, directly or indirectly, the largest percentage
(and at least 40%) of the outstanding securities of On Command entitled to be
cast for the election of directors, to propose, at each election of directors,
a slate of directors, or in the cases of vacancies, individual directors, for
election so that at all times during the term of this Agreement, a majority of
the board of directors of On Command is comprised of persons designated by
Ascent.
2.2 INDEPENDENT DIRECTORS. On Command and, for so long as the Ascent
Entities own the largest percentage (and at least 40%) of the outstanding
securities of On Command entitled to be cast for the election of directors,
Ascent shall each use its Best Efforts to cause no fewer than two individual
directors of On Command to be independent directors within the meaning of the
rules of the National Association of Securities Dealers, Inc. for the Nasdaq
National Market, or such other market or exchange on which the Common Stock may
then be traded, as such rules are in effect as of the date of this Agreement.
2.3 AMENDMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. On Command
hereby covenants and agrees, for so long as the Ascent Entities own the largest
percentage (and at least 40%) of the outstanding securities of On Command
entitled to be cast for the election of directors, not to amend, supplement,
restate, cancel, modify or alter its Certificate of Incorporation or Bylaws in
any manner whatsoever without the prior written consent of Ascent.
2.4 LIMITATION ON INDEBTEDNESS. On Command hereby covenants and agrees,
for so long as the Ascent Entities own the largest percentage (and at least 40%)
of the outstanding securities of On Command entitled to be cast for the election
of directors, that it will not incur any indebtedness, other than that certain
bank credit facility to be entered into on the Closing Date as described in the
Registration Statement and refinancings thereof (the "Credit Facility") and
other indebtedness incurred in the ordinary course of business consistent with
past practices, which together with the Credit Facility shall not exceed $100
million in the aggregate, without the prior written consent of Ascent. For so
long as the Ascent Entities own the largest percentage (and at least 40%) of the
outstanding securities of On Command entitled to be cast for the election of
directors, On Command agrees to (i) utilize reasonable cash management
procedures, and (ii) use its Best Efforts to minimize its excess cash holdings.
2.5 LIMITATION ON ISSUANCE OF EQUITY SECURITIES. On Command hereby
covenants and agrees, for so long as the Ascent Entities own the largest
percentage (and at least 40%) of the outstanding securities
4
<PAGE>
of On Command entitled to be cast for the election of directors, that it will
not issue any equity securities or any securities convertible into equity
securities without the prior written consent of Ascent.
2.6 CHANGE IN FISCAL YEAR. For so long as the Ascent Entities own the
largest percentage (and at least 40%) of the outstanding securities of On
Command entitled to be cast for the election of directors, On Command hereby
covenants and agrees that it will not change its fiscal year without the prior
written consent of Ascent.
ARTICLE III
CERTAIN OTHER COVENANTS AND AGREEMENTS
3.1. FCC CAPITALIZATION PLAN AND CREDIT AGREEMENT REQUIREMENTS. (a) For
so long as the Ascent Entities own the largest percentage (and at least 40%) of
the outstanding securities of On Command entitled to be cast for the election of
directors, On Command covenants and agrees that it will not take any action or
enter into any commitment or agreement which may reasonably be anticipated to
result, with or without notice and with or without lapse of time, or otherwise,
in a contravention or event of default by any Ascent Entity of any provision of
applicable law or regulation, including but not limited to provisions set forth
in Ascent's intercompany agreements with COMSAT and COMSAT's then current
capitalization plan approved by the Federal Communications Commission (the "FCC
Capitalization Plan"), or any provision set forth in any credit agreement,
indenture or other material instrument binding upon any COMSAT Entity or Ascent
Entity (collectively, the "Ascent Credit Agreements") as of the Closing Date and
in any refinancings thereof on the same terms or on terms no more restrictive as
to On Command (provided, that such terms are disclosed to On Command).
(b) On Command and Ascent agree to provide to the other any information
and documentation reasonably requested by the other for the purpose of
evaluating and ensuring compliance with Section 3.1(a) hereof.
(c) In connection with the execution and negotiation of any new loan or
credit agreement or indenture during the term of this Agreement, Ascent agrees
to use reasonable efforts to attempt to exclude the On Command Entities from the
representations, covenants and agreements required of Ascent (other than
financial covenants calculated generally on the basis of Ascent's published
financial statements); provided, that Ascent's obligations under this Section
3.1(c) shall not be construed so as to require Ascent to modify the terms of any
proposed agreement or indenture in a manner that Ascent, in the exercise of its
sole discretion, deems adverse to its interests, including but not limited to
accepting a higher interest rate or other financing costs; PROVIDED, HOWEVER,
that nothing contained in this Agreement is intended the limit in any way the
ability of the Ascent Entities to pledge their interests in any securities of On
Command to secure any financing or borrowing.
3.2 FINANCIAL STATEMENTS AND OTHER INFORMATION. (a) For so long as the
Ascent Entities own the largest percentage (and at least 40%) of the outstanding
securities of On Command entitled to be cast for the election of directors of
any stockholder, On Command shall deliver financial statements and other
information in such format and media, and on the same schedule, as Ascent
requires of its other Subsidiaries. Ascent shall provide On Command with
advance notice of any changes in the content, format or schedule for delivery of
the financial statements and other information required of its Subsidiaries
required by Ascent to analyze and review On Command's business, financial
condition or operating results.
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(b) At such time as Section 3.2 (a) above is no longer applicable, On
Command shall deliver to Ascent in such format and media as Ascent may
reasonably request:
(1) as soon as available, and in any event no later than the first
Friday in February after the end of each fiscal year of Ascent as long as
Ascent's fiscal year ends on December 31 or, if Ascent's fiscal year is
changed, 75 days after the end of such fiscal year, a consolidated audited
balance sheet of On Command and its Subsidiaries as of the end of such
fiscal year and the related consolidated statements of operations and cash
flows for such fiscal year, all prepared in accordance with GAAP, and
reported on by independent public accountants of recognized standing
selected by On Command with the consent of Ascent;
(2) as soon as available, and in any event no later than the Tuesday
of the week immediately preceding the first regularly scheduled meeting of
Ascent's Board of Directors after the end of each quarter of Ascent,
consolidated statements of operations as of the end of such fiscal quarter
and for the portion of On Command's fiscal year then ended, prepared in
accordance with GAAP;
(3) as soon as available, and in any event no later than 30 days after
the end of each quarter of Ascent, a consolidated unaudited balance sheet
of On Command and its Subsidiaries as of the end of such fiscal quarter and
the related consolidated statements of cash flows for such fiscal quarter
and for the portion of On Command's fiscal year then ended, all prepared in
accordance with GAAP;
(4) as soon as available, and in any event no later than the Tuesday
of the week immediately preceding the first regularly scheduled meeting of
Ascent's Board of Directors after the end of each month or, if no board
meeting is scheduled for that month, no later than the Tuesday of the week
immediately preceding the week in which the third Friday of the month
occurs after the end of each month, a report on revenues, operating
earnings and cash flow of On Command on a consolidated basis, which reports
shall contain such other financial information and data as Ascent may
reasonably prescribe, as of the end of the immediately preceding calendar
month;
(5) as soon as available, and in any event on a schedule to be
established in connection with the first regularly scheduled meeting of
Ascent's Board of Directors after the end of any quarter of Ascent, revised
forecasted quarterly statements of operations for the remainder of the
calendar year for On Command and its Subsidiaries on a consolidated basis;
(6) as soon as available, and in any event on a schedule to be
established in connection with the preparation of Ascent's operating budget
for the next fiscal year, a projected operating budget for On Command for
the ensuing fiscal year; and
(7) as soon as available, and in any event no later than five business
days following receipt of a request by Ascent, such other information
relating to On Command as Ascent may reasonably request, in connection with
the reporting of its ownership interest in On Command under the "equity
method" of accounting in accordance with GAAP, to prepare Ascent's own
financial statements and reports under the Exchange Act.
(c) For so long as the Ascent Entities own the largest percentage (and at
least 40%) of the outstanding securities of On Command entitled to be cast for
the election of directors of any stockholder,
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On Command shall deliver copies of its proposed budget and strategic business
plan to its directors on a schedule to be established by On Command's Board of
Directors in advance of the consideration of such documents by the Board of
Directors for approval and concurrently deliver copies thereof to Ascent's chief
executive officer, chief operating officer and chief financial officer.
(d) For so long as the Ascent Entities own the largest percentage (and at
least 40%) of the outstanding securities of On Command entitled to be cast for
the election of directors, On Command shall deliver written notice to Ascent of
(i) filing of any material litigation, counter-claim, administrative proceeding
or arbitration by or against On Command or any Subsidiary, (ii) any event of
default or breach under any material agreement to which On Command or any
Subsidiary is a party (including, but not limited to, this Agreement and the
Intercompany Management Services Agreement), and (iii) the entry of any material
judgment or order for the payment of money or injunctive relief against On
Command or any Subsidiary, in each case as soon as possible and in any event
within five business days after On Command becomes aware of such event. Ascent
shall provide notice to On Command of the occurrence of any of the foregoing
events relating to Ascent within the same time frame if On Command would be
required to disclose such events under applicable financial reporting
requirements pursuant to federal or state securities laws or in accordance with
GAAP.
(e) For so long as the Ascent Entities own the largest percentage (and at
least 40%) of the outstanding securities of On Command entitled to be cast for
the election of directors, On Command shall deliver to Ascent, if requested by
Ascent, information of the same type, and at the same time, as required to be
provided pursuant to paragraphs (a), (b) and (d) of this Section 3.2 for any
Subsidiary or any other corporation, association, partnership, joint venture or
other business entity in which On Command holds an equity interest if such
interest has a material impact on On Command's operating results.
(f) With respect to the financial statements delivered pursuant to Section
3.2(a) and (b), a certification executed by the Chief Financial Officer or Chief
Executive Officer of On Command certifying that such financial statements were
prepared in accordance with GAAP and fairly present the financial position of On
Command and its Subsidiaries as of the end of the applicable fiscal month,
quarter or year-end and their combined results of operations and cash flows for
the periods then ended, subject to year-end audit adjustments.
(g) On Command agrees to reimburse Ascent, no later than 30 days after
delivery to On Command of a written request for reimbursement by Ascent, for all
costs, losses, damages or liabilities (including attorney's fees and expenses)
that Ascent may incur as a result of any breach of the provisions of this
Section 3.2 by On Command.
(h) For so long as the Ascent Entities own the largest percentage (and at
least 40%) of the outstanding securities of On Command entitled to be cast for
the election of directors, On Command hereby agrees to provide to Ascent such
other information respecting the financial condition or operations of On Command
as Ascent may from time to time reasonably request. In addition, subject to
applicable law, each party hereto covenants and agrees to provide the other
party and its authorized accountants, counsel and other designated
representatives (collectively, the "Representatives") reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) during normal business hours to all records, books,
contracts, instruments, computer data and other data and information
(collectively, "Additional Information") insofar as such access is reasonably
required by the other party in connection with the transactions contemplated by
this Agreement and the Intercompany Services Agreement or as may be required by
such other party to comply with all applicable federal, state, county and local
laws, administrative or court orders, ordinances, regulations and codes,
including, but not limited to, securities
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and tax laws and regulations ("Laws"). Without limiting the foregoing,
Additional Information may be requested under this Section 3.2(h) for audit,
accounting, claims, regulatory, litigation and tax purposes, as well as for
purposes of fulfilling disclosure and reporting obligations and for performing
this Agreement and the transactions contemplated hereby. Each party covenants
that it will provide Additional Information to the other party promptly and on a
timely basis following a request therefor so as to permit the other party
sufficient time to process the Additional Information and incorporate such
Additional Information into any report, return or filing required under
applicable Laws or to effect the transactions contemplated by this Agreement and
the Intercompany Management Services Agreement, assuming that the request
therefor is made on a timely basis sufficiently in advance of any filing
deadline so as to permit such response.
(i) For so long as the Ascent Entities own the largest percentage (and at
least 40%) of the outstanding securities of On Command entitled to be cast for
the election of directors, On Command shall provide to Ascent access to On
Command's independent public accountants and Chief Financial Officer or other
officers at reasonable intervals.
(j) Each party shall hold, and cause its Representatives to hold, in
confidence, all information concerning the other in its possession or furnished
by the other or the other's Representatives pursuant to this Agreement and shall
not use any such information except for such purposes as shall be expressly
permitted hereunder (except in each case to the extent that such information has
been (i) in the public domain through no fault of such party or (ii) lawfully
acquired from other sources by such party), and each such party shall not
release or disclose such information to any other person, except its regulators,
auditors, attorneys, financial advisors, bankers, rating agencies, creditors,
insurers, and other consultants and advisors, unless compelled to disclose such
information, as advised by its counsel, in order to comply with reporting or
other requirements under applicable Laws. Without prejudice to the rights and
remedies of any party to this Agreement, a party disclosing confidential
information to the other party in accordance with the terms of this Agreement
shall be entitled to equitable relief by way of an injunction if the other party
hereto breaches or threatens to breach any provision of this Section 3.2(j).
Each party shall use the same care in keeping confidential the information of
the party as it would use in safeguarding its similar information, but in no
event less than reasonable care.
3.3 THE TRANSACTIONS. On Command shall pay all expenses relating to
Transactions (including the fees of the advisors and counsel to Ascent and to On
Command), all of the fees and reimbursable expenses of Allen & Company
Incorporated ("Allen") and Gary Wilson Partners ("Wilson") pursuant to their
respective engagement letters, all of the costs of producing, printing, mailing
and otherwise distributing the Registration Statement and the information
statement/prospectus, or any amendments or supplements to the foregoing relating
to the Transactions (collectively, the "Transaction Expenses"). Notwithstanding
anything to the contrary that may be contained in any other agreements, the
provisions of this paragraph shall govern and control the allocation of
Transaction Expenses as between Ascent and On Command. On Command hereby agrees
to save, protect, indemnify, defend and hold harmless, on an After-Tax Basis,
each of the Ascent Entities and each of the officers, directors, and employees
of each of the Ascent Entities from and against all Losses to which any of them
may become jointly or severally subject (i) arising out of any untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, with respect to the Registration Statement
(PROVIDED, HOWEVER, that On Command shall not be liable to the Ascent Entities
to the extent that any such Losses arise out of or relate to any untrue
statement or alleged untrue statement, or any omission or alleged omission, if
such statement or omission shall have been made in reliance upon and in
conformity with information relating to the Ascent Entities furnished in writing
to On Command by or on behalf of the Ascent Entities specifically for use in the
Registration Statement), or (ii) relating to any litigation initiated by persons
acting in their capacity as
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a stockholder or creditor of On Command and arising out of the Transaction.
Ascent hereby agrees to save, protect, indemnify, defend and hold harmless, on
an After-Tax Basis, On Command and each of the officers, directors, and
employees of On Command from and against all Losses to which any of them may
become jointly or severally subject relating to any litigation initiated by
persons acting in their capacity as a stockholder or creditor of Ascent arising
out of the Transactions.
3.4 ALLOCATION OF CERTAIN CONTINGENT LIABILITIES AND BENEFITS. The
parties agree that any costs and recoveries associated with certain contingent
liabilities and claims described in APPENDIX A and any contingent liabilities
and claims that may arise in the future shall be allocated between Ascent and On
Command in the manner therein described, the terms of which are incorporated
herein by reference.
3.5 INTERCOMPANY RECEIVABLES AND INTEREST. (a) For so long as the Ascent
Entities own the largest percentage (and at least 40%) of the outstanding
securities of On Command entitled to be cast for the election of directors,
Ascent shall debit or credit any amounts that are due and payable by On Command,
or owed to On Command, under the terms of this Agreement, or the Intercompany
Management Services Agreement against an intercompany receivable account (the
"Intercompany Receivable Account") that Ascent will maintain as part of its
books and records. If the Intercompany Receivable Account has a positive
balance (I.E., if the amounts owed to Ascent by On Command exceed the amounts
owed to On Command by Ascent) as of the end of any month, On Command shall pay
the amount of such balance to Ascent by wire transfer, intrabank transfer or
such other immediately available sources of funds as Ascent may agree no later
than the first business day after the date that the monthly financial statements
of On Command for that month are required to be delivered to Ascent pursuant to
Section 3.2(a) or, failing the specification of such a date by Ascent, the date
described in Section 3.2(b)(4) (the "Settlement Date"). If the Intercompany
Receivable Account has a negative balance (I.E., if the amounts owed to On
Command by Ascent exceed the amounts owed to Ascent by On Command) as of the end
of any month, Ascent shall pay the amount of such balance to On Command by wire
transfer, intrabank transfer or such other immediately available sources of
funds as On Command may agree no later than the Settlement Date.
(b) Any balances in the Intercompany Receivable Account that have not been
paid by the party responsible for such payment pursuant to terms of this Section
3.5 after the fifth business day after the Settlement Date shall bear interest
until such amount is paid in full, credited or debited (as applicable) against
the Intercompany Receivable Account, at a rate per annum equal at all times to
4% per annum above the Base Rate then in effect of the party obligated to make
such payment. In the event that the rate provided for in the preceding sentence
exceeds the maximum rate allowed by applicable law, the maximum legal rate of
interest shall apply. In the event that On Command wishes to contest or
disagrees with any credit or debit made against the Intercompany Receivable
Account during any month, On Command shall provide written notice of its
objection to such credit or debit no later than 10 business days after the
Settlement Date. Upon receipt of such notice, Ascent and On Command shall use
their Best Efforts to resolve any disagreements with respect to contested
credits or debits against the Intercompany Receivable Account before the next
Settlement Date. The failure to reach agreement as to the appropriate
resolution of any disputed credit or debit to the Intercompany Receivable
Account, however, shall not relieve either party of its obligation to make, or
give rise to any right of set-off by such party arising either at common law or
in equity (which such rights are hereby waived by each of the parties) against,
future payments to the other in respect of the Intercompany Receivable Account
pursuant to this Section 3.5.
3.6 EXISTING GUARANTEES. On Command acknowledges that Ascent provided
certain guarantees and support in connection with the Transactions and in
particular in connection with entering into the EDS
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Agreement (as defined in the Registration Statement), and On Command agrees to
indemnify and hold Ascent harmless with respect to any and all such guarantees.
3.7 SEPARATION AGREEMENT. Immediately prior to the effective time of any
transaction that would result in the Ascent Entities failing, or being
reasonably likely to fail, to own the largest percentage of the outstanding
securities of On Command entitled to be cast for the election of directors of
any stockholder, On Command and Ascent shall use their respective Best Efforts
to enter into a separation agreement containing such terms, in addition to those
set forth in this Agreement and the Intercompany Management Services Agreement,
as shall be necessary or appropriate to effect the orderly and timely
deconsolidation of On Command from the Ascent consolidated group.
3.8 USE OF ASCENT NAME. At such time as the Ascent Entities no longer own
or hold with power to vote the largest percentage (and at least 40%) of the
outstanding securities of On Command entitled to be cast for the election of
directors, On Command shall cease and desist from any further use of the Ascent
name and any Ascent logo, trademark or service mark, other than pursuant to a
written licensing agreement signed by Ascent authorizing such use or as may be
required to be disclosed by applicable law.
ARTICLE IV
MISCELLANEOUS
4.1. LIMITATION OF LIABILITY. Neither Ascent nor On Command shall be
liable to the other for any special, punitive or consequential damages arising
in connection with this Agreement or the Intercompany Management Services
Agreement.
4.2. SUBSIDIARIES. Ascent agrees and acknowledges that Ascent shall be
responsible for the performance by each Ascent Entity of the obligations
hereunder applicable to such Ascent Entity. On Command agrees and acknowledges
that On Command shall be responsible for the performance by each On Command
Entity of the obligations hereunder applicable to such On Command Entity.
4.3. AMENDMENTS; WAIVERS; REMEDIES. This Agreement and the Intercompany
Management Services Agreement may not be amended or terminated, nor may any
failure of performance or default be waived, orally, except by a writing duly
executed by or on behalf of the parties hereto. Any such amendment or waiver
shall be validly and sufficiently authorized for purposes of this Agreement if
it is signed on behalf of Ascent or On Command by any of their respective
presidents or vice presidents. No failure on the part of Ascent or On Command
to exercise, and no delay in exercising, any right hereunder or thereunder shall
operate as a waiver thereof (except as expressly provided herein or therein);
nor shall any single or partial exercise thereof or the exercise of any other
right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein and therein provided are cumulative and not
exclusive of any remedies provided at law or in equity.
4.4. TERM. This Agreement shall remain in effect until the Ascent Entities
no longer own or hold with power to vote the largest percentage (and at least
40%) of the outstanding securities of On Command entitled to be cast for the
election of directors; PROVIDED, that the provisions of Sections 3.2(j), 3.3,
3.4, 3.6 and any unsatisfied payment obligation pursuant to Section 3.5 shall
survive any such expiration.
4.5 SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction or fully authorized
10
<PAGE>
arbitration tribunal to be invalid, illegal or unenforceable to any extent, the
remainder of this Agreement or such provision or the application of such
provision to such party or circumstances, other than those to which it is so
determined to be invalid, illegal or unenforceable, shall remain in full force
and effect to the fullest extent permitted by law and shall not be affected
thereby, unless such a construction would be unreasonable.
4.6 NOTICES. Any notice, instruction, direction or demand under the terms
of this Agreement required to be in writing will be duly given upon delivery, if
delivered by hand, facsimile transmission or intercompany mail, or five (5) days
after posting if sent by certified mail, return receipt requested to the
following addresses:
Ascent:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Executive Vice President, Finance and Chief Operating
Officer
Telecopy No.: 303/595-0823
With copy (which shall not constitute notice) to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street
Denver, Colorado 80202
Attention: Arthur M. Aaron
Vice President, Business and Legal Affairs
Telecopy No.: 303/595-0127
and
On Command Corporation:
On Command Corporation
3301 Olcott Street
Santa Clara, CA 95054
Attention: Brian A. C. Steel
Executive Vice President, Chief Operating Officer and
Chief Financial Officer
Telecopy No.: 408/496-0668
With copy (which shall not constitute notice) to:
On Command Corporation
3301 Olcott Street
Santa Clara, CA 95054
Attention: Acting General Counsel
Telecopy No.: 408/496-0668
11
<PAGE>
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 4.6.
4.7. FURTHER ASSURANCES. Ascent and On Command shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any exhibit, document or
other instrument delivered pursuant hereto.
4.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same agreement.
4.9. GOVERNING LAW. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Colorado without giving effect to the conflicts of law principles
thereof. Each party hereby agrees that any legal action or proceedings with
respect to this Agreement or the Intercompany Services Agreement shall be
brought in a federal or state court located in the State of Colorado, and each
of the parties hereby consents to the exclusive jurisdiction of such courts and
hereby waives any objections on the grounds of venue, FORUM NON CONVENIENS,
situs of the action, improper forum or any similar grounds.
4.10. SUCCESSORS. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns. Nothing contained in this Agreement, express or implied, is intended
to confer upon any other person or entity any benefits, rights or remedies.
4.11. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives.
ON COMMAND CORPORATION
By: /s/ Robert M. Kavner
----------------------------------------------
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ Charles Lyons
----------------------------------------------
12
<PAGE>
Exhibit 21.1
ASCENT SUBSIDIARIES
Beacon Communications Corp., a Delaware corporation
Ascent Sports Holdings, Inc., a Delaware corporation
Ascent Sports, Inc., a Delaware corporation
The Denver Nuggets Limited Partnership, a Delaware limited partnership
Colorado Avalanche LLC, a Colorado limited liability company
Ascent Network Services, Inc., a Delaware corporation
Ascent Arena Corporation, a Delaware corporation
The Denver Arena Company LLC, a Colorado limited liability company
On Command Corporation*
Spectravision, Inc., a Texas corporation
On Command Video Corporation, a Delaware corporation
- -------------------
* approximately 57% owned
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-09067 and 33-09053 of Ascent Entertainment Group, Inc. on Form S-8 of our
report dated March 23, 1997, appearing in this Annual Report on Form 10-K of
Ascent Entertainment Group, Inc. for the year ended December 31, 1996.
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
March 31, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,963
<SECURITIES> 0
<RECEIVABLES> 54,695
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,740
<PP&E> 301,498
<DEPRECIATION> 0
<TOTAL-ASSETS> 736,602
<CURRENT-LIABILITIES> 289,155
<BONDS> 50,000
0
0
<COMMON> 297
<OTHER-SE> 269,288
<TOTAL-LIABILITY-AND-EQUITY> 736,602
<SALES> 0
<TOTAL-REVENUES> 258,120
<CGS> 0
<TOTAL-COSTS> 217,949
<OTHER-EXPENSES> 84,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,715
<INCOME-PRETAX> (54,469)
<INCOME-TAX> (11,957)
<INCOME-CONTINUING> (42,512)
<DISCONTINUED> 0
<EXTRAORDINARY> (334)
<CHANGES> 0
<NET-INCOME> (36,034)
<EPS-PRIMARY> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
